12

SETTLEMENT
COMMISSION
LEARNING OUTCOMES

After studying this chapter, you would be able to:

 understand and analyse the manner in which application for

settlement of cases is to be made.

 comprehend the procedure on receipt of application.

 identify the powers of Settlement Commission.

 examine the matters in relation to which there is bar on

making subsequent application for settlement.

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1. INTRODUCTION
Settlement Commission was set up to evolve a mechanism for speedy settlement
of cases involving high revenue stakes. This is an alternative channel for
resolution of dispute for assessees without going into the prolonged litigation in
adjudication/appeals/revisions etc.
Customs, Central Excise and Service Tax Settlement Commission is constituted by
Central Government. Section 127A to 127N contained in Chapter XIV A of the
Customs Act deals with the provisions relating to settlement of cases. Presently,
four Benches in the Settlement Commission have been constituted and are
functioning at Delhi, Mumbai, Kolkata and Chennai.

2. DEFINITIONS [SECTION 127A]

In this Chapter, unless the context otherwise requires, -
(a) "Bench" means a Bench of the Settlement Commission;
(b) “Case” means any proceeding under this Act or any other Act for the levy,
assessment and collection of customs duty, pending before an adjudicating
authority on the date on which an application under sub-section (1) of
section 127B is made.
However, when any proceeding is referred back in any appeal or revision, as
the case may be, by any Court, Appellate Tribunal or any other authority, to
the adjudicating authority for a fresh adjudication or decision, as the case
may be, then such proceeding shall not be deemed to be a proceeding
pending within the meaning of this clause.
(c) "Chairman" means the Chairman of the Settlement Commission.
(d) "Commissioner (Investigation)" means an officer of the customs or a
Central Excise Officer appointed as such Commissioner to conduct inquiry or
investigation for the purposes of this Chapter.
(e) "Member" means a Member of the Settlement Commission and includes the
Chairman and the Vice-Chairman.
(f) "Settlement Commission" means the Customs, Central Excise and Service
Tax Settlement Commission constituted under section 32 of the Central
Excise Act, 1944.

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3. APPLICATION FOR SETTLEMENT OF CASES

[SECTION 127B]
Any importer, exporter or any other person may make an application for
settlement in respect of a case, relating to him, before adjudication to the
Settlement Commission. Such application shall be made in such form and in such
manner as may be specified.
Further, any person, other than an applicant may also make an application to the
Settlement Commission in respect of a show cause notice issued to him in a case
relating to the applicant which has been settled or is pending before the
Settlement Commission and such notice is pending before an adjudicating
authority, in such manner and subject to such conditions, as may be specified.
(a) Disclosures required in application: The application shall contain a full and
true disclosure of:
➢ his duty liability which has not been disclosed before the proper officer,
➢ the manner in which such liability has been incurred,
➢ the additional amount of customs duty accepted to be payable by him
and
➢ such other particulars as may be specified by rules including the
particulars of such dutiable goods in respect of which he admits short
levy on account of misclassification, undervaluation or inapplicability of
exemption notification.
(b) Conditions for filing the application: Following conditions are to be
fulfilled for filing an application for settlement of a case. The application
shall not be made unless –
(i) the applicant has filed a bill of entry, or a shipping bill, or a bill of export,
or made a baggage declaration, or a label or declaration accompanying
the goods imported/exported through post or courier, as the case may
be, and in relation to such document(s), a show cause notice has been
issued to him by the proper officer;
(ii) the additional amount of duty accepted by the applicant in his
application exceeds ` 3,00,000.
(iii) the applicant has paid the additional amount of customs duty accepted

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by him along with interest due under section 28AA.

