2019 (9) TMI 834 - HC - Central Excise

Maintainability of Settlement Application - It is the case of the petitioner that the Settlement Commission directed the revenue to submit a report on the Cenvat credit by 30th October, 2017 and to forward the same to the petitioner company as well - Whether the Settlement Commission was justified in holding that there was non-cooperation on the part of the petitioner? HELD THAT - The Settlement Commission has not recorded any finding that the petitioner has not made a true and full disclosure of the facts pertaining to it. More importantly, the Settlement Commission has relegated the matter to the adjudicating authority not on account of failure to make a full and true disclosure on the part of the petitioner but because it was of the view that the case will necessarily involve proper appreciation of facts and circumstances based on documents and records available with the petitioner and correct interpretation of law and procedure. In this view of the matter, when having regard to the totality of the facts of the case, the conduct of the petitioner cannot be said to amount to non-cooperation and the fact that the Settlement Commission has thought it fit to send the matter to the adjudicating authority as it was of the view that it does not have the jurisdiction to decide the dispute with regard to either applicability of service tax and/or entering into the questions raised before it, in the opinion of this court the Settlement Commission was not justified in sending the matter to the adjudicating authority under section 32-L of the Act which has serious consequences in view of the provisions of section 32-O(1)(iii) which postulate that where the case of such person is sent back to the Central Excise Officer having jurisdiction by the Settlement Commission under section 32L, then he shall not be entitled to apply for settlement under section 32E in relation to any other matter. In the opinion of this court, if the Settlement Commission was of the opinion that considering the nature of the dispute raised before it, the matter was required to be remitted to the adjudicating authority, it should have done so in the exercise of powers under section 32F(5) of the Act which empowers it to pass such orders on the application as it thinks fit. The impugned order passed by the Settlement Commission, to the extent it holds that the conduct of the petitioner in the proceedings before it amounts to non-cooperation and, therefore, is liable to be rejected and sent back to the adjudicating authority on this ground alone is hereby quashed and set aside - Petition allowed in part.

Issues Involved:
1. Non-cooperation by the petitioner.
2. Admissibility of CENVAT credit.
3. Jurisdiction and powers of the Settlement Commission.
4. Violation of principles of natural justice.

Issue-wise Detailed Analysis:

1. Non-cooperation by the petitioner:
The Settlement Commission held that there was non-cooperation on the part of the petitioner, leading to the rejection of the application under section 32L of the Central Excise Act. The petitioner argued that mere non-appearance on some dates would not amount to non-cooperation, emphasizing that non-cooperation should be understood as non-disclosure or suppression of facts. The court noted that the petitioner had made a full and true disclosure of the facts and had paid a significant portion of the admitted tax liability. The court found that the previous occasions on which the petitioner had either not appeared or sought adjournments should not have been considered as non-cooperation, especially since the Settlement Commission had not found any concealment or suppression of facts by the petitioner.

2. Admissibility of CENVAT credit:
The petitioner sought to utilize CENVAT credit to pay off part of its service tax liability, which was disputed by the revenue authorities. The Settlement Commission found that the case involved proper appreciation of facts and circumstances based on documents and records available with the petitioner and correct interpretation of law and procedure, particularly the CENVAT Credit Rules, 2004. The court noted that the Settlement Commission received conflicting reports regarding the admissibility of CENVAT credit and that the petitioner had submitted all necessary documents for verification. The court held that the Settlement Commission was not justified in sending the matter to the adjudicating authority under section 32L of the Act based on the disputed CENVAT credit issue.

3. Jurisdiction and powers of the Settlement Commission:
The Settlement Commission held that it did not have the power to adjudicate disputed questions of fact and law, referring to various judicial precedents. The court, however, observed that the Settlement Commission has broad powers under section 32F(5) of the Act to pass such orders on the application as it thinks fit, including referring the matter back to the adjudicating authority. The court held that if the Settlement Commission was of the opinion that the nature of the dispute required adjudication by the appropriate authority, it should have exercised its powers under section 32F(5) rather than section 32L, which has severe consequences for the petitioner.

4. Violation of principles of natural justice:
The petitioner contended that the impugned order was passed without affording an opportunity of being heard, violating the principles of natural justice. The court noted that the third report dated 21st November 2017, which formed the basis of the Settlement Commission's decision, was not provided to the petitioner until 18th December 2017. The petitioner had responded to this report, but the Settlement Commission still held that there was non-cooperation. The court found that the Settlement Commission's decision to send the matter to the adjudicating authority without considering the petitioner's response and the sequence of events constituted a breach of natural justice.

Conclusion:
The court allowed the petition to the extent that the Settlement Commission's order holding the petitioner non-cooperative and rejecting the application under section 32L was quashed. The court directed that the application be deemed sent back to the adjudicating authority under section 32F(5) of the Act, ensuring the petitioner is not barred from approaching the Settlement Commission in the future. The rule was made absolute to the specified extent.

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