2016 (7) TMI 423 - HC - Service Tax

Validity of order of Settlement Commission rejecting their settlement application with respect to service tax liability - Held that - Viewed from any angle, the Settlement Commission has erred in rejecting the petitioner s application for settlement dated 25.11.2013, by its order dated 14.11.2014, on the ground that the said application was barred by Section 32-(O)(1)(i) of the Act. As noted hereinabove the Explanation to Section 32-O(1)(i) does not have retrospective effect and, consequently, the petitioner s application dated 25.11.2013 would be barred under Section 32-(O)(1)(i) of the Act only if either of the two earlier settlement applications, submitted by the assesee, had suffered imposition of penalty for concealment of duty liability before the Settlement Commission itself. We see no reason, however, to undertake a minute scrutiny of the earlier orders passed by the Settlement Commission, on 30.10.2013 and 06.11.2013, to determine whether penalty was imposed on the petitioner for concealment of duty liability before the Settlement Commission itself. The order dated 14.11.2014, impugned in W.P. No.38658 of 2015, is set aside and the matter is remanded to the Settlement Commission for its consideration afresh in the light of the law declared and the observations made in this judgement. - Decided in favor of petitioner.

Summary

Issues Involved:
1. Validity of the rejection of the settlement application by the Settlement Commission.
2. Imposition of penalties without valid grounds or reasons.
3. Applicability of Section 32-O of the Central Excise Act to bar subsequent settlement applications.
4. Retrospective or prospective application of the Explanation to Section 32-O(1)(i) of the Act.
5. Delay in filing the writ petition and its impact on the case.

Detailed Analysis:

1. Validity of the Rejection of the Settlement Application:
The petitioner sought a writ of mandamus to declare Order No.53/2014-ST dated 14.11.2014, which rejected their settlement application for the period October 2010 to March 2012, as arbitrary, illegal, unlawful, and violative of principles of natural justice. The Settlement Commission rejected the application based on the bar under Section 32-O of the Central Excise Act, noting that the petitioner could have filed the application earlier along with the previous ones or before the decisions on the previous applications, as the show-cause notices were periodical in nature.

2. Imposition of Penalties Without Valid Grounds or Reasons:
The petitioner challenged the imposition of penalties in two separate orders:
- Order No.38/2013-ST dated 06.11.2013, which imposed a penalty of ?19,00,000/-.
- Order No.36/2013-ST dated 30.10.2013, which imposed a penalty of ?2,35,000/-.
The petitioner contended that these penalties were imposed without any valid grounds or reasons and were arbitrary, unlawful, and violative of principles of natural justice. The Settlement Commission had imposed these penalties while granting partial immunity from penalty, considering the petitioner's full and true disclosure and cooperation during the proceedings.

3. Applicability of Section 32-O of the Central Excise Act:
The key issue was whether the bar under Section 32-O(1)(i) applied to the petitioner's third settlement application. The petitioner argued that the mere omission to file an application under Section 32-E of the Act for the third show-cause notice did not justify its rejection. The Settlement Commission had settled identical cases arising out of the earlier two show-cause notices without any objection. The court had to determine if the penalties imposed in the earlier orders (30.10.2013 and 06.11.2013) for concealment of particulars of duty liability before the Central Excise Officer barred the third application.

4. Retrospective or Prospective Application of the Explanation to Section 32-O(1)(i):
The court examined whether the Explanation added to Section 32-O(1)(i) by the Finance Act 2 of 2014, effective from 06.08.2014, applied retrospectively or prospectively. The Explanation clarified that "concealment of particulars of duty liability" related to concealment made from the Central Excise Officer. The court concluded that the Explanation did not have retrospective effect and applied only from the date of its enactment. Consequently, the petitioner's application dated 25.11.2013 would be barred under Section 32-O(1)(i) only if the penalties in the earlier applications were for concealment of duty liability before the Settlement Commission itself.

5. Delay in Filing the Writ Petition:
The court addressed the delay of over one year in filing W.P. No.38658 of 2015, which challenged the order dated 14.11.2014. The court noted that the rule against entertaining belated claims is a rule of practice, not law, and each case depends on its facts. The court found that the delay was not inordinate and did not result in third-party rights intervening. Therefore, the delay did not bar the petitioner's claim.

Conclusion:
The court set aside the Settlement Commission's order dated 14.11.2014 and remanded the matter for fresh consideration in light of the law declared and observations made in the judgment. The court directed the Settlement Commission to give the petitioner an opportunity of being heard before passing a new order. Consequently, W.P. Nos.38728 and 38751 of 2015 were dismissed as not pressed, and W.P. No.38658 of 2015 was disposed of accordingly, without costs.