(iv) No application shall be entertained by the Settlement Commission in
cases which are pending in the Appellate Tribunal or any Court.
(v) No application under this sub-section shall be made:
➢ in relation to goods to which section 123 applies or to goods in
relation to which any offence under the Narcotic Drugs and
Psychotropic Substances Act, 1985 has been committed:
➢ for the interpretation of the classification of the goods under the
Customs Tariff Act, 1975.
(c) An application for settlement once made shall not be allowed to be
withdrawn by the applicant.
(d) Every application shall be accompanied by such fees as may be specified by
rules.
Note: It has been clarified that Settlement Commission has no jurisdiction to
entertain the matters in relation to the goods specified under section 123 of the
Customs Act, 1962 which include gold in view of the order dated 25.08.2015 of
Delhi High court in case of Additional Commissioner of Customs v. Shri Ram Niwas
Verma [W.P. (C) No. 7363/2014 & CM 17221/20 L4].
[F. No. 275/46/2015 CX. 8A dated 01.10.2015]
Illustration
Can an application for settlement be withdrawn?
Answer
Application once made cannot be withdrawn in case of settlement [Section
127B(4) of the Customs Act, 1962].

4. PROCEDURE ON RECEIPT OF APPLICATION

[SECTION 127C]
Following procedure is followed on receipt of application for settlement of cases:
(1) The Settlement Commission shall issue a notice to the applicant within 7 days
from the date of receipt of the application to explain in writing as to why the
application made by him should be allowed to be proceeded with. After

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taking into consideration the explanation provided by the applicant, the

Settlement Commission shall, within a period of 14 days from the date of the
notice, pass an order either allowing the application to be proceeded with, or
rejecting the same. The proceedings before the Settlement Commission shall
abate on the date of rejection.
However, where no notice has been issued or no order has been passed
within the aforesaid period by the Settlement Commission, the application
shall be deemed to have been allowed to be proceeded with.
(2) A copy of every order under sub-section (1), shall be sent to the applicant
and to the Principal Commissioner/Commissioner of Customs having
jurisdiction.
(3) Where an application is allowed or deemed to have been allowed to be
proceeded with under sub-section (1), the Settlement Commission shall,
within 7 days from the date of order under sub-section (1), call for a report
along with the relevant records from the Principal
Commissioner/Commissioner of Customs having jurisdiction. The Principal
Commissioner/Commissioner shall furnish the report within a period of 30
days from the date of the receipt of communication from the Settlement
Commission.
However, where the Principal Commissioner/Commissioner does not furnish
the report within the aforesaid period of 30 days, the Settlement Commission
shall proceed further in the matter without the report of the Principal
Commissioner/Commissioner.
(4) After examination of the report of the Principal Commissioner/Commissioner
submitted within time, if the Settlement Commission is of the opinion that
any further enquiry or investigation in the matter is necessary, it may direct,
for reasons to be recorded in writing, the Commissioner (Investigation) within
15 days of the receipt of the report, to make such further enquiry or
investigation on the matters covered by the application and any other matter
relating to the case. The Commissioner (Investigation) should furnish the
report of such enquiry within a period of 90 days from the date of the receipt
of the communication from the Settlement Commission.
However, where the Commissioner (Investigation) does not furnish the report
within the aforesaid period, the Settlement Commission shall proceed to pass
an order under sub-section (5) without such report.

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(5) The Settlement Commission may pass such order as it thinks fit on the
matters covered by the application and any other matter relating to the case
not covered by the application, but referred to in the report of the Principal
Commissioner/Commissioner of Customs and Commissioner (Investigation)
after examination of the records, the report of the Principal
Commissioner/Commissioner of Customs and the report, if any, of the
Commissioner (Investigation) of the Settlement Commission. An opportunity
of being heard either in person or through a representative duly authorised
in this behalf shall be given to the applicant and to the Principal
Commissioner/Commissioner of Customs having jurisdiction before passing
of such order. The Commission shall also examine any further evidence as
may be placed before it or obtained by it before passing the order.
(6) The Settlement Commission may, at any time within 3 months from the date
of passing of the order, amend such order to rectify any error apparent on
the face of record, either suo motu or when such error is brought to its notice
by the jurisdictional Principal Commissioner/Commissioner of Customs or the
applicant.
However, no amendment which has the effect of enhancing the liability of the
applicant shall be made unless the Settlement Commission has given notice
of such intention to the applicant and the jurisdictional Principal
Commissioner/Commissioner of Customs as the case may be, and has given
them a reasonable opportunity of being heard.
(7) Subject to the provisions of section 32A of the Central Excise Act, 1944 the
materials brought on record before the Settlement Commission shall be
considered by the Members of the concerned Bench before passing any
order. The provisions of section 32D of the Central Excise Act, 1944 shall
apply in relation to the passing of such order.
(8) The order shall provide for the terms of settlement including any demand by
way of duty, penalty or interest, the manner in which any sums due under the
settlement shall be paid and all other matters to make the settlement
effective. However, in case of rejection the order shall contain the reasons
therefor. The order shall also provide that the settlement shall be void if it is
subsequently found by the Settlement Commission that it has been obtained
by fraud or misrepresentation of facts.
The amount of settlement ordered by the Settlement Commission shall not
be less than the duty liability admitted by the applicant under section 127B.

