2005 (4) TMI 93 - HC - Central Excise

Summary

Issues Involved:
1. Whether interest is leviable on the additional duty of customs/Countervailing Duty (CVD).
2. Whether the Settlement Commission has inherent power to rectify a mistake in its final order.
3. Whether the Settlement Commission has the power to correct accidental errors in its final order.

Detailed Analysis:

1. Interest on Additional Duty of Customs/Countervailing Duty (CVD):
The petitioner, a public limited company, failed to fulfill its export obligation under the Export Promotion Capital Goods Licence (EPCG Licence) and paid the duty foregone voluntarily. The Customs Department issued a show cause notice demanding duty and interest at 24% per annum. The petitioner filed applications before the Settlement Commission, which partially waived the interest, directing the petitioner to pay interest at 10% per annum on both basic customs duty and CVD. The petitioner contended that no interest should be levied on the CVD since it is available as Modvat credit under Rule 57Q of the Central Excise Rules, 1944, and no financial accommodation accrued to it. The High Court noted that subsequent to the petitioner's case, the Settlement Commission had taken a different view in four other cases, holding that no interest is leviable on the CVD as it is available as Modvat credit. The Court remanded the matter back to the Settlement Commission for fresh consideration, directing it to pass a reasoned order.

2. Inherent Power of Settlement Commission to Rectify Mistakes:
The petitioner argued that the Settlement Commission failed to address the issue of interest on CVD in its final order, constituting an error apparent on the face of the record. The petitioner relied on various judgments, including Grindlays Bank Ltd. v. Industrial Tribunal, which held that tribunals have inherent jurisdiction to correct errors to prevent injustice. The High Court observed that every tribunal or court has inherent jurisdiction to correct its errors to avoid injustice. However, the Court did not decide this larger question, as it found the issue could be resolved on narrower grounds based on undisputed facts.

3. Power to Correct Accidental Errors:
The petitioner submitted that the Settlement Commission has inherent power to rectify accidental errors or omissions. The Settlement Commission, in its order dated 10th June 2004, rejected the petitioner's application for rectification, stating that there was no mistake or accidental error in its final order. The High Court noted that the Settlement Commission had taken a different view in subsequent cases, indicating a possible error in the petitioner's case. The Court remanded the matter to the Settlement Commission for fresh consideration, directing it to pass a reasoned order addressing the rival contentions.

Conclusion:
The High Court quashed and set aside the final order dated 26th February 2002 of the Settlement Commission to the extent it granted interest at 10% per annum on the additional duty of customs (CVD). The matter was remitted back to the Settlement Commission for fresh consideration, with a direction to pass a reasoned order within three months, addressing the rival contentions and following principles of natural justice. The larger questions regarding the inherent power of the Settlement Commission to rectify mistakes and the levy of interest on CVD were left open for consideration in a proper case.