Customs Act 1962 : Supreme Court Delivers Split Verdict On Jurisdiction Of Settlement Commission In Relation To Goods Under Section 123

The Supreme Court, on Thursday, delivered a split verdict in respect to the issue -whether jurisdiction of Settlement Commission under Section 127B of the Customs Act, 1962 can be invoked in relation to goods to which Section 123 applies. 

While considering the conflicting judgments of the Bombay High Court and the Delhi High Court a Division Bench comprising Justice Krishna Murari and Justice Sanjay Karol expressed divergent views. Supporting the law laid down by the Bombay High Court, Justice Murari opined that in cases of seizures of smuggled goods within the customs areas, Section 123 of the Customs Act would not be applicable and the accused can make application to Settlement Commission under Section 127B. Justice Karol opined that the bar in Section 127B precludes filing an application for settlement in relation to goods to which Section 123 applies [for example gold and watches are specified under S.123].

The Division Bench asked the Registry to place the matter before the Chief Justice of India for appropriate order.

Factual Background

The petitioner, a non-resident Indian, was arrested at Delhi International Airport. The allegation was that he had tried to smuggle expensive goods through the green channel entrance to avoid paying duty. A detailed examination of the petitioner and his luggage was conducted and seven wrist watches along with other high value goods were recovered.

Post arrest the writ petition was filed seeking direction to permit the petitioner to have home cooked meals.

The petitioner has been amenable to settle the dispute by approaching the settlement commission under Section 127 of the Customs Act, 1962. Since the customs authorities did not issue notice to initiate the proceedings, the petitioner filed an application seeking the same. In the application, the Apex Court passed an ex-parte order directing the Commissioner of Customs to issue a show-cause notice to the petition to initiate the proceedings. The authorities filed an application seeking to recall the ex-parte order arguing that the Settlement Commission does not have jurisdiction in the matter. After hearing the parties, the Court recalled the order.

As the matter was being heard on merit, two conflicting judgments of the Bombay High Court and the Delhi High Court were brought to the notice of the Apex Court. On one hand the Bombay High Court had held that in a situation where there is no dispute with respect to the origins of the goods the bar contained in Section 127 would not come in the way of the specified goods under Section 123. On the other hand, the Delhi High Court held that no application for settlement can be made if it related to goods to which Section 123 applies. The Apex Court was urged to resolve the conflict.

Analysis by the Supreme Court

Justice Krishna Murari: Section 123 of the Customs Act contemplates that if an accused is caught in the act of smuggling goods, the burden of proof is reversed and the accused is to prove their innocence. Justice Krishna Murari noted that discharge of burden of proof can only happen in cases where there is a reasonable possibility of the accused being innocent. He was of the opinion that in cases where the seizures are within the customs area Section 123 becomes redundant. He agreed with the view taken by the Bombay High Court.

Justice Sanjay Karol: He referred to the bar in Section 127B which states that no application shall be made concerning goods to which Section 123 applies. He noted the proviso specifies that certain categories of goods, including the ones mentioned in Section 123 are barred from the jurisdiction of the Settlement Commission. Section 127B, he added, categorically lists out the circumstances under which an application can be made to a Settlement Commission. Noting that all offences under the Act cannot be settled, he said, “such an interpretation would allow a person importing goods without declaration to evade confiscation and criminal prosecution by simply taking recourse under Section 127B.”

[Case Title: Yamal Manojbhai v. Union of India And Ors. Writ Petition (Crl) No. 55 of 2023]

Citation : 2023 LiveLaw (SC) 399

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