2011 (3) TMI 790 - HC - Customs

Power of settlement commission to impose penalty - Clandestine removal - MPTEL is an 100% EOU engaged in the manufacture of ACSR conductors etc.- The duty free raw materials were used for manufacture of conductors, which were cleared to Domestic Tariff Area (DTA in short) - settlement commission imposed penalties imposed on the company and the persons responsible for the affairs of the company - Held that - That power is available with the Settlement Commission in terms of Section 32F(9) of the Central Excise Act, 1944. In terms of Section 32K of the Central Excise Act, 1944, power to grant immunity from prosecution and penalty is available to the Settlement Commission. Section 32M of the Central Excise Act, 1944 makes the order of settlement conclusive. Petitioners are not able to establish a case to show that the order under challenge is contrary to law or is in any way perverse, arbitrary or without jurisdiction. The Court under Article 226 of the Constitution is not inclined to go into the issue relating to the quantum of penalty imposed by the Settlement Commission and the rational behind imposition of such penalty. The power given to the Settlement Commission, unless exercised in violation of the provision of the Act, cannot be challenged and the petitioners plea on the above issue fails.

Summary

Issues Involved:
1. Imposition of personal penalty on the petitioners.
2. Alleged evasion of Excise Duty by the petitioner company.
3. Legality of the penalties imposed by the Settlement Commission.
4. Applicability of specific provisions of the Central Excise Rules and Act.

Issue-wise Detailed Analysis:

1. Imposition of Personal Penalty on the Petitioners:
The petitioners, including the company and its directors, challenged the imposition of personal penalties by the Customs & Central Excise Settlement Commission. The petitioners argued that the Settlement Commission imposed penalties without specifying the exact nature of the contravention under the relevant rules. They cited the Supreme Court decision in *Amrit Foods v. Commissioner of Central Excise, UP*, which emphasized the necessity of specifying the exact nature of contravention for imposing penalties.

2. Alleged Evasion of Excise Duty by the Petitioner Company:
The petitioner company, a 100% Export Oriented Unit (EOU), was accused of not making any exports and clandestinely clearing duty-free raw materials to the Domestic Tariff Area (DTA) without paying excise duty. The Directorate General of Central Excise Intelligence conducted searches, seized documents, and recorded statements from various personnel, which revealed that the company collected excise duty from customers but did not remit it to the government. The department issued a show-cause notice demanding duty and proposing penalties.

3. Legality of the Penalties Imposed by the Settlement Commission:
The Settlement Commission, after examining the case, concluded that the petitioner company was liable to pay excise duty as per Notification No. 8/97-C.E. and imposed penalties on the company and its directors. The Commission noted that the petitioners had collected duty from customers for DTA sales but failed to deposit it with the revenue, constituting a serious offense. The Commission imposed penalties under Rule 209A of the Central Excise Rules, 1944, and Rules 26 and 27 of the Central Excise Rules, 2002. The petitioners argued that the penalties were unjustified as they had already discharged the admitted duty liability.

4. Applicability of Specific Provisions of the Central Excise Rules and Act:
The Settlement Commission invoked Rule 209A of the Central Excise Rules, 1944, and Rules 26 and 27 of the Central Excise Rules, 2002, to impose penalties on the petitioners. The petitioners contended that the exact nature of the contravention was not specified, making the imposition of penalties invalid. However, the court found that the Settlement Commission had the power to impose penalties under these provisions and that the petitioners had not disputed the penal provisions invoked by the revenue. The court also noted that the Settlement Commission's order was conclusive and could not be subjected to further detailed enquiry.

Conclusion:
The High Court dismissed the writ petitions, upholding the Settlement Commission's order. The court found no error of law in the Commission's proceedings and concluded that the penalties imposed were within the Commission's jurisdiction. The court emphasized that the Settlement Commission had the power to impose penalties and that its order was conclusive as per Section 32M of the Central Excise Act, 1944. The petitioners' plea against the imposition of penalties was deemed misconceived and not tenable in law.