Settlement Commission: Section 127B – Full & True disclosure - It is manifest from a bare reading of the provision that in the application filed under Section 127B, an applicant is required to make a full and true disclosure of his duty liability, which he had failed to disclose before the proper officer. He is also required to exhaustively explain to the Settlement Commission the manner in which such liability has been incurred; the additional amount of customs duty accepted to be payable by him as also the price of such dutiable goods in respect of which he admits short levy on account of misclassification or otherwise of goods. In other words, the applicant is supposed to make a clean breast of his affairs in regard to short levy or non payment of customs duty admitted to be payable by him. The application should have been rejected by the Settlement Commission on that count itself and no relief should have been granted to the appellant. However, in view of the fact that order dated 8th February, 2001 passed by the Settlement Commission allowing the application of the appellant to be proceeded was not challenged by the Commissioner nor such a plea was urged by the Revenue before the High Court or in their reply to the present appeal, we find it difficult to reject the application at this stage. (para 13,22)

Settlement Commission: Accept the favorable and reject which is not -. Having opted to get their customs duty liability settled by the Settlement Commission, under Chapter XIVA of the Act, the appellant cannot be permitted to dissect the Settlement Commission’s order with a view to accept what is favourable to them and reject what is not. . It is manifest from the procedure laid down in Section 127C of the Act that interim order under sub-Section (1) of Section 127C as also the final order under sub-Section (7) of the said Section are to be made by the Settlement Commission after examination of the reports of the Commissioner of Customs or its Commissioner (Investigation). Obviously, these reports are submitted on the disclosures made in the application under Section 127B of the Act and, therefore, the applicant cannot be permitted to resile from his pleadings in the application at any stage of proceedings before the Settlement Commission or set up a new case before the higher Fora. (para 22)

Settlement Commission: Duty free import of ship spares - Notification No.211/83-Cus dated 23rd July, 1983 - In order to avail the benefit of exemption from whole of the duty of customs leviable under the Customs Tariff Act, 1975, twin conditions, viz., (1) capital goods, components, etc. are required for repairs of ocean going vessels, and (2) the ship repair unit should be registered with the Director General of Shipping, Government of India, are to be fulfilled. Both the conditions are cumulative and admit of no exception. Besides, under the Notification, an importer is also required to maintain a proper account of import, use and consumption of the capital goods, components, etc. imported for the aforesaid purpose in a prescribed form and failure to satisfy the Collector about their installation or consumption for the said purpose makes the importer liable to pay an amount equal to the duty payable on such goods. It is a settled position in law that Exemption Notifications have to be strictly construed. A person claiming the benefit of exemption notification, must show that he satisfies the eligibility criteria. (para 17)

Settlement Commission: Fresh grounds raised before High Court - . It is clear that since M/s Elektronik Lab. was not registered with the Director General of Shipping, they were not eligible to avail of duty exemption under the said notification, they entered into an arrangement with the appellant, a registered ship repairing unit, to import the goods for repair of ocean Thus, the sole object of the transactions was to avail of duty exemption under the said notification. Additionally, in order to claim the benefit of the Exemption Notification, the components, consumables etc. had to be used by the importer himself for repair of the vessels and not through someone else, who incidentally was not even named in the shipping bills. Moreover, proper accounts of imports, use and consumption of such goods was to be maintained by the importer, and in the event of failure to render the account for such consumption, the importer was liable to pay the customs duty as may be demanded by the Commissioner of Customs. However, once the imported goods were sold to a third party, the appellant was incapacitated from maintaining and rendering the account to the Commissioner in terms of the notification. All these factors go to show that the additional ground sought to be raised before the High Court was not only an after thought, adjudication thereon did involve investigation into facts and, therefore, the decision of the High court in not entertaining the additional ground did not suffer from any infirmity. Held that the order of the Settlement Commission did not suffer from any error, legal or factual, and, therefore, the High Court was fully justified in dismissing the writ petition. (para 21)

