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TMI Blog2018 (11) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... secution, the department can still proceed further against the present assessee who was facing only the notice for penalty?" 2. We may record facts from Tax Appeal No.1040/2017. The appellant M/s. Shree Naklank Laminates is a proprietary concern. The Directorate General of Central Excise Intelligence, Ahmedabad, had issued a show cause notice on 16.9.2011 against one M/s. Simalin Chemical Industries Pvt. Ltd. and 53 other conoticees, M/s. Shree Naklank Laminates being one of them. Broad allegations in the said show cause notice were that M/s. Simalin Chemical had indulged in large scale evasion of central excise duty by way of clandestine removal of finished goods to different manufacturers of laminated sheets and plywood. Amount of sale proceeds would be collected in cash which was not accounted in the records. M/s. Simalin Chemical would issue Central Excise invoices to manufacturers of laminated sheets and plywood for transportation of goods from factory premises to the premises of buyers. Soon after the delivery of goods, such invoices would be returned and cancelled. After cancellation of the invoices, sale proceeds of such transactions would be received in cash. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f excise duty committed by the main noticee. Once the department decides to put an end to the proceedings against the main noticee, separate proceedings against the appellants cannot be conducted. 3) Even otherwise the very purpose of settlement would fail if individual noticees are to be prosecuted after having allowed the application of settlement of the main noticee. 4) She submitted that in case of all the appellants original noticees, the proposed levy of penalty was below the minimum prescribed under the Act for which an application for settlement could be filed. The department is therefore, incorrect in insisting that separate applications for settlement ought to have been filed by the applicants. Counsel brought to our notice large number of judgments including those which have taken a view contrary to her contentions. We would refer to these judgments at an appropriate stage. 4. On the other hand, learned counsel Shri Divyeshvar for the department opposed the appeals contending that the Tribunal has correctly assessed the factual and legal position. The scheme of settlement under the Act envisages application by each individual assessee and acceptance or rejection of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cases. Under subsection( 1) of section 32E, an assessee may in respect of a case relating to him make an application before adjudication to the Settlement Commission to have the case settled, subject to fulfillment of the conditions contained therein. Clause (c) of the proviso to subsection( 1) of section 32E provides that no such application shall be made unless the additional amount of duty accepted by the applicant in his application exceeds three lakh rupees. 9. Section 32F of the Act lays down the detail procedure on receipt of an application for settlement. As is wellknown, such application would have to pass through various stages mentioned in the said section. After passing through such stages, under subsection (5) of section 32F after examination of the records and the report of the Principal Commissioner, if any, and after giving an opportunity to the applicant and to the department and after examining such further evidence as may be placed before it or obtained by it, the Commission may, in accordance with the provisions of the Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settlement including the demand of duty, penalty or interest and the manner of payment of such amount. Under subsection( 1) of section 32K, the Settlement Commission could grant immunity to the applicant from prosecution, penalty and fine. Under subsection( 2) of section 32K, such immunity will be withdrawn if the sums as specified in the settlement order are not paid. The immunity can be withdrawn at any time, if the Commission is satisfied that the person had during the course of settlement proceedings, concealed any material particular or had given false evidence. 12. All these provisions thus clearly bring out one to one relation between a case where the assessee to whom such case relates who has filed an application for settlement and whose application for settlement is considered by the Settlement Commission. At all stages, there is a requirement of cooperation with the settlement proceedings and true disclosures by the applicant of settlement. The order that the Settlement Commission may pass granting the application would contain details of sums to be paid and the manner in which the same would be paid. The Settlement Commission could grant immunity against prosecution, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners preferred appeal and also applied for dispensing the predeposit before the Tribunal. The Company also preferred appeal. The Tribunal granted stay on depositing a sum of Rs. 50 lacs by the company. When these proceedings were pending before the Tribunal, the Government of India promulgated a scheme called Kar Vivad Samadhan Scheme ("KVS Scheme" for short) with effect from 1.9.1998. The Scheme envisaged declaration by a person to the designated authority in respect of tax arrears payable under the indirect tax enactment which could be settled at the rate of 50% of the amount of such fine, penalty or interest. On 8.12.1998, the Government of India also