2010 (1) TMI 241 - HC - Central Excise

Settlement of case- Admission of application- The petitioner herein were served with the show cause-cum-demand notice dated 9th January, 2006 by the Commissioner of Central Excise, Thane-II demanding duty of Rs. 4,15,25,760/- besides demanding the penalty and interest under the provisions of the Act and Rules framed thereunder. The petitioner faced with the aforesaid show cause-cum-demand notice, finding it difficult to explain their financial transactions in its true letter and spirit, moved an application for settlement of case within prescribed time under Section 32(E) of the Act before the Settlement Commission, Mumbai. Held that- In case, the petitioner fails to deposit the aforesaid amount as directed within stipulated time, the Settlement Commission shall be at liberty to reject the application for settlement giving liberty to the Revenue to take appropriate action against the petitioner in accordance with law. In the result, rule is made absolute in terms of this order with no order as to costs.

Issues Involved:
1. Validity of the Settlement Commission's order directing the petitioner to deposit Rs. 3,12,75,928/-.
2. Interpretation of Section 32F of the Central Excise Act, 1944 regarding the amount of additional duty admitted by the petitioner.

Issue-wise Detailed Analysis:

1. Validity of the Settlement Commission's order directing the petitioner to deposit Rs. 3,12,75,928/-:

The petitioner, M/s. Mandhana Dyeing, was served with a show cause-cum-demand notice dated 9th January, 2006 by the Commissioner of Central Excise, Thane-II, demanding a duty of Rs. 4,15,25,760/-. The petitioner admitted their liability to the extent of Rs. 42,93,771/- in their letter dated 12th October, 2006. However, the Settlement Commission directed the petitioner to deposit a total amount of Rs. 3,12,75,928/- as a condition for admitting the application for settlement. The petitioner challenged this order under Article 226 of the Constitution of India, contending that the Settlement Commission's order was erroneous and contrary to the mandate of Section 35F of the Act.

The court examined the statutory provisions of Section 32F, particularly sub-sections (3) and (4), which stipulate that the applicant must pay the amount of additional duty admitted by him within 30 days from the receipt of the order allowing the application to proceed. The court found that the Settlement Commission erroneously interpreted the petitioner's letter dated 12th October, 2006, by lifting certain figures and ignoring the subtractions indicated by the petitioner. The court emphasized that an admission must be taken as a whole or not at all, and it was not permissible for the Settlement Commission to ignore the subtracted figures shown by the petitioner.

2. Interpretation of Section 32F of the Central Excise Act, 1944 regarding the amount of additional duty admitted by the petitioner:

The court highlighted that the object of the legislation is to open the doors for settlement, not to close them. The intention of the legislature and the policy underlying it must be considered, and beneficial statutes should not be construed too rigidly. The court noted that the Settlement Commission can either accept the application as it is or reject it in toto. In this case, the Settlement Commission erroneously borrowed figures from the petitioner's letter dated 12th October, 2006, to hold that the petitioner admitted a total duty liability of Rs. 3,12,75,928/- as demanded in the show cause notice. However, the petitioner's letter clearly indicated an admission of liability only to the extent of Rs. 42,92,771/-.

The court concluded that the Settlement Commission's order dated 15th November, 2006, was liable to be set aside to the extent it called upon the petitioner to pay Rs. 3,12,75,928/-. The court substituted this figure with Rs. 42,92,771/-, which the petitioner was directed to deposit within 30 days from the date of receipt of the copy of the court's order. The Settlement Commission was directed to proceed with the matter in accordance with law after the deposit of the said amount. If the petitioner failed to deposit the amount within the stipulated time, the Settlement Commission would be at liberty to reject the application for settlement, giving liberty to the Revenue to take appropriate action against the petitioner in accordance with law.

Conclusion:

The court made the rule absolute in terms of its order, with no order as to costs, and directed the petitioner to deposit Rs. 42,92,771/- within 30 days. The Settlement Commission was instructed to proceed with the matter in accordance with law after the deposit.

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