2010 (1) TMI 1053 - AT - Central Excise

Jurisdiction - power of Settlement Commission to entertain an application or pass orders - proviso to Section 32E

Summary

Issues Involved:
1. Jurisdiction of the Settlement Commission.
2. Validity of the order passed by the Commissioner (Appeals) reducing the penalty.
3. Applicability of the Apex Court's decisions in relevant cases.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Settlement Commission:

The Department contended that the Settlement Commission lacked jurisdiction to entertain the application filed by the assessees since an appeal was already pending before the Appellate Tribunal. The relevant provisions of Section 32E and the definition of 'case' under Section 31(c) as they stood at the relevant time were examined. It was established that the Settlement Commission could not entertain an application if a case was already pending before the Appellate Tribunal. The assessees had filed an application before the Settlement Commission on 27-5-2004, and the Settlement Commission admitted the proceedings on 23-12-2004. However, the Department had already filed an appeal on 6-12-2004, and the assessees themselves filed an appeal on 21-12-2004. Therefore, the Settlement Commission lacked jurisdiction to admit the application on 23-12-2004, making its order a nullity.

2. Validity of the Order Passed by the Commissioner (Appeals) Reducing the Penalty:

The Department argued that the Commissioner (Appeals) had no discretion to reduce the penalty in the absence of any statutory provision granting such power. The Apex Court in Dharamendra Textile Processors' case ruled that the penalty must be equivalent to the duty liability if the statutory provisions do not provide discretion. The Commissioner (Appeals) reduced the penalty from Rs. 10,00,001/- to Rs. 1 lakh without providing any specific reasons, which was deemed arbitrary. The Tribunal held that the Commissioner (Appeals) could not have interfered with the adjudicating authority's order regarding the penalty, thus restoring the original penalty imposed by the adjudicating authority.

3. Applicability of the Apex Court's Decisions:

The Department relied on the Apex Court's decision in Union of India v. Dharamendra Textile Processors, which mandated that the penalty should be equivalent to the duty liability. The assessees cited Hindustan Steel Ltd. v. State of Orissa, arguing that penalty should not be imposed merely for failure to perform a statutory obligation. However, the Tribunal clarified that the provisions under the Central Excise Act did not provide discretion in the matter of penalty, unlike the Orissa Sales Tax Act. Therefore, the decision in Hindustan Steel Ltd.'s case was not applicable. The Tribunal concluded that the Commissioner (Appeals) had no discretion to reduce the penalty, aligning with the Dharamendra Textile Processors' case.

Conclusion:

The Tribunal allowed the Department's appeal, setting aside the order of the Commissioner (Appeals) that reduced the penalty, and restored the adjudicating authority's order imposing the original penalty. The assessees' appeal was dismissed. The Tribunal emphasized that the Settlement Commission's order was a nullity due to lack of jurisdiction, and the Commissioner (Appeals) had no discretion to reduce the penalty in contravention of statutory provisions.