issued an order called the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order 1998. This order provided that "where a declaration to the designated authority has been made in respect of tax arrear in relation to indirect tax enactment for the amount of duties (including drawback of duty, credit of duty or any amount representing duty), cesses, interest fine or penalty which constitutes the subjectmatter of a demand notice or a show cause notice issued on or before March 31, 1998, but remaining unpaid, and pending deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, Government of India framed KVS Scheme. The Company as well as its executives including the petitioners both applied for settlement in terms of the scheme by depositing 50% of the penalty arrears and requested waiver of remaining amount of penalty. The petitioners however, later on took a stand that such application for settlement which was filed by them was under legal misconception and once the case of the company is settled, all the proceedings proposing imposition of penalty against the conoticees are required to be dropped. Their request was that the amount deposited with the declaration should be refunded. The Gujarat High Court referred to the explanatory memorandum and did not accept the contention of the petitioners that the same would include the proceedings at the appellate stage as well. The Court was also of the opinion that not including the proceedings at the appellate stage would not render the provisions discriminatory and therefore, violative of Article 14 of the Constitution. 26.10.2018 16. Both these judgments of Kerala and Gujarat High Courts were considered by the Supreme Court for common disposal in case of Omkar S. Kanwar and ors (SC) (supra). In case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar and where in respect of the same matter a show cause notice had also been issued to any other person, then the settlement in favour of the declarant has to be deemed to be full and final in respect of other persons on whom show cause notices had been issued. It is settled law that when an Appeal is pending there is no finality to the proceedings. The proceedings are then deemed to be continuing. Undoubtedly, at one place the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order seems does state that the show cause notice should be pending adjudication. However, the same order also talks of the show cause notice being in respect of same matter on which the show cause notice has been issued to the main declarant. Then the Order provides that a settlement in favour of the declarant will be deemed to be full and final in respect of other persons also. This Order has to be read as a whole. If read as a whole, it is clear that a settlement by the main declarant is to operate as full and final settlement in respect of all other persons on whom show cause notice was issued in respect of the same matter. Thus read as a whole the words "pending adjudication" cannot be read to exclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court on the basis of Kar Vivad Samadhan Scheme (Removal of Difficulties) Order. This order specifically extend the benefit of the declaration made by the company and the settlement of the case on basis of such declaration in favour of all other persons on whom show cause notice was issued in respect of the same subject matter. Kar Vivad Samadhan Scheme (Removal of Difficulties) Order thus made a special provision extending the benefit of settlement in case of the principal noticee to all persons to whom show cause notices were issued in respect of the same subject matter. In fact, the extension of such benefit to the socalled subsidiary noticees was not the focal point of the judgments of Kerala and Gujarat High Court. What was at the centre of controversy was what can be stated to be a pending adjudication. It was in this context while approving the decision of Kerala High Court, Supreme Court observed that "Thus read as a whole the words "pending adjudication" cannot be read to exclude cases where the proceedings are still pending in Appeal." Any other way of understanding this judgment of Supreme Court would pose a serious difficulty. If we accept the contention of Ms. Vyas fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atories applied for settlement. Such application was granted. Certificate of settlement was issued. Before CEGAT, therefore, it was argued by the petitioner that penalty imposed against him should be dropped. The contention was rejected. Appeal was dismissed. Penalty imposed by the adjudicating authority was confirmed. At that stage, the petitioner approached the Bombay High Court. The High Court was of the opinion that ordinarily when a declaration made by the main noticee under the KVS Scheme is accepted, the proceeding against all conoticees would abate. But when the orderinoriginal is a composite order and the liability fastened upon the principal noticee and the conoticees is based on separate, distinct and independent causes of action and the principal noticee settles only part of the tax arrears arising out of such composite order, the benefit of immunity to the principal noticee would not be valid to conoticee. The decision of Supreme Court in case of Omkar S. Kanwar and ors (SC) (supra) was noticed. The Court was of the opinion that the ratio of the said decision is that only when the tax arrears arises from the same matter then the declaration made by the principal notice ..... X X X X Extracts X X X X X X X X Extracts X X X X
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