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Settlement Commission - Central Excise Practice Manual (OLD) - Central ExciseExtract Chapter No. 40 SETTLEMENT COMMISSION Settlement Commission machinery is meant for settling complicated cases of tax-evaders who wants to turn a new leaf, by giving such persons an opportunity to make a true confession and have matters settled once for all, and avoiding long drawn and expensive litigations before the authorities or in courts by resorting to Settlement of cases. Constitution of Settlement commission The commission consists of following: - Chairman Three vice-chairman Eight members functioning under department of revenue, Ministry of finance. It has principal bench at Delhi and additional benches at Mumbai, Chennai and Kolkata. They shall be appointed from amongst persons of integrity and outstanding ability, having special knowledge of, and experience in, administration of Customs and Central Excise laws. The jurisdiction of the Bench is decided not by the place of business of the applicant but by the location of the headquarters of the Commissionerate passing the order. 'Applicant' seeking Settlement As per section 32E, any assessee may make a 'case' for settlement. As per section 31(a) 'assessee' is defined as any person who is liable to payment of excise duty assessed under Central Excise Act or any other act. Thus application can be filed by any of the following- Manufacture/ producer Registered person of a warehouse Directors, employees or any other person (such as marketing company) if duty/ penalty is imposed on them. Co-noticees, however if only one notice makes application, case before commission is to be confined to appellant only but he has to make application only along with main appellant. In respect of others appellant is free to decide the case. Meaning of 'case' A case at any stage can be settled. Section 31(c) defines 'case' as any proceedings by way of appeal or revision in connection with levy, assessment or collection of excise duty, which may be pending before a central excise officer or central government on the date on which application is made to Settlement commission u/s 32E of CEA, provided, application for such appeal or revision has been made in the specified time otherwise such appeal or revision shall not be deemed to be a proceeding pending. The following cases cannot be entertained by the Settlement Commission: - a) An application or Cases pending before Tribunal or court cannot be taken up by Settlement commission. Thus cases pending before AC/ DC, or commissioner or commissioner (Appeals) are eligible for settlement. b) Cases involving classification and valuation of excisable goods. c) Cases where the applicant has not filled the returns showing the production, clearances and central excise duty paid. If Settlement Commission is satisfied that circumstances exist for not filing returns, he may allow filing of application. d) Cases where the additional amount of duty accepted by the applicant does not exceed ₹ 3 lakhs. e) Cases where a show cause notice has not been issued/ received by the applicant. f) Cases where fraud is involved and revenue has already discovered the fraud. Note : Once order has been passed by commissioner or commissioner (Appeals) case is not pending. However till appeal period is over, the case is pending and hence application cannot be made to Settlement Commission within the time permitted for filling appeal. The case should be relating to duty. Thus case relating only to penalty cannot be taken up by Settlement Commission. Procedure for Settlement commission Procedure for filling application for settlement of cases Section 32E of CEA contains the provisions concerning making an application before the Settlement commission at any stage of a case. The procedure is as follows: - a) The applicant shall make an application in quintuplicate in the prescribed Form SC(E)-1, deposit the additional amount of excise duty accepted by him along with stipulated interest due thereon. b) The application shall contain a full and true disclosure of - The duty liability which has not been disclosed before the Central Excise officer having jurisdiction, The manner in which such liability has been calculated, The additional amount of excise duty accepted to be payable by him, Other particulars as called for in the application, such as, particulars of such excisable goods in respect of which he admits short levy on account of misclassification, undervaluation , inapplicability of exemption notification or CENVAT credit or otherwise and any such application shall be disposed of in the manner hereinafter provided, for the purpose of the settlement of case. c) The application should be accompanied with a fee of ₹ 1000.. d) The application should be signed and verified by the following - In case of individual - by the individual himself or by some person duly authorized by him in this behalf. In case of HUF - by the Karta or if he is absent or incapacitated by any other adult member of such family. In case of company or local authority - by the principal officer. In case of firm - by any partner but not minor partner. In case of any other person - by a person competent to act on his behalf. e) Application once made cannot be withdrawn by the applicant. The Settlement Commissioner however has the power not to proceed with the application or not to admit the application for reasons to be recorded as per the provisions of Chapter V of the Act. Procedure to be followed by the Settlement Commission on receipt of application Section 32F of CEA contains the procedure to be followed by the Commissioner on receipt of an application. The procedure is as follows: - a) Allowance or rejection of application by issuing notice - The Settlement Commission shall, within seven days from the date of receipt of the application, issue a notice to the applicant to explain in writing as to why the application made by him should be allowed to be proceeded with. After taking into consideration the explanation provided by the applicant, the Settlement Commission, shall, within a period of 14 days from the date of the notice, pass an order, either allowing the application to be proceeded with or rejecting the application as the case may be. If no order has been passed within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded with. A copy of above order shall be sent to the applicant and to the Commissioner of Central Excise having jurisdiction. b) Calling for report from the Commissioner - Where an application is allowed to be proceeded with, the Settlement Commission shall, within seven days from the date of order call for a report along with the relevant records from the Commissioner of Central Excise having jurisdiction and the Commissioner shall furnish the report within a period of thirty days of the receipt of communication from the Settlement Commission. c) Time limit with in which report has to be submitted - The Commissioner shall furnish the report within a period of thirty days of the receipt of communication from the Settlement Commission. If no report is received, it will be presumed that the Commissioner has no objection and the