2021 (2) TMI 514 - HC - Service Tax

Jurisdiction to impose penalty - Levy of late fee payable under Rule 7C of the Service Tax Rules, 1994 - submission of petitioner is that late fee was imposed beyond the scope of the Show Cause Notice cannot be countenanced in as much as the returns were filed belatedly by the petitioner after the issuance of Show Cause Notice - HELD THAT - If the Petitioner had filed its periodical returns under Section 70 of the Finance Act, 1994 read with Rule 7C of the Service Tax Rules, 1994 belatedly prior to the issue show cause notice and if there was a deficit in the payment of late fee and if no proposal was made in the show cause notice to recover such late fee, the arguments of the learned counsel for the petitioner can be considered. Therefore, it would be incorrect to state that the first respondent Settlement Commission was not justified and asking the petitioner to pay a late fee of ₹ 1,46,000/- for delayed filing of returns while passing the impugned order. Further, before the Settlement Commission, the petitioner had prayed for waiver of late fee as the petitioner was facing the extreme financial constraints. In the alternative, the petitioner prayed for time to pay the late fee. Since the petitioner himself offered to pay the late fee of ₹ 1,28,000/- instead of ₹ 1,66,000/- as was demanded by the respondents, there is no justification in this Writ Petition - Further, under the Scheme of Section 32F of the Central Excise Act, 1944 as made applicable for settling of cases under the Finance Act, 1994, it is to be observed that every order passed by the Settlement Commission is final and conclusive and therefore such orders of the Settlement Commission cannot be interfered. Unless the order passed by the Settlement Commission is contrary to the provisions of the Act, it cannot challenged. The Court while exercising its jurisdiction under Article 226 of the Constitution of India is also not concerned with the correctness or otherwise of the decision arrived by the Settlement Commission or Tribunal whose orders are challenged before it unless there is perversity in the order impugned before it or there was a material irregularity in the procedure followed by such Tribunal while passing the order impugned before it which had caused prejudice to the petitioner or there was a violation of Principles of Natural Justice. The petitioner has not made out a case for any interference as the petitioner himself agreed to pay the late fee of ₹ 1,28,000/- before the first respondent Settlement Commission - petition dismissed.

Summary

Issues:
Challenge to impugned order by Settlement Commission regarding late fee imposition under Rule 7C of Service Tax Rules, 1994 without proposal in Show Cause Notice. Interpretation of Section 32E of Central Excise Act, 1944 in relation to settlement of cases. Validity of late fee imposition and financial constraints faced by petitioner. Jurisdiction of Settlement Commission and interference under Article 226 of Constitution of India.

Analysis:
The petitioner challenged the Settlement Commission's order imposing a late fee of &8377; 1,46,000 under Rule 7C of the Service Tax Rules, 1994, contending that it was unjustified as there was no proposal in the Show Cause Notice. The petitioner argued that late fee is for return filing delay, and since penalty was already imposed for non-filing, the late fee was unwarranted. Reference was made to Section 32E of the Central Excise Act, 1944, allowing settlement applications even without filed returns. The petitioner claimed the late fee was unsustainable due to this provision. The Division Bench decision highlighted that the Settlement Commission cannot exceed the Show Cause Notice scope, similar to Assessing Officers' limitations.

Defending the Settlement Commission's order, the respondents cited precedents and contended that the late fee was justified as returns were filed belatedly post-Show Cause Notice issuance. They argued that the Commission's order aimed to settle the dispute comprehensively, preventing interference under Article 226 of the Constitution to maintain Chapter V finality. The respondents emphasized that unless irregularities in the Commission's procedure exist, interference is unwarranted, asserting the order was not perverse and should be upheld.

During the proceedings, the petitioner offered to pay a reduced late fee due to financial constraints and sought waiver or extended payment time. The Settlement Commission determined the late fee based on both parties' submissions, concluding the petitioner owed &8377; 1,46,000 instead of the proposed &8377; 1,28,000. The Court noted the petitioner's agreement to pay the late fee before the Commission, indicating no grounds for interference. It highlighted that Settlement Commission orders are final and conclusive under Section 32F of the Central Excise Act, 1944, unless contrary to the Act's provisions.

The Court found no basis for interference, as the petitioner's acceptance of the late fee amount and absence of irregularities or perversity in the Commission's order were evident. It dismissed the Writ Petition, emphasizing that the Court's jurisdiction under Article 226 does not involve reviewing Commission or Tribunal decisions unless procedural irregularities or violations of natural justice occur. The judgment concluded that the petitioner failed to establish grounds for interference, leading to the dismissal of the Writ Petition without costs.