Customs Act, 1962 Section 127h — Power of Settlement Commission to grant immunity from prosecution and penalty
Customs Act, 1962 · Power of Settlement Commission to grant immunity from prosecution and penalty
Plain-English Explanation
Overview
Section 127H of the Customs Act, 1962 empowers the Settlement Commission (and from April 1, 2025, the Interim Board) to grant immunity from prosecution and penalty to applicants who have sought settlement under section 127B. This provision incentivizes truthful disclosure and cooperation in resolving customs disputes.
Who Does This Apply To?
This section applies to any person (including individuals, companies, and other entities) who has filed an application for settlement of a customs case with the Settlement Commission under section 127B of the Customs Act, 1962. This means they have admitted to a duty liability and are seeking to settle the case to avoid prolonged litigation and potential penalties.
How It Works
Here's how the immunity process under Section 127H works:
- Application for Settlement: The person must first have filed an application under section 127B to settle their customs liability.
- Cooperation is Key: The Settlement Commission must be satisfied that the applicant has cooperated with them in the settlement proceedings. This includes providing all necessary information and documents.
- Full and True Disclosure: The applicant must have made a full and true disclosure of their duty liability. This is critical. Any concealment or false statement will jeopardize the immunity.
- Grant of Immunity: If satisfied with the cooperation and disclosure, the Settlement Commission may grant immunity from prosecution for any offense under the Customs Act. They can also grant partial or full immunity from the imposition of any penalty and fine under the Act with respect to the case covered by the settlement. The immunity will be subject to such conditions as the Settlement Commission may deem fit to impose.
- No Immunity if Prosecution Started: The Settlement Commission cannot grant immunity if prosecution proceedings for the offense have already been instituted before the date the settlement application was received under section 127B.
Important Conditions & Exceptions
- Condition 1: The applicant must pay the sum specified in the settlement order passed under section 127C(5) within the time specified. Failure to do so withdraws the immunity.
- Condition 2: The applicant must comply with all other conditions imposed by the Settlement Commission while granting immunity. Failure leads to withdrawal of immunity.
- Exception: The Settlement Commission can withdraw immunity at any time if they are satisfied that the applicant concealed any particulars material to the settlement or gave false evidence during the proceedings. In such cases, the person can be tried for the original offense and any other offenses connected to the settlement. They also become liable for the penalties they would have faced if no immunity had been granted.
- Interim Board: On and from April 1, 2025, the powers of the Settlement Commission will be exercised by the Interim Board.
Practical Example
ABC Importers discovered they underreported the value of imported goods by ₹50 Lakhs. Realizing their mistake, they file a settlement application under section 127B admitting to the duty evasion. They fully cooperate with the Settlement Commission, providing all required documents and information. The Settlement Commission is satisfied with ABC Importers’ cooperation and disclosure. They pass a settlement order under section 127C(5) directing them to pay the evaded duty of ₹50 Lakhs plus interest and a reduced penalty of ₹10 Lakhs, totaling ₹60 Lakhs. They pay the ₹60 Lakhs within the stipulated time. The Settlement Commission grants immunity from prosecution and waives the original penalty of ₹25 Lakhs under Section 127H.
Key Amendments
- The Finance Act, 2021 amended this section to allow the Interim Board to exercise the powers of the Settlement Commission from April 1, 2025.
No case laws found for this provision yet.
Browse all case laws →Frequently Asked Questions
Under what circumstances can the Customs Settlement Commission grant immunity from prosecution and penalties under Section 127H?
The Settlement Commission can grant immunity under Section 127H if the applicant has cooperated with the Commission, made a full and true disclosure of their duty liability, and the prosecution hasn't been instituted before the application under Section 127B. The immunity can cover prosecution for offences under the Customs Act and either wholly or partly the imposition of penalties and fines related to the settled case.
If I apply for settlement under Section 127B, does that automatically guarantee immunity from prosecution and penalties under Section 127H?
No, applying for settlement under Section 127B does not guarantee immunity. The Settlement Commission must be satisfied that you have fully cooperated with the proceedings and made a true disclosure of your duty liability. Furthermore, immunity is discretionary and can be granted subject to conditions imposed by the Commission.