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(9) The duty, interest, fine and penalty payable in pursuance of the order shall be
paid by the applicant within 30 days of receipt of a copy of the order by him.
If the applicant fails to do so, the amount which remains unpaid shall be
recovered along with interest due thereon as the sums due to the Central
Government by the proper Officer having jurisdiction over the applicant in
accordance with the provisions of section 142.
(10) Where a settlement becomes void, the proceedings with respect to the
matters covered by the settlement shall be deemed to have been revived
from the stage at which the application was allowed to be proceeded with by
the Settlement Commission. The proper officer having jurisdiction may,
notwithstanding anything contained in any other provision of this Act,
complete such proceedings at any time before the expiry of 2 years from the
date of the receipt of communication that the settlement became void.

5. POWERS OF SETTLEMENT COMMISSION

(a) Power to order provisional attachment to protect revenue [Section
127D]: The Settlement Commission may, by order, attach provisionally any
property belonging to the applicant in such manner as may be specified by
rules. Such attachment can be made during the pendency of any proceeding
before it, and for protecting the interests of the revenue.
Every provisional attachment made by the Settlement Commission shall cease
to have effect from the date the sums due to the Central Government for
which such attachment is made are discharged by the applicant and evidence
to that effect is submitted to the Settlement Commission.
(b) Power to grant immunity from prosecution and penalty [Section 127H]:
The Settlement Commission may, if it is satisfied that any person who made
the application for settlement under section 127B has co-operated with the
Settlement Commission in the proceedings before it and has made a full and
true disclosure of his duty liability, grant to such person, subject to such
conditions as it may think fit to impose, immunity from prosecution for any
offence under this Act and also either wholly or in part from the imposition of
any penalty and fine under this Act, with respect to the case covered by the
settlement.

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No such immunity shall be granted by the Settlement Commission in cases

where the proceedings for the prosecution for any such offence have been
instituted before the date of receipt of the application under section 127B.
An immunity granted to a person shall stand withdrawn if such person fails to
pay any sum specified in the order of the settlement passed under section
127C within the time specified in such order or fails to comply with any other
condition subject to which the immunity was granted and thereupon the
provisions of this Act shall apply as if such immunity had not been granted.
An immunity granted to a person may, at any time, be withdrawn by the
Settlement Commission, if it is satisfied that such person had, in the course of
the settlement proceedings, concealed any particulars, material to the
settlement or had given false evidence, and thereupon such person may be
tried for the offence with respect to which the immunity was granted or for
any other offence of which he appears to have been guilty in connection with
the settlement and shall also become liable to the imposition of any penalty
under this Act to which such person would have been liable, had no such
immunity been granted.
(c) Power to send a case back to the proper officer [Section 127-I]: The
Settlement Commission may, if it is of opinion that any person who made an
application for settlement under section 127B has not cooperated with the
Settlement Commission in the proceedings before it, send the case back to
the proper officer who shall thereupon dispose of the case in accordance with
the provisions of this Act as if no application under section 127B had been
made.
For this purpose, the proper officer shall be entitled to use all the materials
and other information produced by the assessee before the Settlement
Commission or the results of the inquiry held or evidence recorded by the
Settlement Commission in the course of the proceedings before it as if such
materials, information, inquiry and evidence had been produced before such
proper officer or held or recorded by him in the course of the proceedings
before him.
For the purposes of the time limit under section 28 and for the purposes of
interest under section 28AA, in a case, the period commencing on and from
the date of the application to the Settlement Commission under section 127B
and ending with the date of receipt by the officer of customs of the order of

