High Court of Punjab and Haryana, Chandigarh
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M/s Atma Tube Products Limited, Dera Bas v. Commissioner of Central Excise, Chandiga - CRM-17476-2005  RD-P&H 5934 (24 August 2006)
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
CWP No.17476 of 2005
Date of decision: 25.8.2006
M/s Atma Tube Products Limited, Dera Bassi, Distt.Patiala.
Commissioner of Central Excise, Chandigarh and another ...Respondents
CORAM: HON'BLE MR. JUSTICE ADARSH KUMAR GOEL
HON'BLE MR. JUSTICE RAJESH BINDAL
Present: Mr. Jagmohan Bansal, Advocate, for the petitioner.
Mr. Gurpreet Singh, Central Govt. Counsel.
This writ petition has been filed against rejection of petitioner's application by the Settlement Commission under Section 32E of the Central Excise Act, 1944 (for short, 'the Act').
Facts noticed in the impugned order are that the petitioner is engaged in the manufacture of cold rolled strips and ERW precision tubes from HR coils and HR strips. Officers of Central Excise (Preventive) visited the factory of the petitioner on 21.4.1999 and resumed certain records. After investigation, a show cause notice was issued claiming duty of Rs.1,11,05,584/- with interest and penalty. Case was adjudicated upon by the Commissioner on 5.12.2003. On appeal, the matter was remanded by CWP No.17476 of 2005 2
the Tribunal on 25.6.2004. The matter was again adjudicated upon by the Commissioner on 11.8.2005. On 11.8.2005 itself, an application was filed before the Settlement Commission. The petitioner admitted duty liability of Rs.34,21,109/-.
Stand of the department was that the case involved duty evasion by clandestine removal and fraud. The assessee remained avoiding filing of reply even after remand by the Tribunal and sought time from the department on 6.10.2004 for approaching the Settlement Commission.
Report dated 26.8.2005 submitted to the Commission opposed admission of application.
The Commission observed that the petitioner had been delaying the adjudication and moved the Commission about one year after making a statement before the department. It was observed that on the date when application was made, no proceeding was pending before any Adjudicating Officer or Central Government and the matter was, thus, not covered by the definition of "case" as defined under section 31(c) of the Act.
We have heard learned counsel for the parties and perused the record.
Learned counsel for the petitioner submitted that the Commission wrongly held that the petitioner was delaying the proceedings and that application was filed on 11.8.2005, while the order passed on 11.8.2005 by the Commissioner was conveyed on 12.8.2005. The petitioner had to collect voluminous records and examine the same which took time and there was no delay on the part of the petitioner.
Learned counsel for the revenue supported the impugned order, particularly the following observations therein:- "5.The Bench has considered the application alongwith records and submissions made both oral and written during the hearing by both the sides. It is observed that the applicant first informed the Commissioner on 6.10.2004 that they would be taking up their case with the Settlement Commission within a week's time.
However, the assurance was not honoured by them.
When the applicant was informed by letter dated CWP No.17476 of 2005 3
4.7.2005 by the department giving them the last chance and case was taken up for hearing on 15.7.2005, the applicant's advocate submitted that they would furnish the evidence of filing their application with the Settlement Commission within 15 days, and in case this was not done, case may be adjudicate without giving any further opportunities of being heard. The case was finally adjudicated by Commissioner as no evidence had been filed within the stipulated period and the order-in- original (OIO) was issued on 11.8.2005. From the written report of the Commissioner, Central Excise, Chandigarh dated 26.8.2005 and the submissions before the Bench during the hearing on 22.9.2005, it is revealed that the applicant had been delaying the adjudication without keeping the promises made to come to the Settlement Commission for nearly a period of one year from 6.10.2004 till the day when the case was adjudicated and order issued on 11.8.2005. It is not free from doubt that when the applicant sensed that the case in adjudication on 11.8.2005 had gone against them they rushed and filed the application on the same day. In view of the aforesaid peculiar facts and circumstances, the Bench is of the view that no 'case' was pending before the proper officer on the day the application was filed and, therefore, it is not covered within the definition of the 'case' under Section 31(c) of the Act and therefore, no application could be entertained under Section 32E of the Act. In view of the observations made and without going into the merits of claims and counter claims, the Bench reject the application under Section 32F(1) of the Act. Revenue is free to pursue the matter as per law."