What happens if I fail to comply with the conditions attached to the immunity granted under Section 127H?
If you fail to pay the sum specified in the settlement order under Section 127C(5) within the specified time or fail to comply with any other condition attached to the immunity, the immunity will be withdrawn. Consequently, the provisions of the Customs Act will apply as if the immunity was never granted, making you liable for prosecution and penalties.
Can the Settlement Commission withdraw immunity granted under Section 127H, even after the settlement order has been passed?
Yes, the Settlement Commission can withdraw immunity even after the settlement order if it finds that you concealed material particulars or gave false evidence during the settlement proceedings. In such cases, you may be tried for the offence for which immunity was granted or any other connected offence, and you will also be liable for penalties as if no immunity had been granted.
Is there a time limit within which the Settlement Commission must grant or deny immunity under Section 127H?
While Section 127H doesn't specify a strict time limit for granting or denying immunity, the process is inherently linked to the overall settlement proceedings under Chapter XIV-A of the Customs Act, 1962. The Commission is expected to act expeditiously in considering the application and granting immunity if the conditions are met.
Does Section 127H immunity extend to offences outside the Customs Act, 1962?
No, the immunity granted under Section 127H is specifically limited to offences 'under this Act' (Customs Act, 1962). It does not extend to offences under other laws, such as the Indian Penal Code or other fiscal statutes, even if those offences are related to the customs matter being settled.
What is the impact of the Finance Act, 2021 on the powers of the Settlement Commission under Section 127H?
The Finance Act, 2021 has significantly altered the landscape. From February 1, 2021, the Settlement Commission ceased to admit new applications. Furthermore, from April 1, 2025, the power of the Settlement Commission under Section 127H will be exercised by the Interim Board, with the provisions applying *mutatis mutandis* to the Interim Board as they applied to the Settlement Commission.
Key Conditions & Requirements
| Condition | Details |
|---|---|
| Application Requirement: Cooperation and Full Disclosure | The applicant must cooperate with the Settlement Commission during proceedings and make a full and true disclosure of their duty liability to be eligible for immunity. |
| Immunity Scope: Prosecution, Penalty, and Fine | The Settlement Commission can grant immunity from prosecution for offenses under the Customs Act and either wholly or partially from penalties and fines related to the settled case. |
| Prosecution Bar: Pre-existing Prosecution | Immunity will not be granted if prosecution proceedings for the offense have already been initiated before the date the application under section 127B was received. |
| Withdrawal: Failure to Pay or Comply | Immunity is withdrawn if the person fails to pay the settlement amount within the specified time or fails to comply with any other condition attached to the immunity. |
| Withdrawal: Concealment or False Evidence | The Settlement Commission can withdraw immunity if it discovers the person concealed material particulars or gave false evidence during settlement proceedings, leading to prosecution and penalties. |
| Consequences of Withdrawal: Prosecution and Penalty | Upon withdrawal of immunity, the person may be tried for the offense for which immunity was granted and also becomes liable for any penalties that would have been applicable had no immunity been granted. |
| Transfer of Power to Interim Board | On and from April 1, 2025, the power to grant immunity under this section will be transferred from the Settlement Commission to the Interim Board. |
Amendment History
Substituted by the Finance Act, 2007 (22 of 2007), section 105 (i) (a), for "or under the India Penal Code (45 of 1860) or under any other Central Act for the time being in force and also either wholly or in part from imposition of any penalty, fine and interest" (w.e.f. 01.06.2007).
Explanation omitted by the Finance Act, 2015 (20 of 2015), section 89 (w.e.f. 14.05.2015). Earlier explanation was inserted by Act 22 of 2007, section 105(i)(b) (w.e.f. 01.06.2007). Explanation, before omission by Act 20 of 2015, stood as under: " Explanation. - For the removal of doubts, it is hereby declared that the application filed before the Settlement Commission on or before the 31st day of May, 2007 shall be disposed of as if the amendment in this section had not come into force."
Substituted by the Finance Act, 2007 (22 of 2007), section 105(ii), for "sub-section (7) of section 127C within the time specified in such order or within such further time as may be allowed by the Settlement Commission" (w.e.f. 01.06.2007).
Inserted by s. 102 of the Finance (No.7) Act, 2025.