2010 (8) TMI 411 - HC - Central Excise

100% EOU - DTA Clearance - Natural justice Reasoned order - submissions made by the Petitioner were rejected by the Settlement Commission without seconding reasons - Court under an obligation to record reasons, it is a requirement of principles of natural justice - order being in breach of principles of natural justice, we have no option but to set aside the same to the extent it has determined the duty liability of the Petitioner and the proceedings are remanded bark to the Settlement Commission for consideration afresh

Summary

Issues Involved:
1. Legality of the Settlement Commission's order directing the petitioner to pay duty.
2. Calculation and assessment of the duty payable by the petitioner.
3. Applicability of the cum-duty principle.
4. Judicial review of the Settlement Commission's order by the High Court.

Detailed Analysis:

1. Legality of the Settlement Commission's Order:
The petition filed under Article 226 of the Constitution challenges the Settlement Commission's order dated 2-6-2006, which directed the petitioner to pay a duty of Rs. 33,96,718/-. The petitioner, a 100% Export Oriented Unit (EOU), was accused of clearing goods to the Domestic Tariff Area (DTA) without permission and without paying the appropriate excise duty. The Additional Commissioner, Central Excise, confirmed the demand along with interest and penalties. The petitioner approached the Settlement Commission, which rejected their contentions and upheld the duty demand.

2. Calculation and Assessment of Duty:
The petitioner argued that the duty was erroneously calculated at 30% instead of 15% as per Notification 21/2002-Cus. They contended that the correct duty liability, considering the cum-duty price benefit, should be Rs. 21,14,563/- instead of Rs. 33,96,718/-. The Settlement Commission dismissed this contention without providing detailed reasons, merely stating that the cum-duty benefit could not be acceded to.

3. Applicability of the Cum-Duty Principle:
The petitioner cited the Supreme Court judgment in C.C.E., Delhi v. Maruti Udyog to support their claim for cum-duty benefit. Conversely, the respondent argued that the cum-duty principle was inapplicable because the goods were removed clandestinely without duty, and the inputs used were duty-free. The respondent also referenced the Supreme Court judgments in Amrit Agro Industries Ltd. v. CCE and Assistant Commissioner, Central Excise v. Bata India, which clarified that abatement under Section 4(4)(d)(ii) of the Central Excise Act, 1944, does not apply in the absence of duty payment.

4. Judicial Review of the Settlement Commission's Order:
The High Court held that the orders of the Settlement Commission are amenable to writ jurisdiction and judicial review under Article 226 of the Constitution. The court emphasized that the Settlement Commission's decision-making process must follow the law, including Rule 5(3) of the Valuation Rules. The court observed that the Settlement Commission failed to provide cogent reasons for rejecting the petitioner's contentions, thus breaching the principles of natural justice. The court cited several Supreme Court judgments underscoring the necessity of reasoned orders in judicial decisions.

Conclusion:
The High Court set aside the Settlement Commission's order to the extent it determined the duty liability of the petitioner, citing a breach of natural justice principles. The case was remanded to the Settlement Commission for reconsideration, with instructions to provide a reasoned order addressing all contentions within three months. The petition was partly allowed, and no order as to costs was made.