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TMI Blog2000 (10) TMI 961X X X X Extracts X X X X X X X X Extracts X X X X ..... e International Ltd. and Rollscon (India) Private Ltd. with equity ratio of 85% and 15% respectively. In order to manufacture Oriflame brand products in India, Oriflame found a manufacturer in the name and style of Silver Oak Laboratories Pvt. Ltd. (hereinafter referred to as Silver Oak) for the manufacture of cosmetic items. Agreement was entered into between Oriflame and Silver Oak for the manufacture of Oriflame brand products by Silver Oak and for the sale of the products from Silver Oak to Oriflame. The factory initially set up by Oriflame for the manufacturing activity was transferred to Silver Oak and thereafter Silver Oak started the manufacturing activity and the sale of finished goods to Oriflame. Silver Oak are a registered assessee with the Central Excise Department. 3. The application was fixed for Admission Hearing on 21-8-2000. At the outset, the Bench raised the following specific issues and desired that the applicant and the authorised representative of the Jurisdictional Commissioner should address the Bench on these issues : I. How does the applicant satisfy the provisions of section 31(a) with regard to its Directors? Do the Directors/employees of a comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that misuse thereof will be difficult and the disclosure will not normally breed further tax evasion. Each individual case can be considered on its merits and full disclosures not only of the income but of the modus operandi of its build-up can be insisted on, thus sealing off chances of continued evasion through similar practices. 5. Before addressing the 4 issues raised by the Bench, the learned Advocate submitted that the very rationale of setting up the machinery to settle cases was that a one time tax evader or an unintended defaulter should have an opportunity to come clean and willingly make good the taxes which were short-paid and this would require a flexible and broader view on the part of the Commission as a rigid attitude would not only inhibit him from making a clean breast of his affairs but would also unnecessarily strain the investigational resources of the Department in cases of doubtful benefit to revenue, while needlessly proliferating litigation and holding up collections. The Commission was, therefore, required to adopt liberal interpretation while fixing its jurisdiction. In support of this contention the learned Advocate cited the case of N. Krishnan v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible to approach the Settlement Commission. The Advocate further emphasised that though the definition of the term Case in section 31(c) of the Act refers to assessment and collection of duty, charging of interest and imposition of penalty is a concomitant of any adjudication proceedings. He relied on the provisions of section 32F(9) which required that an order passed by the Commission under sub-section (7) shall provide for the terms of settlement including any demand by way of not only duty but penalty or interest also. Further section 32K empowers the Commission to give immunity from prosecution and also either wholly or in part from the imposition of any penalty, fine or interest with respect to the case covered by the Settlement. The Advocate, therefore, emphasised that the Commission had to deal with the entire gamut of a case including the liability of the co-noticees and therefore, all the co-noticees were liable to invoke the jurisdiction of the Commission. In support of his contention, the learned Advocate cited the Supreme Court's judgment in the case of CIT v. Paharpur Cooling Towers Pvt. Ltd. - (1996) 219 ITR 618 SC. Taking support from this decision, the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he return visualised in first proviso to section 32E(1) was not necessarily in respect of goods in question or all goods which formed subject matter of the case. The requirement stipulated in the proviso only made it obligatory that the applicant before the Commission should have filed prescribed returns and to that extent should have been an assessee before the Department. In the present case since Oriflame has to be construed as having filed the returns for the goods manufactured on their behalf by Silver Oak, the requirement of the first proviso to section 32E(1) are clearly complied with. 10. We have considered submission on both sides. 11. In the instant case, the question for consideration is whether each of the application made by the company and their Directors etc. can be considered to have satisfied the provisions of Section 32E of the Central Excise Act. It would be pertinent to mention the main ingredients of Section 32E ibid. 1. Assessee; 2. Application; 3. Full and true disclosure of his duty liability; 4. The manner in which such liability has been derived; 5. Additional amount of excise duty accepted to be payable b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m at his choice; for every wrongdoer is jointly and severally liable for the whole damage, and it does not matter whether they acted as between themselves as equals, or one of them as agent or servant of another. 