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the Settlement Commission sending the case back to the officer of customs
shall be excluded.
(d) Other powers and procedure of Settlement Commission [Section 127F]:
In addition to the powers conferred on the Settlement Commission under
Chapter V of the Central Excise Act, 1944, it shall have all the powers which
are vested in an officer of the customs under this Act or the rules made
thereunder.
Where an application made under section 127B has been allowed to be
proceeded with under section 127C, the Settlement Commission shall, until
an order is passed under section 127C, have exclusive jurisdiction to exercise
the powers and perform the functions of any officer of customs or Central
Excise Officer as the case may be, under this Act or in the Central Excise Act,
1944, in relation to the case.

In the absence of any express direction by the Settlement Commission to the

contrary, nothing in this Chapter shall affect the operation of the provisions
of this Act in so far as they relate to any matter other than those before the
Settlement Commission.

The Settlement Commission shall have power to regulate its own procedure
and the procedure of Benches thereof in all matters arising out of the
exercise of its powers, or of the discharge of its functions, including the
places at which the Benches shall hold their sittings, subject to the provisions
of Chapter V of the Central Excise Act, 1944 and this Chapter.

6. INSPECTION, ETC., OF REPORTS [SECTION

127G]
No person shall be entitled to inspect, or obtain copies of, any report made by
any officer of the Customs to the Settlement Commission; but the Settlement
Commission may, in its discretion, furnish copies thereof to any such person on
an application made to it in this behalf and on payment of such fee as may be
specified by rules.
However, for the purpose of enabling any person whose case is under
consideration to rebut any evidence brought on record against him in any such
report, the Settlement Commission shall, on an application made in this behalf,

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and on payment by such person of such fee as may be specified by rules, furnish
him with a certified copy of any such report or part thereof relevant for the
purpose.

7. ORDER OF SETTLEMENT TO BE CONCLUSIVE

[SECTION 127J]
Every order of settlement passed section 127C shall be conclusive as to the
matters stated therein and no matter covered by such order shall, save as
otherwise provided in this Chapter, be reopened in any proceeding under this Act
or under any other law for the time being in force.

8. RECOVERY OF SUMS DUE UNDER ORDER OF

SETTLEMENT [SECTION 127K]
Any sum specified in an order of settlement passed under section 127C may,
subject to such conditions, if any, as may be specified therein, be recovered, and
any penalty for default in making payment of such sum may be imposed and
recovered as sums due to the Central Government in accordance with the
provisions of section 142, by the proper officer having jurisdiction over the
applicant.

9. BAR ON SUBSEQUENT APPLICATION FOR

SETTLEMENT IN CERTAIN CASES [SECTION
127L]
As per section 127L, a person shall not be entitled to apply for settlement under
section 127B in relation to any other matter in the following cases:-
(a) Where an order of Settlement has been passed which provides for the
imposition of a penalty on applicant under section 127B for settlement, on
the ground of concealment of particulars of his duty liability.
Here, concealment of particulars of duty liability relates to any such
concealment made from the officer of customs.
(b) Where after the passing of an order of settlement, in relation to a case, such
person is convicted of any offence in relation to that case; or

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(c) Where the case of such person is sent back to the proper officer by the
Settlement Commission under section 127-I.

10. PROCEEDINGS BEFORE SETTLEMENT

COMMISSION TO BE JUDICIAL
PROCEEDINGS [SECTION 127M]
Any proceedings under this Chapter before the Settlement Commission shall be
deemed to be a judicial proceeding within the meaning of sections 193 and 228,
and for the purposes of section 196, of the Indian Penal Code.