Settlement Commission can proceed with the application. d) Further enquiry by the Commissioner (Investigation) - After the examination of report from the commissioner, the Settlement Commission if it is of the opinion that any further enquiry or investigation in the matter is necessary, direct the Commissioner (Investigation) within fifteen days of the receipt of the report, to make such further enquiry or investigation and furnish a report within a period of ninety days of the receipt of the communication from the Settlement Commission. Where the Commissioner (Investigation) does not furnish the report within time prescribed, Settlement Commission shall proceed to pass an order without such report. e) Hearing on the application - The Settlement Commission shall give an opportunity of being heard to the applicant as well as the jurisdictional Commissioner. f) Final order of Commission - After hearing both the parties i.e. applicant in person or through duly authorized representative and jurisdictional Commissioner and after examining the records and reports as submitted by the jurisdictional Commissioner and Commissioner (Investigation), the Settlement Commission will pass order providing for terms of settlement, including duty, penalty and interest payable, manner of payment etc. The order passed by the settlement commissioner may also refer to any other matter relating to the case not covered by the application but as referred to in the reports of the Commissioner and Commissioner (Investigation). Also Commission can take only cases relating to assessment year for which application is filed for settlement. The amount of settlement ordered by the commission shall in no case be less than duty liability admitted by the applicant. g) Time limit for passing the final order - The order should be passed within 9 months of the application. The settlement commission after recording reasons may extend this period up to 3 months. It is important to note that if the order is not passed in 9 months/ 12 months period, the settlement proceeding shall abate and it will be treated as if no application has been made under settlement commission. h) Time limit within which settlement amount shall be paid - The settlement amount shall be paid within 30 days of the receipt of the order and no extension for payment of this amount shall be granted by the commission. Order obtained by fraud or misrepresentation If an order of Settlement Commission has been obtained by fraud or misrepresentation of facts, it becomes void and the Central Excise Officer having jurisdiction over the applicant is empowered to complete the proceedings at any time before the expiry of two years from the date of receipt of communication that the settlement order has become void. Powers of Settlement Commission 1. Power to order provisional attachment of property to protect revenue [section 32G of CEA] - Where the Settlement Commission is of the opinion during the pendency of the proceedings before it, it can order attachment of property for the protection of revenue. Copy of such order will be sent to jurisdictional Excise Commissioner who will authorize any officer not below the rank of AC/ DC to attach the property and make a list of property attached giving details. Copy of property will be sent to the applicant, to the person from whom property is attached to jurisdictional Commissioner and Settlement Commission. 2. Power to regulate its own procedure [section 32I] - As per section 32I , it shall have all the powers which are vested in a Central Excise Officer under this Act or the rules made thereunder. The Settlement Commission has got the power to regulate its own procedure and the procedure of the Benches in all matters arising out of the exercise of its power. 3. Power to inspect the reports filed by Central Excise Officer [section 32J] - The Settlement Commission may, in its discretion furnish copies made by any Central Excise Officer to the Settlement Commission to any such person on an application made to it in this behalf and on payment of the prescribed fee. 4. Power to grant immunity from prosecution and penalty [section 32K] - The Settlement Commission has the power to grant immunity from prosecution and penalty in respect of the case covered by the Settlement, if the applicant has cooperated with the Commission and has made full and complete disclosure of his duty liabilities. Such immunity may be complete or partial. If the payment is not made as per order, or if it is found that applicant has concealed any matter during the course of the settlement or has given false evidence, the immunity granted by the Settlement Commission shall stand withdrawn. If prosecution was already launched before submission of application for Settlement, the immunity cannot be granted. But immunity will be granted if prosecution is launched after submission of application for Settlement. This provision is intended to discourage filing of belated applications after a prosecution is launched. Such immunity cannot be questioned by any criminal court that it is void and illegal. 5. Power to send back a case to Central Excise officer [section 32L] - The settlement Commission has the power to send back the case to the proper officer, if the applicant does not cooperate, for further action as per law. When the application is sent back, all submissions such as documents, records given by the applicant to the Settlement Commission can be used by the proper officer. Order of Settlement to be conclusive As per section 32M of CEA , every order of Settlement Commission is conclusive as to the matters covered by the order and cannot be reopened except where provided in any law. Recovery of sums due under order of Settlement As per section 32N of CEA , any sum due as per the order such as duty, interest, penalty, fine etc. and any penalty for defaulting of payment of such amount due will be recovered as sums due to the Central Government. Bar on subsequent application for settlement Section 32O of CEA contains a bar on subsequent applications for settlement in the following cases : - 1. If an order of the Settlement Commission imposes penalty, on application made under section 32E, for concealment of particulars of his liability; 2. If after passing the order such person is convicted of any offence in relation to that case; 3. If the case is sent back under section 32L for non-cooperation. Judicial proceeding As per section 32(P), any proceeding before the Settlement Commission shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of Indian Penal Code. Other issues: - 1. Since settlement commission is exercising the same powers which is being exercised by adjudicating authority, it is entitled to levy interest on the duty payable. 2. Settlement Commission has no power to reduce or waive duty, interest or penalty except where by board circular such payments can be waived by any authority, that benefit can also be given by Settlement Commission [Sant Ram Mangat Ram 2003 (1) TMI 10 - SUPREME Court (]. 3. Settlement Commission does not have any power to accept application to rectify its mistake apparent from records under CEA.
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