2017 (5) TMI 98 - HC - Central Excise

Natural justice - deferring of adjudication to go before Settlement Commission - whether the assessee would have a right after adjudication? - Held that - It is true that Section 32E (1) as it stood before the amendment of 22 of 2007 enabled an assessee to make an application at any stage of a case. But the first proviso to Section 32E (1) even before amendment made it clear that no application can be entertained by the Settlement Commission in cases, which were pending with the Appellate Tribunal or any Court. The same prescription is retained under the third proviso to Section 32E (1), even after amendment. The question as to whether the assessee would have a right after adjudication does not arise any more, after Amendment Act 22 of 2007. The right is conferred by Section 32E (1) only before adjudication and not after adjudication, at least after Amendment Act 22 of 2007. By the letter dated 27-12-2016, the petitioner merely requested the 4th respondent not to pass an order of adjudication, so that he could go before the Settlement Commission. At least if the petitioner had made an application on 27- 12-2016 before the Settlement Commission claiming ignorance of the order of adjudication dated 24-12-2016, he may be entitled to raise all the legal issues. But even till date the petitioner has not made any application before the Settlement Commission. But admittedly the order of adjudication has been served at least on 18-01-2017 - the petitioner is not even entitled to raise any of the above issues. Petition dismissed - decided against petitioner.

Summary

Issues:
Challenge to Order-in-Original demanding service tax, interest, and penalty. Interpretation of Section 32E of the Central Excise Act, 1944 regarding the right to approach the Settlement Commission before adjudication.

Detailed Analysis:

1. The petitioner, engaged in construction business, challenged an Order-in-Original demanding service tax, interest, and penalty. The petitioner had made partial payments before the show cause notice and submitted a reply, followed by a request to defer adjudication to approach the Settlement Commission.

2. The key issue was the interpretation of Section 32E of the Central Excise Act, 1944, enabling an assessee to apply to the Settlement Commission before adjudication. The petitioner argued that their right to approach the Settlement Commission was not extinguished until the order of adjudication was served.

3. The Court emphasized the importance of serving orders to affected parties as per Section 37C. Differentiating between rights against an order of adjudication and rights available before adjudication, the Court highlighted that certain rights accrue only after communication of the order.

4. The petitioner's counsel argued that the amendment to Section 32E in 2007 restricted the right to approach the Settlement Commission before adjudication, eliminating the possibility of applying post-adjudication.

5. Referring to the Bombay High Court case, the petitioner sought a purposive interpretation of "before adjudication." However, the Court disagreed, stating that the language of the statute was deliberate and intended to distinguish between rights in fight mode and settlement mode.

6. The Court cited the Punjab and Haryana High Court's ruling, affirming that an order of adjudication deprives the Settlement Commission of jurisdiction. As the petitioner had not approached the Settlement Commission despite the order of adjudication being served, they were not entitled to raise legal issues.

7. Consequently, the writ petition was dismissed, allowing the petitioner to file a statutory appeal against the Order-in-Original. The Court advised leniency in case of any delays in filing the appeal.

8. The judgment clarified that the petitioner's failure to approach the Settlement Commission before the order of adjudication was served precluded them from raising legal issues related to the interpretation of Section 32E. The ruling highlighted the distinction between rights available before and after adjudication under the Central Excise Act, 1944.