11. APPLICATIONS OF CERTAIN PROVISIONS

OF CENTRAL EXCISE ACT [SECTION 127N]
The provisions of Chapter V of the Central Excise Act, 1944 in so far as it is not
inconsistent with the provisions of this Chapter shall apply in relation to
proceedings before the Settlement Commission under this Chapter.

12. CUSTOMS (SETTLEMENT OF CASES) RULES,

2007
In exercise of the powers conferred by Section 156 of the Customs Act, the
Central Government has notified Customs (Settlement of Cases) Rules, 2007.

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13. TEST YOUR KNOWLEDGE

1. ` 50 lakh drawback was paid to M/s. Sun Export Ltd. Subsequently the
Commissioner of Customs issued a show cause notice for recovery of the
erroneously paid drawback. M/s. Sun Export Ltd. filed an application for
settlement of case before the Settlement Commission. The Department disputed
the jurisdiction of the Settlement Commission by contending that recovery of
drawback did not involve levy, assessment and collection of customs duty as
envisaged under section 127A(b) of the Customs Act. Discuss with the help of
decided case whether the stand taken by the Commissioner is correct.
2. Can the Settlement Commission entertain applications involving evasion of
duty by fraudulent means and mis-declaration? Discuss
3. Explain with reference to the Customs Act, 1962, the conditions to be fulfilled
for filing application to Settlement Commission.
4. Settlement Commission passed an order for release of seized goods of Mr.
Banerjee. Since the goods were subject to deterioration, the Revenue informed
the Commission that the seized goods had already been auctioned. The
Commission, therefore, directed the Revenue to refund the amount remaining
in balance after the application of sale proceeds as provided under section
150(2) of the Customs Act, 1962. The Revenue refunded the principal amount
of the sale proceeds without payment of interest for the delay, on the premise
that it did not represent duty or interest as contemplated under section 27 and
27-A of the Customs Act. Reason out the action of the Revenue by supporting
with a case law.
5. State the circumstances under which an application will not be entertained by
the Settlement Commission.
6. Briefly explain the powers of the Settlement Commission under the Customs
Act, 1962.
7. When will a person be not entitled to apply for settlement under section 127B?
Discuss with reference to the provisions of section 127L

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14. ANSWERS/HINTS
1. No, the stand taken by the Commissioner is not correct. The High Court, in
case of Union of India v. Cus. & C. Ex. Settlement Commission 2010 (258) ELT
476 (Bom.), has concluded that the duty drawback or claim for duty drawback
is nothing but a claim for refund of duty may be as per the statutory scheme
framed by the Government of India or in exercise of statutory powers under
the provisions of the Act. Hence, the Settlement Commission has jurisdiction
to deal with the question relating to the recovery of drawback erroneously
paid by the Revenue.
2. This issue has been addressed to by the High Court in the case of Tata
Teleservices (Maharashtra) Ltd. v. Union of India 2006 (201) ELT 529 (Bom .). In
this case the assessee had evaded duty and had applied for settlement in the
Settlement Commission. The contention of the Department was that the
companies or the persons, who evaded the customs duty fraudulently, could
not avail of the benefit of approaching the Settlement Commission. It was
submitted by the Department that the Settlement Commission had a limited
jurisdiction of accepting only the cases of short levy on account of
misclassification or otherwise and not other cases.
The High Court observed that the Settlement Commission had wide
jurisdiction to entertain all kinds of settlement claim applications, with liberty
to reject the same even at preliminary stage, depending upon the nature,
circumstances and complexity of a case. However, a case would be accepted
by the Settlement Commission only if the mandatory requirements of:
(i) filing Bill of Entry/Shipping Bill or a bill of export, or a baggage
declaration, or a label or declaration accompanying the goods imported
or exported through post or courier, as the case may be and issuance of
a show cause notice in relation to such such document or documents.
(ii) making a full and true disclosure of duty liability which was not disclosed
earlier before the proper officer and the manner in which such liability
had been incurred and additional amount of customs duty accepted to
be payable by the assessee and
(iii) furnishing such other particulars as may be specified by the rules
including the particulars of such dutiable goods in respect of which the