13. In Pennigton's Company Law, 5th Edition, at Page 58, the topic of evasion of obligation imposed by is discussed. The Courts have disregarded separate legal personality of the company if it was formed or used to facilitate the evasion of legal obligations. The American Courts have disregarded a company separate legal personality when it was clearly formed or acquired to facilitate breach of the general law. In Income Tax Commissioner, Madras (supra), their Lordships expressed that it is well established that in a matter of this description the Income-Tax authorities are entitled to pierce the veil of corporate entity and to look at the reality of the transaction. It is true that from the juristic point of view the company is a legal personality entirely distinct from its members and the company is capable of enjoying rights and being subjected to duties which are not the same as those enjoyed or borne by its members. But in certain exceptional cases the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to conceal the true state of affairs from the depositors for years. 16. Applicant - Section 32E refers to the term application and 'applicant but both the terms have not been defined. In the absence of such definition, it has to be construed in its ordinary dictionary parlance. According to Oxford Dictionary, application means the action of bringing something into material or effective contact with something else .. . It also includes the making of a request expressly of a formal nature. Similarly, the term applicant has been defined in Oxford Dictionary as person who applies or makes request especially formally. In view of this definition each of the person will qualify as applicant after having made an application in the prescribed format. 17. Filing of returns - In the instant case, it is on record that returns, statements and declarations have been filed by the job worker who is allegedly not be construed as manufacturer. According to the definition of the term 'manufacturer' in Clause (f) of Section 2 of the Central Excise Act, a person who employs hired labour in the production or manufacture of excisable goods is considered as 'manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place. 22. The scheme of the Act clearly visualises that the Settlement Commission should deal with the case as a whole and its decision with regard to the case should provide finality in terms of the correct duty liability as well as the immunities to be granted in whole or in part and further that the Commission must exercise complete jurisdiction over the case after it is admitted till it is finally settled. In view of this position, the case in the present matter relates to the show cause notice as a whole and, therefore, all aspects of the case as covered in the show cause notice will have to be considered by the Commission. If this be so, then it is clear that in the scheme of the Law, a composite application by all co-noticees in a case is clearly p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther matter relating to the case not covered by the application, but referred to in the report of the Commissioner of Central Excise and Commissioner (Investigation) submitted under sub-section (1) or sub-section (6). This order is required to be passed by the Commission in accordance with the provisions of the Act and after full examination of the records of the case and the report submitted under sub-section (1) and sub-section (6) and after giving an opportunity to both sides to be heard in the matter. Sub-section (9) lays down that recovery order passed under sub-section (7) shall provide for the terms of settlement including any demand by way of duty, penalty or interest and the manner in which such sums shall be paid including all other matters so as to make the settlement effective. Section 32K provides for power of Settlement Commission to grant immunity from prosecution for any offence under the Act or under IPC or under any other Central Act as also from imposition of any penalty, fine and interest under the Act, with respect to the case covered by the settlement. This is subject to the condition that the applicant has fully cooperated with the Commission in the proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Act must be construed as it stands today and a harmonious construction of all the provisions in the Act is called for in this context. Any construction which renders any provisions of the Act nugatory and defeats the object of that provisions must, if it is possible, be avoided Chapter XIXA is attracted only when an assessee wants to avail of the option of settlement. It is limited to those assessees who have been found wanting in voluntary compliance with tax laws at the initial stages, want to avoid further prolonged disputes and delays. It is recognised that the proceedings before the Commission lead to an expeditious culmination of complex tax proceedings. The finality attached to the Commission's order as per section 245-I ensures that after passing an order under section 245-D(4) the entire proceedings reach finality. (emphasis provided). It may be stated that Chapter XIXA of the Income Tax Act is pari materia to Chapter V of the Central Excise Act and sections 245-D and 245-I of the Income Tax Act are substantially on the same lines as section 32F and section 32M of the Central Excise Act. Having regard to the scheme of the Act as mentioned by us above and kee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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