The main legal point established in the judgment is that the evidence brought forward by the revenue regarding over-valuation did not conclusively prove Revenue's case, and the charge of non-compliance of export obligation and violation of post-import conditions was not tenable.

NAJMI WAZIRI, J.

1. These petitions seek the quashing of the orders passed by respondent no. 2, Customs Central Excise Settlement Commission (hereinafter referred to as the Settlement Commission) on 30.05.2005 and 31.05.2005 by which it allowed the applications of respondent no. 1, M/s. Padmini Polymers, under Section 125-B of the Customs Act, 1962 (the Act for short). The order is impugned on two grounds inter-alia, the first being that the provisions of Section 127-A and 127-B of the Act are for bona fide applicants to approach the Settlement Commission for settlement of dues which are mistakenly not paid or over paid, and not for tax dossiers indulging in criminal activities. The learned counsel for the petitioner states that the power to grant immunity against criminal prosecution is to be used sparingly and in deserving cases and that the present case is not one of misclassification or mis-declaration but one in which respondent no. 1 offered to pay the differential unpaid tax only after incriminating evidence for prosecution had been gathered by the petitioner. The learned counsel relied on the principle laid down in CIT vs. B.N. Bhatacharya, 1979 (118) ITR 461 (SC) wherein the court held that “It is not to provide a rescue shelter for big tax-dodgers who indulge in criminal activities by approaching the Settlement Commission.” The second ground on which the impugned order is challenged is that the settlement commission has erred in overlooking the fact that during settlement proceedings, it is not for the petitioner to establish respondent no. 1's guilt beyond reasonable doubt; instead it was for the licence holder to establish its innocence apropos the issues raised in the show cause notice. The learned counsel further contended that the aspect of over invoicing of CD ROMs and Audio CDs could only have been appreciated after a full trial and the settlement commission is not the appropriate forum to adjudicate the same or appreciate the evidence submitted to it.

2. The facts of the case are that respondent no. 1 (for short “Padmini”) a manufacturer of CD ROMs and audio CDs sold both domestically and internationally; it obtained 25 advance licences under the Duty Exemption Scheme notified by Ministry of Commerce in terms of EXIM policy between November, 1996 and March, 1997. Against the exports made, Padmini was entitled to duty free imports through the aforesaid licences under the schemes provided in Foreign Trade policy such as DEPB, EPCG and DEEC. These licences were freely transferrable and were sold in the open market by Padmini to third party importers to utilise them. Against seven of the advance licences, no imports were made. Against licence No. 83515, a duty benefit of Rs. 9,06,300/- was obtained without fulfilment of the corresponding export obligation. Against another licence bearing No. 82338, the export obligation was unfulfilled to the extent of Rs. 13,76,973/-. Regarding the remaining 16 advance licences, Padmini had claimed fulfilment of the export obligations.

3. The petitioner-Directorate of Revenue Intelligence had issued two Show Cause Notice (SCN) on 20.04.2001 and 11.02.2001 respectively alleging that Padmini had claimed fraudulent fulfilment of the export obligation. Accordingly, it demanded jointly and severally an amount of Rs. 20,84,75,559/- (Rs. 19,44,83,561/- in respect of 33 DEPB licences and Rs. 1,39,91,998/- in respect of EPCG licence) vide Show Cause Notice dated 20.4.2001 and customs duty of Rs. 7,81,73,260/- in respect of 25 DEEC licences as unpaid duties. The notice proposed a charge of interest as well as confiscation of the imported goods under Section 111(o) of the Act, and of the CD ROMs and Audio CDs exported. It also proposed the imposition of penalty under Section 114, 114A read with Section 112(a) & (b) of the Act.

4. In substance the petitioner had alleged that CD ROMs were exported by Padmini @ $23/29.50 to two Singapore companies i.e. M/s. Inter Metallco and M/s. Multi