2016 (8) TMI 705 - HC - Central Excise

Validity of settlement order - petitioner cleared the finished goods from the factory with cover of statutory invoice and without payment of duty - failed to maintain proper accounts of finished goods manufactured and cleared from its factory premises - petitioners have paid duty as demanded in the show cause notice i.e. more than amount which has been settled by the Settlement Commissioner. Held that - Settlement Commissioner had conducted enquiry on 02-12-2014 and, thereafter, granted ten days more time to make further submissions, if any. Perusal of impugned order, it is manifest that revenue subsequently relied on letters dated 08-12-2014, 13-12-2014, 27-01-2015 and 05-02-2015. These letters were much subsequent to the date of hearing conducted by Settlement Commissioner. The copies of said letters/documents were also never provided to the petitioners. The petitioners had filed specific application seeking documents. Provisions of Section 32-J of the Excise Act clearly entitles the applicant to provide certified copies of any such report or part thereof. Considering the above, the said letters appear to have been read while passing the impugned order without giving copies of the same to the petitioners and also without bringing it to the knowledge of petitioners. Such an order is certainly not in consonance with the cardinal principles of natural justice, also considering the fact that petitioners have paid duty as demanded, we are inclined to exercise our discretion. Therefor, the impugned order is quashed and set aside. The Settlement Commissioner shall decide said proceedings afresh after giving opportunity to the petitioners to put forth their case so also furnish certified copies of the relevant letters/documents to the petitioners. - Petition disposed of

Summary

Issues:
Challenge to order under Central Excise Act - Natural justice principles violation - Duty payment dispute - Settlement Commissioner's powers and duties - Entitlement to copies of reports.

Analysis:
The petitioners contested an order passed by respondent No. 2 under Section 32-F(5) of the Central Excise Act, 1944, which negated their application. The show cause notice accused the petitioners of clearing finished goods without duty payment and failing to maintain proper accounts, proposing a duty demand of ?1,28,01,529. The petitioners filed a settlement application under Section 32-E. The Settlement Commissioner's order was challenged on the grounds of natural justice violation due to undisclosed subsequent documents and lack of notice to the petitioners. The petitioners argued that they were not provided with copies of relevant documents despite their application and fee submission. The High Court noted the discrepancy and ruled in favor of the petitioners, citing the importance of natural justice principles.

The respondents contended that the petitioners were liable for duty as they had removed goods without payment. The duty amount was reduced after subsequent submissions. The respondents relied on Section 32-J of the Excise Act to argue against providing copies of reports to the petitioners. They also claimed that the Settlement Commissioner's decision was not subject to writ jurisdiction, citing a Supreme Court case. However, the High Court found in favor of the petitioners, emphasizing the right to access certified copies of reports and the need for procedural fairness.

After considering both parties' arguments, the High Court acknowledged that the petitioners had paid the demanded duty, even exceeding the settled amount. It was established that subsequent documents were considered without providing copies to the petitioners, violating natural justice principles. The High Court quashed the impugned order, directing the Settlement Commissioner to rehear the case, provide copies of relevant documents to the petitioners, and ensure procedural fairness. The parties were instructed to appear before the Settlement Commissioner for further proceedings on a specified date. The writ petition was disposed of with the mentioned observations, and no costs were awarded.