The Delhi High Court dismissed Nitco Ltd.’s petition challenging Clause (e) of Paragraph No. 51(ii) of the Settlement Commission’s order dated Nov 14, 2019, which directed the jurisdictional Commissioner to quantify the interest liability. The Court held that Nitco had consciously elected to invoke the Settlement Commission’s jurisdiction instead of pursuing the statutory appellate remedy against the adjudication order, and having obtained a settlement order, could not be permitted to reopen the validity of the underlying SCN on the ground of limitation.
The Court further held that the direction for quantification of interest was a consequential direction and did not revive the adjudication of the underlying duty liability, and that the mere enhancement of the interest amount from Rs. 1.10 crores to Rs. 15.16 crores did not constitute a ground for interference with the settlement order.
Noting the Supreme Court’s observation that frequent interference with reasoned orders of the Settlement Commission may erode the confidence of bona fide assessees and lead to multiplicity of litigation, the Division Bench comprising Justice Anil Kshetarpal and Justice Harish Vaidyanathan Shankar observed that Nitco had consciously elected to invoke the jurisdiction of the Settlement Commission instead of pursuing the statutory appellate remedy against the adjudication order.
The Court also observed that the liability to pay interest is a statutory consequence of the duty liability and does not stand extinguished merely because the quantum of duty is settled by the Settlement Commission; the Commission may direct the jurisdictional Commissioner to verify and quantify the interest payable. Further, an assessee who places its own computation of interest before the Settlement Commission cannot later complain about enhancement of the interest amount by the jurisdictional Commissioner pursuant to the Commission’s direction for verification and quantification.
Briefly, the controversy in this case arises from a long-running customs duty evasion investigation against M/s Nitco Ltd. by the Directorate of Revenue Intelligence, Mumbai Zonal Unit, which was initiated in the year 2009. The investigation revealed multiple contraventions, including evasion of customs and anti-dumping duty on imports of tiles from China through over-valuation and mis-declaration, evasion of customs duty on marble imports from Italy, Turkey and Spain, and misuse of the EPCG Scheme in respect of capital goods imports. Several show cause notices were issued between 2011 and 2012, and Nitco had previously approached the Settlement Commission on multiple occasions for settlement of disputes relating to marble imports and certain EPCG authorisations.
The dispute presently under consideration pertains to a Show Cause Notice dated June 18, 2018, which demanded a duty of Rs. 10.29 crores along with interest in connection with the remaining EPCG authorisation issued by DGFT, New Delhi. The said SCN was adjudicated by the Commissioner of Customs (Export), Mumbai Customs Zone-I. Significantly, instead of preferring an appeal against the adjudication order, Nitco voluntarily filed an application before the Settlement Commission seeking settlement of the very proceedings arising from the SCN.
The Settlement Commission, vide order dated Nov 14, 2019, settled the duty liability at Rs. 6.69 crores, and after giving credit for Rs. 1.41 crores already deposited, the net liability was determined at Rs. 5.28 crores. Nitco themselves had placed a quantified interest liability of Rs. 1.10 crores before the Commission, which directed the jurisdictional Commissioner to verify and quantify the interest payable. The Commissioner subsequently re-calculated the interest at Rs. 15.16 crores and communicated the same to Nitco.
