2015 (8) TMI 248 - HC - Central Excise

Validity of decision of settlement commission - Scope of section 32-E and 32-F(2) - Settlement commission closed the proceedings - Settlement Commission has found that the applicant-petitioner has not made full and true disclosure of the duty liability and the computation and calculation of the same is not in order - Under Valuation of goods - actual amortization cost of moulds was not included into the assessable value for payment of excise duty. Held that - Settlement Commission ought to have understood that section 32-E of the Central Excise Act, 1944, deals with application for settlement of cases and by sub-section (1) what the law postulates is a proper application to the Commission to have a case settled. The application must be in such form and must be made in such manner as is prescribed by the Rules. It should contain full and true disclosure of the duty liability which has not been disclosed before the Central Excise Officer having jurisdiction; the manner in which the liability has been derived, the additional amount of excise duty accepted to be payable and such other particulars as may be prescribed and set out in sub-section (1) of section 32-E Matter proceeded upto sub-section (4) of section 32-F of the Central Excise Act, 1944. There are certificates which have been obtained and placed on record by both the appellant-petitioner and the Revenue. The Revenue faults the contents of that certificate and by raising several pleas. However, the Bench viz. the Settlement Commission found that the petitioner is contesting the methodology of the Department in arriving at the demand in the show-cause notice. A reference is made to the certificate of the Chartered Engineer and the recalculation of the duty payable on that basis by the petitioner. Thereafter, Revenue s objection to the certificate is noted and particularly that there is no documentary evidence to support the claim. The Bench felt that a legal settlement is not possible without going into a lot of details of the disputes as far as the methodology is concerned. If the Revenue is not accepting the certificate or the lower amount, the Bench is then not handicapped and just cannot fold its hands in cases like the present one. It is not a dismissal based on a conclusion that the disclosure is not full and true. If it was indeed not so, there was no occasion for issuing further directions and to permit parties to examine certificates and equally the Revenue to file the report. All this means that unmindful of the statutory obligation and duty, the Commission wanted to abruptly end the proceedings. - If such an approach is adopted, the very purpose of setting up a Commission and enabling settlement of disputes expeditiously and promptly is defeated. That is to encourage settlement of claims which are long overdue and by pendency of which larger public interest cannot be sub-served. Delay in recovery of taxes harms the National economy and one need not over-emphasize this aspect. - matter restored before the Settlement Commission - Decided in favour of assessee.

Summary

Issues:
Challenge to order of Settlement Commission regarding duty short-paid and rejection of application under section 32-E of the Central Excise Act, 1944.

Analysis:
The petitioner, engaged in manufacturing plastic moulded containers and caps, challenged an order by the Settlement Commission dated 27th June, 2014, demanding duty short-paid amounting to Rs. 39,89,012. The petitioner contended that they used moulds as raw materials, taking cenvat credit, and one of their customers supplied moulds on a lease basis. Despite producing certificates from a Cost Accountant and a Chartered Engineer, a show cause notice was issued demanding Rs. 49,90,069, alleging non-inclusion of amortization cost of moulds in assessable value for excise duty payment.

The petitioners approached the Settlement Commission for closure of the matter through settlement. The Commission found pre-admission compliances made, but the Revenue objected to computations and certificates obtained by the petitioner. The Commission allowed time for examination of certificates and submissions were made regarding the Chartered Engineer's certificate. However, the proceedings were abruptly closed without further scrutiny, leading to the rejection of the application under section 32-E of the Act.

In the judgment, the Court highlighted the statutory provisions under sections 32-E and 32-F of the Central Excise Act, emphasizing the requirement of full and true disclosure of duty liability for settlement applications. The Court noted that the matter had progressed beyond section 32-E and reached section 32-F, where further procedures for consideration of applications were outlined.

The Court criticized the Commission for prematurely closing the proceedings without following the statutory requirements of section 32-F. It emphasized the need for thorough examination and cooperation between parties for a legal settlement. The Court held that the Commission's actions hindered the purpose of expeditious dispute resolution and encouraged settlement of long-overdue claims. Consequently, the Court quashed the impugned order, directing the Settlement Commission to proceed with the application under section 32-F in accordance with the law, keeping all contentions open for both sides.

In conclusion, the Court allowed the Writ Petition, setting aside the impugned order and instructing the Settlement Commission to adhere to the statutory process for settlement applications under the Central Excise Act, 1944.