2013 (1) TMI 305 - HC - Central Excise

Short Payment of Duty - clearance of excisable goods veneer - amounts in excess of invoice values realized either through cash or through D.Ds., which was in- turn utilized for unaccounted expenditure - the appellants in order to camouflage the excess amounts received through D.Ds. indulged in the fictitious sale of non-excisable goods like sawn timber door/window frames, trading - demand of sum of Rs.21,48,55,018/- besides a penalty u/s 11-AC along with interest u/s 11 AB - appellants approached the Settlement Commission - whether the adjudication order passed by the Commissioner of Central Excise, Visakhapatnam which was passed after filing of an application before the Settlement Commission under Section 32E and was declared as Non Est by the Settlement Commission is valid in law ? - Held that - In view of the language of clause (7) of Section 32F the Settlement Commission was entitled to pass final orders not only in relation to matters covered by the application for settlement but also any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner of Central Excise and Commissioner (Investigation) under sub section (1) or sub section (6). The matter relating to the lack of jurisdiction of the Settlement Commission was specifically raised by the Commissioner of Central Excise in his report dated 13-09-2004 submitted to the Settlement Commission under clause (1) of Section 32F and the said issue has been decided by the Settlement Commission in its order of admission dated 31-05- 2005. Therefore its finding that the order of the Commissioner of Central Excise dated 30-07-2004 is non est in law is a finding given by it in exercise of jurisdiction conferred on it under Section 32F (7). Therefore, it cannot be said that the said finding given by the Settlement Commission is without jurisdiction. Therefore the said order of the Settlement Commission cannot be denuded of its efficacy by any collateral attack or in incidental proceedings. As this portion of the order of the Settlement Commission dated 31-05-2005 was admittedly not challenged by the Revenue in W.P. of 2005 or in S.L.P. of 2006, the Revenue is barred by the principle of constructive resjudicata from reagitating the said finding of the Settlement Commission before the Tribunal collaterally. The Tribunal therefore is bound to proceed on the footing that the order dated 30-07-2004 of the Commissioner is non est in law and therefore it ought to have held in the impugned orders that the Revenue could not have challenged the order dated 30-07-2004 of the Commissioner in the appeals before it. It should have therefore rejected the said appeals filed by the Revenue as not maintainable. As the Settlement Commission in its final order dated 17-01-2007 had rejected application for settlement and remitted the case back to the adjudicating authority for adjudication of the matter in terms of the show cause notice dated 01-11-2003, the said authority should consider the matter afresh uninfluenced by the order in original No.14/2004 dated 30-07-2004 of the Commissioner of Central Excise, the order dated 17-01-2007 of the Settlement Commission or the impugned orders dated 06-09-2007 of the CESTAT. Therefore the appeals are allowed and the impugned orders of the CESTAT are set aside.

Summary

Issues Involved:
1. Validity of the adjudication order passed by the Commissioner after the application for settlement was filed.
2. Authority of the Committee of Chief Commissioners to review an adjudication order declared non est by the Settlement Commission.
3. Maintainability of the appeal filed by the Revenue against the Commissioner's order before the Tribunal.
4. Jurisdiction of the Settlement Commission to declare the Commissioner's order as non est.

Detailed Analysis:

1. Validity of the Adjudication Order Passed by the Commissioner:
The appellants contended that the Commissioner should have deferred adjudication of the matter once the application for settlement was filed with the Settlement Commission. The Settlement Commission had declared the Commissioner's order dated 30-07-2004 as non est in law. The Tribunal, however, held that the Settlement Commission did not have the power to invalidate the adjudication order and that the appellate jurisdiction of the Tribunal could not be taken away by the Settlement Commission's observation.

2. Authority of the Committee of Chief Commissioners:
The appellants argued that once the Settlement Commission declared the Commissioner's order as non est, the Committee of Chief Commissioners could not review it. The Tribunal, however, maintained that the Committee of Chief Commissioners is a statutory body created for the specific purpose of deciding whether appeals should be filed, and therefore, the appeals filed by the Revenue were maintainable.

3. Maintainability of the Appeal Filed by the Revenue:
The appellants contended that the appeals by the Revenue were not maintainable as the order impugned was declared non est by the Settlement Commission. The Tribunal, however, held that the Settlement Commission's declaration did not affect the appellate jurisdiction of the Tribunal and that the appeals filed by the Revenue were maintainable.

4. Jurisdiction of the Settlement Commission:
The appellants argued that the Settlement Commission had the exclusive jurisdiction to exercise the powers of any Central Excise Officer once an application for settlement was admitted. The Tribunal disagreed, stating that the Settlement Commission did not have the power to declare the Commissioner's order as non est. However, the High Court held that the Settlement Commission was entitled to pass final orders on matters covered by the application and any other matter relating to the case not covered by the application but referred to in the report of the Commissioner of Central Excise and the Commissioner (Investigation).

Conclusion:
The High Court concluded that the Settlement Commission had the jurisdiction to declare the Commissioner's order as non est and that the Tribunal should have rejected the appeals filed by the Revenue as not maintainable. The High Court allowed the appeals, set aside the impugned orders of the CESTAT, and directed the adjudicating authority to consider the matter afresh without being influenced by the previous orders.