2011 (8) TMI 665 - HC - Central Excise

Settlement Commission - Benefit of immunity from prosecution - Department failed to prove clandestine removal - Held That - In view of Garware Nylon Limited (1996 -TMI - 44318 - SUPREME COURT OF INDIA), onus upon the department to prove about the nature of goods cleared without payment of duty. - Thus Settlement Commission should not have refused the benefit of immunity from prosecution.

Summary

Issues involved:
- Adjudication of duty demand and penalties by Commissioner of Customs and Central Excise
- Appeal to CEGAT and subsequent withdrawal for Settlement Commission application
- Settlement Commission's order confirming duty demand, penalties, and confiscation
- Denial of immunity against prosecution by Settlement Commission
- Challenge to Settlement Commission's decision in High Court

Adjudication of duty demand and penalties by Commissioner of Customs and Central Excise:
The petitioner, a fabric manufacturer, faced a duty demand of Rs.73,65,851 on processed fabrics allegedly cleared between 1995 and 1997. The Commissioner confirmed Rs.68,93,822 duty, ordered confiscation of fabrics, and imposed penalties on individuals. The petitioner appealed to CEGAT but later withdrew to approach the Settlement Commission.

Appeal to CEGAT and subsequent withdrawal for Settlement Commission application:
After withdrawing the CEGAT appeal, the petitioner made a full disclosure of Rs.8,76,864 to the Settlement Commission under Section 32E of the Central Excise Act. The Settlement Commission confirmed duty, imposed a penalty of Rs.15 lakhs, and ordered confiscation, denying immunity against prosecution, leading to the filing of writ petitions.

Settlement Commission's order confirming duty demand, penalties, and confiscation:
The Settlement Commission confirmed the duty amount, imposed penalties, levied interest, and ordered confiscation of seized fabrics from specific premises. Despite the full disclosure, the Commission declined to grant immunity for prosecution, prompting the petitioners to challenge this decision.

Denial of immunity against prosecution by Settlement Commission:
The petitioner argued that the Settlement Commission erred in denying immunity despite the full disclosure and compliance with requirements. The Commission's decision conflicted with the purpose of Section 32E of the Central Excise Act, which aims to settle matters with voluntary disclosures and immunity provisions.

Challenge to Settlement Commission's decision in High Court:
In response to the petitioners' challenge, the High Court analyzed the Settlement Commission's decision and emphasized the burden on the department to prove allegations of duty evasion. Citing legal principles and precedents, the Court found the Commission's refusal to grant immunity unjustified and set aside that part of the order, granting the petitioners immunity from prosecution. The writ petitions were partly allowed with no costs incurred.