MAINTAINABILITY OF WRIT PETITION CHALLENGING ONE PORTION OF ORDER OF SETTLEMENT COMMISSION

[Mr. M. GOVINDARAJAN]

Settlement Commission (‘Commission’ for short) is the forum created by a statute and to deal with cases where voluntary disclosures are made and attempts made to settle the disputes amicably or with the assistance of the Commission.

The object behind the setting up the Settlement Commission is to create a channel whereby tax disputes can be settled expeditiously and in a spirit of conciliation rather than prolonging them through adversarial attitude. The Commission is not designed to provide an escape route for tax evaders. It is, in fact, designed to provide a balanced resolution of tax disputes with a view to avoid lengthy litigation which helps neither the department nor the member of the Trade and Industry. In the proceedings before the Commission, there are no adversaries but only parties to the Settlement. Any assessee can make an application in such form and in such manner as may be prescribed by the Commission and containing “Full & True” disclosure of his duty liability which has not been disclosed before the proper officer having jurisdiction, the manner in which such liability has been derived, the additional amount of Customs or Excise Duty or Service Tax accepted to be payable by him as also the particulars of excisable goods or import or export goods or taxable services in respect of which he admits short levy.

 In ‘Union Of India  V. Ind-Swift Laboratories Ltd’ - 2011 (2) TMI 6 - Supreme Court, the Hon'ble Supreme Court held that an order passed by the Settlement Commission could be interfered with only if the said order is found to be contrary to any statutory provisions of the Act.

Whether a portion of the order of Settlement Commission can be challenged?  The following case laws give answers for this question:

In ‘Sanghvi Reconditioners Private Limited V. Union of India’ – 2010 (2) TMI 6 - SUPREME COURT  the Supreme Court pointed out that the assessee having opted to get their customs duty liability settled by the Settlement Commission cannot be permit to dissect the Settlement Commission’s Order with a view to accept what is favorable to them and reject what is not.

In ‘Fitness One Group India Limited V. Customs, Central Excise & Service Tax Settlement Commission, Chennai’ – 2016 (12) TMI 167 - MADRAS HIGH COURT the petitioner is engaging in providing health and fitness services, business auxiliary service etc.,  A show cause notice was issued to the appellant on 20.10.2014 and also a statement of demand on 02.07.2015 by the Commissioner of Service Tax, Commissionerate – I, Chennai for the irregular credit taken on ineligible input services and irregular credit taken on common input services.  The petitioner preferred an application before the Settlement Commission.  The petitioner admitted the total liability of ₹ 86,02,114/- out of the demand of ₹ 1,30,30,990/-.

The Settlement Commission passed order on his petition.  The petitioner is not aggrieved by the entire order passed by the Settlement Commission but are aggrieved only by a portion of the order.  There are six cases settled by the Settlement Commission.   Out of six cases the petitioner disputed two cases as detailed below-

• Irregular credit taken on ineligible input services – Amount demanded in SCN is ₹ 9,89,796/-.Amount accepted by the petitioner is ₹ 6,24,492 and the balance ₹ 3,65,304 is disputed on the reason that the amount related to pre 01.04.2011;
• Irregular credit taken on common inputs – Amount demanded in SCN is ₹ 15,42,500/-.Amount accepted by the petitioner is ₹ 7,17,572/- and the balance ₹ 8,24,928/- is disputed on the reason that the amount related to pre 01.04.2011.

The petitioner contended that-

• the Settlement Commission committed a serious error on the said issue as to whether the reassessment made as per Notification 3/2011-CE (NT), dated 01.03.2011 will have retrospective effect and apply even for the period prior to 01.04.2011;
• prior to 01.04.2011 the CENVAT credit of service tax paid on input service was eligible even if it was used for trading since it was not an exempted service;
• the Commission committed a serious error under these two heads and therefore the Court should exercise its jurisdiction under Article 226 of the Constitution and interfere with the order of Settlement Commission.

The High Court held that the first and foremost what is to be borne in mind is that the petitioner cannot selectively accept the portion of the order passed by the Settlement Commission and dispute correctness of the other portions of the order which in the opinion of the petitioner is not fully favorable.

The High Court further held that the scope of interference of orders passed by the Settlement Commission while exercising the writ jurisdiction is no longer res integra.  The High Court will not exercise its extraordinary jurisdiction examining the correctness of the order of the Settlement Commission as if acting as an Appellate Authority.    So far the findings of the fact recorded by the Commission or questions of fact are concerned, the same is not opened for examination either by the High Court or by the Supreme Court.   Admittedly the petitioner had full and effective opportunity before the Commission.  It is on their own volition they had approached the Commission and filed an application for the settlement of the case.   Unless and until the petitioner is able to establish total non application of mind or perversity in the approach of the Commission or when there is violation of principles of natural justice, the question of examining the correctness of the proceedings of the Commissioner in exercise of writ petition cannot be made.  There is no challenge to the impugned order on these grounds.  The High Court dismissed the writ petition.

Thus it is evident that the writ jurisdiction cannot be invoked to challenge the partial order of Settlement Commission unless it violates the  principles of natural justice or perversity in the approach of the Commission.