2021 (8) TMI 668 - HC - Service Tax

Rejection of application by the Settlement Commission - Demand proposed on exempted Course - Courses approved by All India Council for Technical Education (AICTE) as stated in the affidavit - vires of Section 76(A)(6)(b) of the Finance Act, 2010, inserting the above Explanation to Section 65(105)(zzc) of Finance Act, 1994 - Settlement Commission rejected the application on the ground that the dispute exists between the Department and the petitioner and therefore, the jurisdiction of the Settlement Commission under the provisions of the Act, is ousted. HELD THAT - This Court is of an opinion that the Settlement Commission followed the procedures by considering the application filed by the petitioner as well as the issues proposed for settlement. When the Settlement Commission, in clear terms, formed an opinion that the failure of the petitioner/applicant and the absence of true spirit of settlement shows a lack of cooperation and further, the petitioner had not come out with true and full nature of disclosure and in this context, the Settlement Commission formed an opinion that the Commission cannot take on itself the role of Adjudicator. The observations made by the first respondent that the Bench is constrained to believe that the lack of cooperation on the applicant/petitioner emerges as the main cause for the kind of deadlock to this issue. The Commission further proceeded by stating that the Settlement Commission is not the Forum to decide the Bench contentious issues by weighing in the evidence let in by the rival parties to the proceedings and conclude one way or the other. The Settlement Commission has rightly formed an opinion that the disputed issues cannot be adjudicated in an application filed to settle the issues. Thus, the spirit of provision under the Central Excise Act, in the matter of entertaining the application for settlement has been rightly considered by the Settlement Commission and there is no infirmity or perversity as such - The settlement of cases under Section 32E of the Central Excise Act, no doubt, is the right provided to a person. However, such right is contemplated subject to certain terms and conditions. The settlement, in other words, is a facility provided to get this from the adjudication. Therefore, the party willing to settle the issues statutorily is expected to approach with true and full disclosure of facts and extend full cooperation for the settlement of issues. Settlement though read under the Act, cannot be construed as conclusive, in view of the fact that in the event of non-settlement, the issues are to be adjudicated before the Competent Authority under the provisions of the Act. Therefore, it is an additional facility or redressal mechanism contemplated under the Act for the benefit of the aggrieved persons/assessees - this being the scope and spirit of the settlement to be done under the provisions of the Central Excise Act, this Court is of an opinion that the findings of the Settlement Commission in the impugned orders are candid and convincing and there is no infirmity or perversity as such. The writ petition is dismissed.

Summary

Issues Involved:
1. Exemption from service tax for AICTE-approved courses.
2. Jurisdiction of the Settlement Commission.
3. Full and true disclosure by the petitioner.
4. Cooperation with the Settlement Commission.
5. Role of the Settlement Commission as an adjudicating authority.

Detailed Analysis:

1. Exemption from Service Tax for AICTE-Approved Courses:
The petitioner, a non-profit organization, claimed exemption from service tax for its AICTE-approved courses (PGPM and PGDM). The Service Tax Department treated the petitioner’s activities as taxable under 'Commercial Training or Coaching Services' and issued multiple show cause notices. The petitioner argued that the courses were exempt from service tax, which was not considered by the Settlement Commission, leading to the demand being upheld.

2. Jurisdiction of the Settlement Commission:
The Settlement Commission rejected the petitioner’s application, stating that the existence of a dispute between the Department and the petitioner ousted its jurisdiction. The Commission emphasized that it could not entertain applications where there were contentious issues requiring adjudication, as it is not an adjudicating authority but an arbitration forum.

3. Full and True Disclosure by the Petitioner:
The Settlement Commission found that the petitioner did not provide a full and true disclosure of facts. The petitioner admitted liability for a portion of the demanded amount but contested the rest, claiming exemptions. The Commission noted that the petitioner failed to effectively counter the Department’s claims and did not provide sufficient evidence to support their exemption claims.

4. Cooperation with the Settlement Commission:
The Commission observed a lack of cooperation from the petitioner, which was a primary reason for the deadlock. The petitioner did not respond adequately to the objections raised by the Department, nor did it provide necessary clarifications regarding the AICTE approval and exemptions. The Commission highlighted that cooperation and a true spirit of settlement are essential for the process.

5. Role of the Settlement Commission as an Adjudicating Authority:
The Settlement Commission reiterated that it is not an adjudicating authority and cannot decide on contentious issues based on evidence from rival parties. The Commission’s role is to facilitate settlements where there is a consensus. The presence of unresolved disputes on facts and tax liabilities meant that the case was unsuitable for settlement through the Commission.

Conclusion:
The High Court upheld the Settlement Commission’s decision, stating that the Commission followed due procedures and correctly identified the lack of cooperation and full disclosure from the petitioner. The Court emphasized that the Settlement Commission is not the forum for adjudicating disputed issues and that the petitioner’s failure to meet the statutory requirements justified the rejection of the settlement application. The writ petition was dismissed, affirming the Commission’s findings and the legal principles governing the settlement process under the Central Excise Act.