2014 (8) TMI 291 - HC - Central Excise

Order of settlement commission - appellant contested the demand u/s 11D as per parallel invoices issued for obtaining finance - commission remanded back the matter - Held that - Considering the provisions of law, more particularly section 32E and 32F of the Act, the Settlement Commission is justified in not accepting the suggestion made by the learned advocate appearing on behalf of the petitioner that the case may be settled only in respect of first two issues where duty demand has been accepted by the petitioner and the third issue relating to section 11D may be referred to the adjudicating for deciding as per law. However, the learned Settlement Commission has erred in rejecting the application by observing that the demand of duty amounting to ₹ 35,13,847/- under section 11D of the Act has not been accepted by the petitioner. Settlement Commission has materially erred in not exercising the jurisdiction and passing order under section 32F(5) of the Act with respect to demand of duty amounting to ₹ 35,13,847/- under section 11D of the Act, which was disputed by the petitioner. - matter remanded back to commission - Decided in favour of assessee.

Issues Involved:
1. Legality of the Settlement Commission's rejection of the petitioner's application under Section 32L of the Central Excise Act.
2. Requirement for the Settlement Commission to pass a final order under Section 32F(5) of the Central Excise Act.
3. Applicability and interpretation of Section 11D of the Central Excise Act regarding duty liability.

Issue-Wise Detailed Analysis:

1. Legality of the Settlement Commission's Rejection of the Petitioner's Application under Section 32L of the Central Excise Act:
The petitioner challenged the Settlement Commission's rejection of their application under Section 32L of the Central Excise Act. The Settlement Commission rejected the application on the grounds that the petitioner did not accept the demand of Rs. 35,13,847 under Section 11D and raised a legal issue regarding the applicability of Section 11D where there is no removal/sale of goods under an invoice. The Commission considered this as a failure to cooperate and thus rejected the application.

2. Requirement for the Settlement Commission to Pass a Final Order under Section 32F(5) of the Central Excise Act:
The petitioner argued that once the Settlement Commission allowed the application to proceed under Section 32F(1) after the petitioner complied with all requirements, it was mandatory for the Commission to pass a final order under Section 32F(5). The petitioner contended that the Settlement Commission failed to exercise its powers under Section 32F(5) by not determining the amount of duty, interest, fine, and penalty after following the due procedure. The court noted that the Settlement Commission should have passed an appropriate order under Section 32F(5) after examining the records, reports, and giving an opportunity for a hearing.

3. Applicability and Interpretation of Section 11D of the Central Excise Act Regarding Duty Liability:
The petitioner did not accept the duty liability claimed under Section 11D for parallel invoices issued for obtaining finance. The Settlement Commission viewed this as a legal issue beyond its purview to settle. The court observed that the petitioner was not required to accept the entire demand raised in the Show Cause Notice while approaching the Settlement Commission. The petitioner was only required to disclose his duty liability, pay the accepted additional duty along with interest, and the Settlement Commission was then required to determine the disputed amount under Section 32F(5). The court held that the Settlement Commission erred in not addressing the issue of the demand under Section 11D, as it was within its jurisdiction to do so.

Conclusion:
The court quashed the Settlement Commission's order rejecting the petitioner's application and remanded the matter back to the Settlement Commission. The Commission was directed to pass an appropriate order under Section 32F(5) of the Central Excise Act regarding the demand of Rs. 35,13,847 under Section 11D, after following due procedure and providing an opportunity for a hearing. The Settlement Commission was instructed to complete this exercise within six months from the date of receipt of the court's order. The rule was made absolute to this extent, with no order as to costs.

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