2014 (8) TMI 253 - HC - Central Excise

Validity of settlement Commission s order - Clandestine removal of goods - unaccounted purchases of raw materials, unaccounted production of finished goods - Evasion of duty - Matter remanded back by Commission - Held that - Under sub-section (1) of section 32-E, the applicant is required to make a full and true disclosure of his duty liability and merely because the Settlement Commission has, after considering the explanation offered by the applicant, allowed the application to be proceeded with under sub-section (1) of section 32-F, will not mean that the Settlement Commission has accepted that the applicant has made full and true disclosure of his duty liability because that is not the stage to make such an inquiry. It is after examination of the records and the report of the Commissioner of Central Excise that the Settlement Commission, after giving an opportunity to the applicant and to the Commissioner of Central Excise to be heard, is required to pass an order as it thinks fit under sub-section (5) on the matters covered by the application. It cannot, therefore, be asserted that once the application filed under sub-section (1) of section 32-E has been allowed to be proceeded with under sub-section (3) of section 32-F, the Settlement Commission has necessarily to make a settlement. If that was so, then in that event power would not have been conferred on the Settlement Commission under sub-section (8) of section 32-F to reject the application. Since a complaint had been filed under section 200 of the Code of Criminal Procedure in which charges had been framed on 10 December 2013, the officers, with a mala fide intention made attempts to ensure that the case was not settled. The officers have not been impleaded by name as party respondents and even otherwise the allegations are very vague and have not been substantiated. The Settlement Commission has given good and cogent reasons for sending the case back to the adjudicating authority. The Settlement Commission noticed that the applicants had not accepted a substantial part of the duty liability and had in fact contested the evidence collected by the Revenue as being fabricated and tampered with. It also noticed that the Revenue had given reasons to substantiate its position regarding the investigation as well as the quantification of duty liability. In such a situation, the Settlement Commission thought it appropriate, particularly when the applicants had not made a full and true disclosure and that complex questions of fact, which required appreciation of evidence, were required to be settled through adjudication. Unless it is established that the discretion has been exercised in an arbitrary or perverse manner or that it is not based on relevant considerations or has taken into consideration irrelevant matters, Courts will not interfere in the exercise of such discretion by the Settlement Commission under Article 226 of the Constitution. There is, therefore, no illegality in the impugned order which may call for any interference by this Court under Article 226 of the Constitution - Decided against assessee.

Summary

Issues Involved:
1. Legitimacy of the Settlement Commission's decision to send the case back to the adjudicating authority.
2. Allegations of fabricated evidence and coercion by DGCEI officers.
3. Compliance with Section 32-E and Section 32-F of the Central Excise Act, 1944.
4. Settlement Commission's discretion in handling complex factual disputes.

Issue-wise Detailed Analysis:

1. Legitimacy of the Settlement Commission's Decision:
The petitioners sought to quash the Settlement Commission's order dated 31 January 2014, which sent the matter back to the adjudicating authority. The Commission concluded that it could not settle the dispute due to the petitioners' non-acceptance of substantial duty liability and allegations of fabricated evidence. The Court upheld the Commission's decision, emphasizing that the Commission has the discretion to reject applications if it finds that the disclosure is not full and true or if complex factual disputes are involved that require adjudication.

2. Allegations of Fabricated Evidence and Coercion:
The petitioners alleged that the search was conducted based on information provided by an ex-employee and that evidence was planted by DGCEI officers. They also claimed that the Director was detained and beaten, leading to a coerced confessional statement. The Court noted that these allegations were not substantiated and that the officers were not named as party respondents. Consequently, the Court did not find merit in these claims.

3. Compliance with Section 32-E and Section 32-F:
The Court analyzed the provisions of Section 32-E and Section 32-F, which outline the application process for settlement and the procedure to be followed. It clarified that merely allowing an application to proceed does not imply acceptance of full and true disclosure. The Settlement Commission is required to call for a report from the Commissioner of Central Excise and may conduct further inquiries before passing an order. The Court found that the Settlement Commission acted within its statutory powers and followed the prescribed procedure.

4. Settlement Commission's Discretion in Handling Complex Factual Disputes:
The Court acknowledged that the Settlement Commission has the discretion to settle cases or send them back to the adjudicating authority, especially when complex factual disputes are involved. The Commission observed that the petitioners contested much of the evidence and alleged fabrication, making it difficult to settle the matter without detailed appreciation of evidence. The Court supported the Commission's decision, stating that settlement is not akin to adjudication and that the Commission's discretion should not be interfered with unless exercised arbitrarily or perversely.

Conclusion:
The Court dismissed the writ petition, finding no illegality in the Settlement Commission's order. The Commission's decision to send the case back to the adjudicating authority was upheld, as it was based on relevant considerations and the statutory framework provided under the Central Excise Act, 1944.