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assessee admits short levy on account of misclassification or otherwise of

goods have been fulfilled.
The High Court observed that the jurisdiction of the Settlement Commission
was not restricted only to cases of short levy on account of misclassification
or otherwise. The object of introducing Chapter XIVA to the Customs Act,
1962 was to resolve all disputes so as to collect revenue for the department.
The High Court held that if interpretation of section 127B was restricted to
mean only bona fide cases, then there would be no scope of unearthing
revenue. It was pointed out by the High Court that earlier part of section
127B ibid laid down the jurisdiction and only the latter part dealt with the
rules whereby certain details were to be provided. Therefore, it was held by
the High Court that the argument with regard to short levy due to mis-
classification or otherwise was purely a procedural one and there was no
need to decide the same.
Note: This ruling has been maintained in Union of India vs. Bipin H Badani
2015 (326) ELT 25 by the Supreme Court and affirmed in Union of India vs.
Bipin H Badani 2017 (51) STR 226 by the Supreme Court.
3. According to section 127B of the Customs Act 1962, the following conditions
are to be fulfilled for filing an application for settlement of cases:
(i) the applicant has filed a bill of entry, or a shipping bill, or a bill of export,
or made a baggage declaration, or a label or declaration accompanying
the goods imported or exported through post or courier, as the case may
be, and in relation to such document or documents, a show cause notice
has been issued to him by the proper officer.
(ii) the additional duty accepted is more than ` 3 lakhs.
(iii) the applicant has paid the additional amount of customs duty accepted
by him alongwith interest due under section 28AA.
(iv) the case is not pending with CESTAT or any Court.
(v) the application does not relate to goods to which section 123 applies or
to goods in relation to which any offence under the Narcotic Drugs and
Psychotropic Substances Act, 1985 has been committed.
(vi) the application is not for the interpretation of the classification of the
goods under the Customs Tariff Act, 1975

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Further, application before Settlement Commission can be made only when

adjudication is pending.
4. The action of the Revenue is not justified in law. The High Court in a similar
case of Vishnu M Harlalka v. Union of India 2013 (294) ELT 5 (Bom) directed
the Department to pay interest on the balance of the sale proceeds.
The High Court observed that inordinate delay in payment of balance sale
proceeds by the Department is not justifiable. The Department cannot plead
that the Customs Act, 1962 provides for the payment of interest only in
respect of refund of duty and interest and hence, the assessee would not be
entitled to interest on the balance of the sale proceeds which were directed
to be paid by the Settlement Commission.
The High Court clarified that acceptance of such a submission would mean
that despite an order of the competent authority directing the Department to
grant a refund; the Department can wait for an inordinately long period to
grant the refund.
5. [Refer Section 127L]
6. [Refer para 5]
7. [Refer section 127L]

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SIGNIFICANT SELECT CASES

1. In case of a Settlement Commission's order, can the assessee be
permitted to accept what is favourable to them and reject what is not?
Sanghvi Reconditioners Pvt. Ltd. V. UOI 2010 (251) ELT 3 (SC)

Supreme Court’s Decision: The Apex Court held that the application under
section 127B of the Customs Act, 1962 is maintainable only if the duty liability
is disclosed. The disclosure contemplated is in the nature of voluntary
disclosure of concealed additional customs duty. The Court further opined
that having opted to get their customs duty liability settled by the Settlement
Commission, the appellant could not be permitted to dissect the
Settlement Commission's order with a view to accept what is favourable
to them and reject what is not.

2. Is judicial review of the order of the Settlement Commission by the High

Court or Supreme Court under writ petition/special leave petition,
permissible?
Saurashtra Cement Ltd. v. CCus. 2013 (292) ELT 486 (Guj.)

