Application To Settlement Commission May Be Filed By Any Person To Whom A Show Cause Notice Is Served Charging Him With Customs Duty: Bombay High Court

=The division bench of Justice K.R. Sriram and Justice Prithviraj K. Chavan has observed that the term "any other person" appearing in Section 127-B of the Customs Act, 1962 should be interpreted to mean in its literal sense. The proviso to Section 127-B provides that a bill of entry must be filed, not necessarily by the person who approaches the settlement commission, provided the person is served with a show-cause notice charging him with customs duty.

The petitioner/assessee is a company incorporated under the laws of the Cayman Islands and has been operating in India since 1983, providing logging and perforating services to the oil companies.

Until 1998, the petitioner provided logging and perforating services to ONGC. The petitioner caused a number of logging tools for its contract with ONGC to be imported by ONGC without payment of customs duty or at a concessional rate of duty under different notifications issued under section 25 (1) of the Customs Act, 1962. Most of the tools and equipment imported were not subject to the condition of re-export under the Customs Act by reason of the fact that they were not fully exempt from payment of custom duty. Some of the tools and equipment were subject to conditions of re-export under the Customs Act. The petitioner was entitled to retain most of the imported tools in India. Ownership of tools is always vested in petitioners. Customs duty, if any, was borne and paid by ONGC, according to the agreement.

In 1998, the petitioner was awarded a contract for a private oil company, namely "Hardy Exploration and Production Inc.". The Hardy, in the contract, acted on behalf of a consortium of various entities, which included ONGC. The relationship between the petitioner and Hardy was purely contractual. There was no common beneficial ownership.

The petitioner caused Hardy to import 24 capital equipment without payment of customs duty as per notification that was then in force. The tools were permitted to be cleared without payment of customs duty on the strength of the Essentiality Certificate issued by the Directorate General of Hydrocarbons, subject to re-export condition. The petitioner, on completion of the Hardy Contract, re-exported certain equipment. Later, the petitioner realised that what it had re-exported was equipment that was imported for its contract with ONGC and not with Hardy. Having realised the error, the petitioner decided to pay customs duty and, to that extent, avail of the provisions of Section 127-B.

The realisation dawned upon the petitioner during a certain investigation that customs authorities carried out. The petitioners approached the customs authorities, offering to pay the customs duty. A show cause notice has been issued to the petitioner. Having received show cause notice, the petitioner approached the Settlement Commission by way of an application under section 127-B.

The petitioner contended that Section 127-B provides for any importer, exporter, or any other person who has been issued a show cause notice to file an application. The proviso (a) to Section 127-B not only clarifies who is an applicant but provides that any person who is being served with a show cause notice charging with duty is also entitled to file an application.

The court ordered the Settlement Commission to examine the petitioner's application on the merits and in accordance with the law, and to rule on the application within 12 weeks.

Case Title: M/s Halliburton Offshore Services Inc. Versus The Union of India

Case No: Writ Petition No. 2778 Of 2001

Citation: 2022 LiveLaw (Bom) 230 

Dated: 09.06.2022

Counsel For Petitioner: Advocate Mihir Mehta

Counsel For Respondent: Advocate Sham V. Walve

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