2017 (9) TMI 354 - HC - Central Excise

Rejection of Settlement Application - assessment under Sections 4 and 4A of the CEA - N/N.10/2010-CE (N.T.) dated 27th February, 2010 - packing machines - Petitioner approached the Settlement Commission under Section 32 E of the CEA with a prayer to admit the application and settle the SCN issued to it. The Settlement Commission then directed the application to be proceeded with under Section 32 F (1) on 2nd July, 2012 and called for a report from the Additional Commissioner under Section 32 (F) (3), which was submitted on 8th August, 2012 The Settlement Commission, after considering the same and after hearing the parties, by the impugned order dated 3rd September, 2012, by a 2 1 majority sent the matter to the adjudicating authority and did not entertain the application of the Petitioner - Held that - if there is a complex question of fact or law or a mixed question requiring adjudication, then the Settlement Commission, may, depending on the facts of each case, refer the matter to the adjudicating authority, more so in a situation where it is of the opinion that a settlement is unlikely. The powers of the Settlement Commission under Section 32L (1) of the CEA to send the matter to the adjudicating authority, if the applicant does not cooperate with the Settlement Commission, is in addition to the powers under Section 32F (5) of the CEA. If in a settlement proceeding, any party refuses to cooperate with the authority, which is dealing with the dispute, it cannot expect it to proceed further. In any Alternate Dispute Resolution mechanism namely mediation, conciliation etc., cooperation of the parties is a pre-requisite and an essential condition. Thus, Section 32 L of the CEA merely states the obvious i.e. if there is noncooperation, the matter would be sent to the adjudicating authority. In any process of settlement, it cannot be expected that the Settlement Commission would force any party into a settlement. The power of granting immunity from prosecution and penalty, vested with the Settlement Commission, is a consequence being provided to any applicant before the Settlement Commission, only to ensure the speedier disposal and resolution of the disputes and is not a tool for delaying adjudication. Whenever the Settlement Commission comes to the conclusion that the dispute cannot be resolved by it, it must refer the matter to the adjudicating authority. Any other interpretation to the contrary, defeats the fundamental purpose for constitution of the Settlement Commission namely speedier resolution. The writ petition is dismissed and the matter is sent to the adjudicating authority to proceed from the stage of the issuance of the SCN dated 21st July, 2011, in accordance with law - petition allowed by way of remand.

Issues Involved:
1. Powers of the Customs and Central Excise Settlement Commission to send the matter to the adjudicating authority.
2. Full and true disclosure requirement under Section 32E of the Central Excise Act (CEA).
3. Jurisdiction and powers of the Settlement Commission under Sections 32F and 32L of the CEA.
4. Applicability of Notification No. 10/2010 and the CTU Rules to the machines used by the Petitioner.

Detailed Analysis:

1. Powers of the Customs and Central Excise Settlement Commission:
The primary issue in this case is whether the Settlement Commission has the authority to send the matter to the adjudicating authority by rejecting the Petitioner’s application for settlement. The Court examined the provisions under Sections 32F and 32L of the CEA. It was held that the Settlement Commission has broad powers to pass such orders as it thinks fit, including the power to refer the matter back to the adjudicating authority if the dispute involves complex questions of fact and law. The Court noted that the Settlement Commission is not a substitute for adjudication proceedings and should refer cases involving highly contentious issues back to the adjudicating authority.

2. Full and True Disclosure Requirement under Section 32E of the CEA:
The Petitioner argued that it had made a full and true disclosure of its duty liability, as required under Section 32E of the CEA. The Court found that the Settlement Commission’s finding that its jurisdiction could only be invoked by tax evaders who conceal facts was unsustainable. The Court clarified that forums like the Settlement Commission are created for quicker settlement of disputes and not just for those who evade tax. However, the Court upheld the Settlement Commission’s principal finding that the issue of the nature of the machines used by the Petitioner required detailed enquiry and adjudication.

3. Jurisdiction and Powers of the Settlement Commission under Sections 32F and 32L of the CEA:
The Court analyzed the powers of the Settlement Commission under Sections 32F and 32L. It was held that the Settlement Commission has the discretion to reject an application and refer the matter to the adjudicating authority if it involves complex questions requiring detailed enquiry. The Court agreed with the observations of the Allahabad High Court in Vinay Wire & Poly Product Pvt. Ltd. v. Dir. General of Central Excise, which stated that the powers under Section 32L are in addition to the powers under Sections 32F(5) and 32F(8).

4. Applicability of Notification No. 10/2010 and the CTU Rules:
The controversy revolved around whether the machines used by the Petitioner were “packing machines” as defined in Notification No. 10/2010 and the CTU Rules. The Settlement Commission found that this was a mixed question of fact and law requiring detailed adjudication. The Court did not embark on an enquiry into the nature of the machines but noted that the technical reports and the minority view indicated a clear dispute between the parties. The Court held that such disputes should be adjudicated by the appropriate authority.

Conclusion:
The writ petition was dismissed, and the matter was sent to the adjudicating authority to proceed from the stage of the issuance of the SCN dated 21st July 2011. The Court emphasized the need for expeditious resolution given the delays that had already occurred. No order as to costs was made.

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