2019 (5) TMI 219 - HC - Central Excise

Settlement Application - exemption for the Polyvastra for the period from 1996 to 2002 as per the KVIC Certificate issued to M/S.Majestic Dyers and Printers which is the branch of the Petitioner - Notification No.8/96 - HELD THAT - It is evident that the Petitioner approached the Settlement Commission in respect of the demand made under the four show cause notices referred to supra for an aggregate sum of ₹ 7,00,42,408/-. It is also evident from paragraph 27 of the Impugned Order that the Settlement Commission has fixed the total liability of the applicant/petitioner herein at ₹ 4,64,72,058/- after accepting the contentions of the Petitioner herein with regard to certain heads of demand for excise duty by the Respondents - it is clear that the Petitioner has derived substantial benefit by approaching the Settlement Commission. In the present Writ Petition, the Petitioner seeks to quash the Impugned Order of the Settlement Commission in so far as it denies exemption to the Petitioner from payment of excise duty for processing of Polyvastra for the period extending from the years 1996 to 2002. In effect, the prayer in the Writ Petition is confined to a portion of the order of the Settlement Commission whereby the demand of excise duty in respect of the processing of Polyvastra was held to be valid by the Settlement Commission. The Petitioner cannot be permitted to approbate and reprobate - petition dismissed.

Issues Involved:
1. Validity of the exemption claim under Notification No. 8/96 CE for Polyvastra processing.
2. Legitimacy of the Settlement Commission's order.
3. Applicability of the doctrine of approbate and reprobate.
4. Interpretation and application of exemption notifications.

Issue-wise Detailed Analysis:

1. Validity of the exemption claim under Notification No. 8/96 CE for Polyvastra processing:
The petitioner, a partnership firm, claimed exemption from excise duty for processing Polyvastra based on a KVIC certificate issued to its branch, M/S. Majestic Dyers and Printers (MDP). The petitioner contended that the KVIC certification for MDP was valid for claiming exemption under Notification No. 8/96 CE from 1996 to 2002. However, the Settlement Commission found that MDP was a separate entity and not a branch of the petitioner. Therefore, the exemption notification was erroneously availed by the petitioner, making them liable to pay the excise duty demanded.

2. Legitimacy of the Settlement Commission's order:
The Settlement Commission's order fixed the petitioner's liability at ?4,64,72,058/- out of the original demand of ?7,00,42,408/-. The petitioner was granted immunity from penalty and prosecution, with interest fixed at 10% per annum. The petitioner challenged this order, arguing that the Settlement Commission did not consider the Investigation Report's observation that MDP was a branch of the petitioner. However, the court noted that the Settlement Commission had considered the Investigation Report and the exemption under entry 52.09 (Khadi fabrics) was accepted, but the exemption under entry 52.10 (Polyvastra) was denied due to lack of evidence showing MDP as a branch of the petitioner.

3. Applicability of the doctrine of approbate and reprobate:
The court held that the petitioner could not approbate and reprobate by accepting the favorable portions of the Settlement Commission's order while challenging the unfavorable parts. The petitioner had derived substantial benefits from the Settlement Commission, including a reduced liability and immunity from penalties. The court cited the principle that a party cannot accept and reject the same instrument selectively, referencing the Supreme Court's judgments in R.N. Gosain v. Yashpal Dhir and Sanghvi Reconditioners Pvt. Ltd. v. Union of India.

4. Interpretation and application of exemption notifications:
The court emphasized the need for strict interpretation of exemption notifications. Entry 52.10 of Notification No. 8/96 CE specified that the exemption was organization-specific, requiring KVIC approval for the processing of Polyvastra by the organization claiming the exemption. The petitioner failed to provide credible evidence that MDP was a branch of the petitioner and had not obtained KVIC certification in its own name until April 2002. Consequently, the petitioner was not entitled to the exemption for the period from 1996 to 2002.

Conclusion:
The court dismissed the writ petition, directing the petitioner to pay the unpaid principal amount of ?2,60,28,995/- with interest at 10% per annum within six weeks. The court upheld the Settlement Commission's order, reinforcing the principles of strict interpretation of exemption notifications and the doctrine of approbate and reprobate.

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