2002 (3) TMI 59 - HC - Central Excise

Summary

Issues Involved:
1. Challenge to the order of the Settlement Commission.
2. Alleged diversion of duty-free raw materials.
3. True and full disclosure requirement under Section 32E(1) of the Central Excise Act.
4. Scope of the Settlement Commission's jurisdiction and discretion.
5. Judicial scrutiny of the Settlement Commission's decision-making process.

Issue-wise Detailed Analysis:

1. Challenge to the order of the Settlement Commission:
The petitioner challenged the order dated 15th January 2002 of the Settlement Commission, Customs and Central Excise Additional Bench, Mumbai, under Section 32F of the Central Excise Act, 1944. The petitioners contended that the Settlement Commission should have considered disclosures made by the Commissioner of Central Excise (Investigation) regarding the diversion of goods, even though these were not part of the original application under Section 32E(1).

2. Alleged diversion of duty-free raw materials:
The 1st petitioner, a 100% Export Oriented Unit (EOU), was accused of diverting duty-free raw materials procured under CT-3 Certificates. Investigations revealed that the petitioners procured 40,000 kgs of yarn involving duty of Rs. 46,73,700/- from M/s. Sarla Polyester Ltd., which were allegedly diverted to the local market instead of being used for manufacturing export goods. The Settlement Commission concluded that there was a significant evasion of duty based on the evidence presented.

3. True and full disclosure requirement under Section 32E(1) of the Central Excise Act:
The petitioners admitted to a duty liability of Rs. 2,07,062/- but failed to disclose the diversion of goods involving higher duty evasion. Section 32E(1) mandates a full and true disclosure of duty liability by the assessee. The Settlement Commission found that the petitioners did not make a full and true disclosure, which justified the rejection of their request for immunity from prosecution.

4. Scope of the Settlement Commission's jurisdiction and discretion:
The Settlement Commission has the discretion to pass orders on matters covered by the application and other matters relating to the case referred to in the report of the Commissioner (Investigation) under Section 32F(1) or (6). The Commission confined its inquiry to the disclosures made in the application filed under Section 32E(1) and did not extend it to the issues raised in the subsequent show cause notices. The court held that the Commission exercised its discretion judiciously and reasonably.

5. Judicial scrutiny of the Settlement Commission's decision-making process:
The court emphasized that its role in writ jurisdiction is to examine the legality of the decision-making process, not the validity of the order itself. The Settlement Commission followed the proper decision-making process, and the court found no fault in it. The petitioners did not approach the Commission with clean hands and failed to make the required full and true disclosure. Consequently, the court dismissed the writ petition, allowing the petitioners the option to approach the Settlement Commission for the settlement of other cases related to the subsequent show cause notices.

Conclusion:
The writ petition was dismissed in limine with no order as to costs. The court upheld the Settlement Commission's decision, emphasizing the importance of full and true disclosure by the petitioners and the proper exercise of discretion by the Commission. The petitioners were granted the liberty to approach the Settlement Commission for the settlement of other cases related to the additional show cause notices.