2015 (6) TMI 776 - HC - Central Excise

Settlement Commission rejected the application - scope of the powers of the Commission - Bifurcation or segregation of the issues in the show cause notice is permissible or not - Differential duty on aluminium conductors manufactured - Wrong availment of Cenvat credit - Held that - The term case has been defined to mean any proceeding under the Act or any other Act for the levy, assessment and collection of Excise duty, pending before an adjudicating authority on the date on which the Application under sub-section (1) Section 32E is made. The Settlement Commission had before it an Application and in respect of a case relating to the Assessee. If the case relating to the Assessee according to Mr. Jetly appearing before us for the Revenue is that which pertains to the show cause notice, then, we do not see how the Commission could have refused to entertain the Application. If the case relating to the Applicant before the Commission is the show cause notice and it is not yet adjudicated but the Settlement Commission can make an adjudication in terms of sub-section (1) and settle it, then, we do not see how the Application could have been rejected or thrown out at the threshold. It is conceded that when the Petitioners approached the Settlement Commission and admitted their duty liability all that had happened and transpired was that they had received a show cause notice raising the claims and which they have admitted. In such circumstances, the other reason assigned in para 9.7 for rejecting the Application at the threshold cannot be sustained. We are of the view that the Commission would have to proceed in accordance with law. The issues raised in the show cause notice and which are before the Settlement Commission are not dealt with in the Central Board of Excise and Customs order dated 6th January, 2009 or in the Writ Petition which is pending before this Court. In such circumstances, we are of the view that the Commission erred in rejecting the Application made by the Petitioners on the ground that it is not admissible in terms of Section 32E of the Central Excise Act, 1944. The Settlement Commission would have been well advised in proceeding with the Application and passing a final order thereon. Such an approach of the Commission in the given facts and circumstances defeats the object and purpose of approaching the Commission with an Application for settlement of the case. Commission will adjudicate the Application made by the Petitioners under Section 32E in terms of all the claims which are referred to in para 9.2(i) to (iv) but in so far as (i), (ii) and (iii) the adjudication will proceed with regard to payment of interest and the Commission would also be empowered to decide as to whether the show cause notice rightly demands a sum of ₹ 1,59,39,047/- stated to be a Cenvat credit illicitly availed by the Petitioners. - Decided in favour of assessee.

Issues Involved:
1. Demand for differential duty on aluminium conductors.
2. Alleged irregular availment of Cenvat credit.
3. Withdrawal of monthly payment facility and requirement to pay excise duty per consignment.
4. Settlement Commission's rejection of the application for settlement.

Issue-wise Detailed Analysis:

1. Demand for Differential Duty on Aluminium Conductors:
The Petitioners challenged the demand for differential duty on aluminium conductors manufactured and cleared by them. They admitted to the under-valuation of goods and accepted the demand of Rs. 1,72,00,781/-. They also admitted to non-payment of excise duty of Rs. 13,79,686/- and an additional demand of Rs. 13,98,690/- due to excise duty rate differences at the time of issuing supplementary invoices. The Petitioners paid Rs. 2,12,51,157/- as demanded and sought to settle these issues without the imposition of penalties or interest.

2. Alleged Irregular Availment of Cenvat Credit:
The Petitioners did not seek settlement for the alleged irregular availment of Cenvat credit amounting to Rs. 1,59,39,047/-. They claimed this issue was independent and had a strong case on merits. The Settlement Commission noted that the Petitioners' application did not address this aspect, which was part of the show cause notice.

3. Withdrawal of Monthly Payment Facility and Requirement to Pay Excise Duty Per Consignment:
The Petitioners faced proceedings under Rule 12AA of the Cenvat Credit Rules, 2004, and Rule 12CC of the Central Excise Rules, 2002, which led to the withdrawal of the facility for monthly payment of central excise duty for three months. This issue was part of a separate notice dated 6th October 2008 and was subject to an interim order by the High Court.

4. Settlement Commission's Rejection of the Application for Settlement:
The Settlement Commission rejected the Petitioners' application on the grounds that it did not meet the requirements of Section 32E of the Central Excise Act, 1944. The Commission held that the application was not maintainable due to the Petitioners' partial admission of liability and their failure to pay interest on the admitted duty. The Commission also noted that the Petitioners' application was truncated, as it did not cover all issues raised in the show cause notice.

Court's Analysis and Decision:

On the Settlement Commission's Powers:
The Court analyzed the powers of the Settlement Commission under Chapter V of the Central Excise Act, 1944, particularly Sections 32E and 32F. It noted that the Settlement Commission has wide powers to settle cases and can entertain applications involving partial admissions of liability. The Court emphasized that the Settlement Commission's role is to facilitate the settlement of disputes to avoid prolonged litigation.

On the Rejection of the Application:
The Court found that the Settlement Commission erred in rejecting the Petitioners' application. It held that the Commission should have proceeded with the application and adjudicated the issues on their merits. The Court noted that the Petitioners' application was not non-compliant with Section 32E and that the Commission should have considered the Petitioners' arguments regarding the disputed interest and the separate issue of Cenvat credit.

On the Pending High Court Matter:
The Court clarified that the pending writ petition before the High Court was related to a distinct issue concerning the withdrawal of the monthly payment facility and was not connected to the show cause notice dated 30th August 2011. Therefore, the Settlement Commission's rejection of the application on the ground of the pending High Court matter was unjustified.

Conclusion:
The Court set aside the Settlement Commission's order dated 29th May 2013 and directed the Commission to adjudicate the Petitioners' application in accordance with the law. The Commission was instructed to consider all claims referred to in the show cause notice, including the disputed interest and the demand for Cenvat credit, and to pass a final order without being influenced by its earlier conclusions. The Court emphasized that it had not expressed any opinion on the merits of the show cause notice.

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