Valuation - short payment/short levy of duty: The assessee was able to demand from its customers the balance of the higher prices by virtue of retrospective revision of the prices. At the time of sale the goods carried a higher value and those were cleared on short payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts. Seen thus it was clearly a case of short payment of duty though indeed completely unintended and without any element of deceit etc. The differential price signify that value, which is the function of the price, on the date of removal/clearance of the goods was not correct. That, it was understated. Therefore, the price indicated by the supplementary invoice is directly relatable to the value of the goods on the date of clearance, hence, enhanced duty. This enhanced duty is on the corrected value of the goods on the date of removal. When the differential duty is paid after the date of clearance, it indicates shortpayment/ short-levy on the date of removal. (para 14)

Valuation – interest: The assessee in default may make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and, in that event, such assessee in default would not be served with the Demand Notice under Section 11A(1) of the Act. However, Explanation (2) to the sub-section makes it clear that such payment would not be exempt from interest chargeable under Section 11AB of the Act. What is stated in Explanation (2) to sub-section 2(B) is reiterated in Section 11AB of the Act, which deals with interest on delayed payment of duty. From the Scheme of Section 11A(2B) and Section 11AB of the Act, it becomes clear that interest is levied for loss of revenue on any count. Appeal allowed. (para 14)

Interpretation of Statute: Retrospective Effect: When a new type of tax is introduced or a new concept of tax is introduced so as to widen the net, it, in our opinion, should not be construed to have a retrospective operation on the premise that it is clarificatory or declaratory in nature. If a substantive law is introduced, it will have no retrospective effect.
 
Revenue Vs Service: Raising of revenue by the State, by itself cannot amount to rendition of any service. For the purpose of invoking the provisions of taxing statute a question assumes significance for the purpose of ascertaining as to whether the same amounts to rendition of service within the meaning of the sub-clause.

Hire Purchase Finance not taxable : Distinction between Hire Purchase Agreement and Hire Purchase Finance made out. Service tax not leviable on Hire Purchase Finance. Civil Appeal filed by the department dismissed.

Classification - Petroleum jelly  a ‘drug’ or a ‘cosmetic’ - A drug as defined in Section 3(b) thereof would not only include a medicine which is used for external use of human beings, but if used for prevention of any disease or disorder in human being, shall also come within the purview thereof. The said definition is an extensive one. It even applies to preparations applied on human body for the purpose of killing insects like mosquitoes, which per se does not have any medicinal or any value for curing any disease or disorder in human beings. Parliament consciously used a restrictive meaning while defining the term “cosmetic” but an extensive meaning has been given to the word “drug”. The said material itself shows that it helps keep the outside world out and it protects the skin from the effects of weather and exposure.  If used as a preventive measure, of course, it would have a curative value. Any product which prevents a disorder of human function would also come within the purview of drug.  (para 15, 24,25) 

Interpretation of statue -  There cannot be any doubt whatsoever that artificial definition of a term under a statute is permissible in law, but when goods which were included in one notification is consciously taken out in the latter, the same meaning cannot be attributed thereto simply on the basis of judicial interpretation.When a case of obvious intent on the part of the Legislature is made out, a meaning which subserves the legislative intent must be given effect to. It is however also well known that when a word is defined by the legislature itself, the same meaning may be attributed even in the changed situation.If an entry had been interpreted consistently in a particular manner for several assessment years, ordinarily it would not be permissible for the Revenue to depart therefrom, unless there is any material change. (para 38, 39,44)

C&F Services: What is necessary for determining the question is as to whether the purported job of the appellant as a clearing and forwarding agent was incidental to its main activity, namely, getting orders from the clients and selling the products to various customers of the company or not.

Reference Application: Instead of deciding the Reference Application, the High Court confirmed the order of the Tribunal as if it is deciding the appeal/case finally on merits. High Court erred in not proceeding in accordance with the provisions of Section 130A of the Act in requiring the Tribunal to make a reference to the High Court on such questions which the High Court opined to be the questions of law. Order of the High Court set aside and remanded back to the Tribunal to decide afresh disposing the Reference Application expeditiously.