2011 (7) TMI 269 - HC - Central Excise

Waiver of interest - The petitioner is a manufacturer of chewing tobacco and it was issued show cause notice on 23.12.2002, demanding duty of Rs.64,08,807/-. An application for settlement was filed and the said application was finally settled by the Commission on 30.09.2005, wherein, the duty was confirmed. Though the benefit of immunity from penalty and prosecution was granted, the interest was levied at the rate of 10% per annum. The petitioner was aggrieved by the order with regard to charging of simple interest at the rate of 10% per annum and filed a Writ Petition in W.P.No.7405 of 2006 - Held that - immunity granted - interest waived.

Summary

Issues:
Challenge to order refusing to waive interest under Section 32K of the Central Excise Act, 1944.

Analysis:
The petitioner, a chewing tobacco manufacturer, challenged the Settlement Commission's decision to levy 10% interest per annum despite granting immunity from penalty and prosecution. The petitioner sought waiver of interest due to financial difficulties caused by Tsunami and a state government ban on chewing tobacco. The petitioner contended that similarly placed companies were granted full waiver of interest, highlighting the Commission's inconsistency. The petitioner's counsel argued that the Commission should have considered the reasons for immunity provided by the petitioner and granted full waiver based on compliance with Section 32K requirements.

The respondents argued that the Commission's discretion to reduce interest from 10% to 9% was valid under Section 32K and cited legal precedents to support their position. The Commission's finding that the petitioner made a full and true disclosure of duty liability and cooperated in proceedings was not disputed. However, the Commission rejected the petitioner's grounds for immunity as irrelevant under Section 32K, which the petitioner challenged as erroneous interpretation. The Court emphasized that the Commission should have considered the petitioner's circumstances, including the impact of Tsunami and the state government ban, in deciding on interest immunity.

The Court rejected the respondents' reliance on legal judgments that did not support their argument and clarified that the petitioner was entitled to challenge the adverse portion of the order. The Court upheld the Supreme Court's principle that findings of fact by the Settlement Commission are not subject to review, but noted that the issue at hand was the Commission's exercise of discretion under Section 32K. The Court highlighted cases where total immunity from interest was granted to similarly situated entities, supporting the petitioner's claim for full immunity. Consequently, the Court set aside the impugned order and granted the petitioner full immunity from interest, citing the petitioner's compliance with Section 32K requirements and the unique circumstances affecting the petitioner's business.