High Court’s Observation and Decision: While examining the scope of

judicial review in relation to a decision of Settlement Commission, the High
Court noted that although the decision of Settlement Commission is final,
finality clause would not exclude the jurisdiction of the High Court under
Article 226 of the Constitution (writ petition to a High Court) or that of the
Supreme Court under Articles 32 or 136 of the Constitution (writ petition or
special leave petition to Supreme Court). The Court would ordinarily interfere
if the Settlement Commission has acted without jurisdiction vested in it or its
decision is wholly arbitrary or perverse or mala fide or is against the
principles of natural justice or when such decision is ultra vires the Act or the
same is based on irrelevant considerations.
The Court, however, pronounced that the scope of court’s inquiry against the
decision of the Settlement Commission is very narrow, i.e. judicial review is
concerned with the decision-making process and not with the decision of the
Settlement Commission.

Note: Apart from the appellate remedies available under the customs law, the
Constitution of India also provides remedies in the form of Special Leave

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Petitions (SLPs) and Writs. The Supreme Court of India is empowered under
Article 136 of the Constitution of India to grant special leave to any of the
parties to appeal, aggrieved by any order or judgment passed by any Court or
Tribunal in India. The applications under Article 136 are termed as Special
Leave Petitions (SLPs) as these can be admitted only with special leave
(permission) of Supreme Court. The High Courts, within the territory of its
jurisdiction, have powers, vide article 226 of Constitution, to issue orders or
writs for enforcement of any fundamental right and for any other purpose. The
Supreme Court, under Article 32 of the Constitution of India, is also empowered
to issue writs for enforcement of fundamental rights.
3. Does the Settlement Commission have jurisdiction to settle cases
relating to the recovery of drawback erroneously paid by the Revenue?
Union of India v. Cus. & C. Ex. Settlement Commission 2010 (258) ELT
476 (Bom.)
Facts of the Case: The above question was the issue for consideration in a
writ petition filed by the Union of India to challenge an order passed by the
Settlement Commission in respect of a proceeding relating to recovery of
drawback. The Commission vide its majority order overruled the objection
taken by the Revenue challenging jurisdiction of the Commission and vide its
final order settled the case. The aforesaid order of the Settlement
Commission was the subject matter of challenge in this petition.
The contention of the Revenue was that the recovery of duty drawback does
not involve levy, assessment and collection of customs duty as envisaged
under section 127A(b) of the Customs Act, 1962. Therefore, the said
proceedings could not be treated as a case fit to be applied before the
Settlement Commission. However, the contention of the respondent was that
the word “duty” appearing in the definition of “case” is required to be given a
wide meaning. The Customs Act provides for levy of customs duty as also the
refund thereof under section 27. The respondent contended that the
provisions relating to refund of duty also extend to drawback as drawback is
nothing but the return of the customs duty and thus, the proceedings of
recovery of drawback would be a fit case for settlement before the
Commission.
High Court’s Observations: The High Court noted that the Settlement
Commission while considering the aforesaid question of its jurisdiction for
taking up the cases relating to drawback had considered the definition of

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“drawback” as defined in rules relating to drawback as also the definition of

the word “case” as defined in section 127A(b) and after referring to the
various judgments of the Tribunal came to the conclusion that the
Commission had jurisdiction to deal with the application for settlement. The
High Court stated that the reasons given by the Settlement Commission in
support of its order are in consonance with the law laid down by the Supreme
Court in the case of Liberty India v. Commissioner of Income Tax (2009) 317
ITR 218 (SC) wherein the Supreme Court has observed that drawback is
nothing but remission of duty on account of statutory provisions in the
Act and Scheme framed by the Government of India.

High Court’s Decision: The High Court, thus, concluded that the duty
drawback or claim for duty drawback is nothing but a claim for refund of duty
as per the statutory scheme framed by the Government of India or in exercise
of statutory powers under the provisions of the Act. Thus, the High Court
held that the Settlement Commission has jurisdiction to deal with the
question relating to the recovery of drawback erroneously paid by the
Revenue.

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