Court distinguishes between statutory recovery limits and voluntary payment adjustments, allowing appropriation of Rs. 70.20 lakh beyond five-year statutory limit under Customs Act
In a significant judgment dated September 16, 2026, the Delhi High Court dismissed the writ petition filed by Ridhi Sidhi Overseas challenging the Settlement Commission's order that appropriated voluntary deposits made during a customs investigation, including amounts beyond the statutory five-year limitation period prescribed under Section 28 of the Customs Act, 1962.
The case arose from an investigation by the Directorate of Revenue Intelligence (DRI) into alleged under-invoicing and misdeclaration of confectionery imports from Dubai-based M/s Seville Products Ltd. The DRI found that imports made by the petitioner between 2008-09 and 2010-11 were undervalued to evade customs duty, resulting in a differential duty liability of Rs. 1.15 crore, split between Rs. 45.68 lakh within the limitation period and Rs. 70.20 lakh beyond it.
During the investigation, the petitioner voluntarily deposited Rs. 85 lakh and admitted the total liability including the sum beyond the five-year limit. The petitioner requested adjustment of the deposit against the liability. However, in the settlement application, the petitioner contested liability for the amount beyond five years, relying on limitation defenses.
The Settlement Commission, exercising jurisdiction under Chapter XIV-A of the Customs Act, accepted the admitted liability of Rs. 45.68 lakh within the limitation period and directed appropriation of Rs. 70.20 lakh from the voluntary deposit towards the duty liability beyond five years. The Commission emphasized that limitation bars statutory recovery mechanisms but does not prohibit voluntary payment and its appropriation. It also granted immunity from prosecution on conditions and imposed penalties.
The petitioner challenged this order before the Delhi High Court, arguing that the Commission could not appropriate deposits towards time-barred liabilities and that the limitation under Section 28 precluded such recovery. The petitioner relied on precedents including a Bombay High Court decision in C.J. Shah & Co. v. Union of India.
The Court, however, distinguished the present facts from the cited authority. It underscored that the voluntary deposit was made during investigation with explicit admission and instructions for adjustment by the petitioner's proprietor, Shri Navin Singh, whose statements were never retracted. The Court noted no material disputing these factual findings was placed before it, nor was a rejoinder filed contesting the Respondents' affidavits.
It held that the Settlement Commission's role was to appropriate amounts already voluntarily paid, not to issue fresh demands beyond limitation. The limitation under Section 28 restricts statutory recovery but does not extinguish the underlying right or bar voluntary payments from being retained and adjusted. The Court refused to reappreciate settled factual findings absent jurisdictional errors, violation of natural justice, or manifest legal mistakes.
Further, the Court emphasized the finality of Settlement Commission orders under Section 127J of the Customs Act, noting writ jurisdiction does not permit appellate reconsideration of facts. The petition was dismissed, affirming the Commission's order.
This ruling clarifies that voluntary deposits made during investigations can be considered and appropriated by the Settlement Commission even for duty liabilities beyond statutory limitation periods, provided there is a clear admission of liability and no retraction of statements. It draws a crucial distinction between the limitation on statutory demands and voluntary payment adjustments, reinforcing the legal validity of Settlement Commission proceedings under the Customs Act.
Bottom Line:
Settlement Commission can consider voluntary deposits made during investigations and direct their appropriation, even for periods beyond the limitation under Section 28 of the Customs Act, provided such deposits are accompanied by admissions of liability and directions for adjustment.
Statutory provision(s):
Customs Act, 1962 Sections 28, 127C(5), 127J
Ridhi Sidhi Overseas v. Principal Commissioner of Customs, (Delhi)(DB) : Law Finder Doc Id # 2979773