Before considering the issue, it is necessary to notice the relevant provisions of Section 32E and F of the Act, which are as under:- CWP No.17476 of 2005 4
"32E.Application for settlement of cases (1) An assessee may, at any stage of a case relating to him make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his duty or liability which has not been disclosed before the Central Excise Officer having jurisdiction, the manner in which such liability has been derived, the additional amount of excise duty accepted to be payable by him and such other particulars as may be prescribed including the particulars of such excisable goods in respect of which he admits short levy on account of misclassification or otherwise of such excisable goods, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided:
Provided that no such application shall be made unless - (a) the applicant has filed returns showing production, clearance and central excise duty paid in the prescribed manner;
(b) a show cause notice for recovery of duty issued by the central excise Officer has been received by the applicant; and
( c )the additional amount of duty accepted by the applicant in this application exceeds two lakh rupees: Provided further that application shall be entertained by the Settlement Commission under this sub-section in cases which are pending with the Appellate Tribunal or any court:
Provided also that no application under this sub-section shall be made for the interpretation of the classification of excisable goods under the Central excise Tariff Act, CWP No.17476 of 2005 5
1985 (5 of 1986).
(2) Where any excisable goods, books of account, other documents have been seized under the provisions of this Act or Rules made thereunder, the assessee shall not be entitled to make an application under sub-section (1), before the expiry of one hundred and eighty days from the date of the seizure.
(3) Every application made under sub-section (1) shall be accompanied by such fees as may be prescribed.
(4) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant.
32F.Procedure on receipt of an application under Section 32E (1) On receipt of an application under sub-section (1) of section 32E, the Settlement Commission shall call for a report from the Commissioner of Central excise having jurisdiction and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded with or reject the application: Provided that an application shall not be rejected under this sub-section unless an opportunity has been given to the applicant of being heard:
Provided further that the Commissioner of Central Excise shall furnish such report within a period of one month of the receipt of the communication from the settlement Commission, failing which it shall be presumed that the Commissioner of Central Excise has no objection to such application; but he may raise objections at the time of hearing fixed by the Settlement Commission for admission of the application and the date of such hearing shall be communicated by the Settlement Commission to the applicant and the Commissioner of Central Excise CWP No.17476 of 2005 6
within a period not exceeding two months from the date of receipt of such application, unless the presiding officer of the Bench extends the time, recording the reasons in writing.
(2) A copy of every order under sub-section (1) shall be sent to the applicant and to the Commissioner of Central Excise having jurisdiction.
(3) Subject to the provisions of sub-section (4), the applicant shall within thirty days of the receipt of a copy of the order under sub-section (1) allowing the application to be proceeded with, pay the amount of additional duty admitted by him as payable and shall furnish proof of such payment to the Settlement Commission.
(4) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee that he is unable for good and sufficient reasons to pay the amount referred to in sub-section (3), within the time specified in that sub section, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by instalments, if the assessee furnishes adequate security for the payment thereof.
(5) Where the additional amount of duty referred to in sub section (3) is not paid by the assessee within the time specified or extended period, as the case may be, the Settlement Commission may direct that the amount which remains unpaid, together with simple interest at the rate of eighteen per cent, per annum or at the rate notified by the Central Board of Excise and Customs from time to time on the amount remaining unpaid, be recovered, as the sum due to Central Government by the Central excise Officer having jurisdiction over the assessee in accordance with the provisions of section 11.
(6) Where an application is allowed to be proceeded with CWP No.17476 of 2005 7
under sub section (1), the Settlement Commission may call for the relevant records from the Commissioner of Central Excise having jurisdiction and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner (Investigation) to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case.
(7) After examination of the records and the report of the Commissioner of Central Excise received under sub section (1) and the report, if any, of the Commissioner (Investigation) of the Settlement Commission under sub section (6), and after giving an opportunity to the applicant and to the Commissioner of Central excise having jurisdiction to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this 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 application, but referred to in the report of the Commissioner of Central Excise and Commissioner (Investigation) under sub-section (1) or sub-section (6).
(8) Subject to the provisions of section 32A, the materials brought on record before the Settlement Commission shall be considered by the Members of the Bench concerned before passing any order under sub-section (7) and, in relation to the passing of such order, the provisions of section 32D shall apply.
(9) Every order passed under sub-section (7) shall provide for the terms of settlement including any demand by way CWP No.17476 of 2005 8
of duty, penalty or interest, the manner in which any sums due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud, or misrepresentation of facts.
(10) Where any duty payable in pursuance of an order under sub section (7) is not paid by the assessee within thirty days of the receipt of a copy of the order by him, then whether or not the Settlement Commission has extended the time for payment of such duty or has allowed payment thereof by instalments, the assessee shall be liable to pay simple interest at the rate of eighteen per cent, per annum or at such other rate as notified by the central Board of Excise and Customs on the amount remaining unpaid from the date of expiry of the period of thirty days aforesaid.
(11) Where a settlement becomes void as provided under sub section (9) the proceedings with respect to the matters covered by the Settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the Central Excise Officer having jurisdiction may, notwithstanding anything contained in any other provision of this Act, complete such proceedings at any time before the expiry of two years from the date of the receipt of communication that the settlement became void."
The above provisions are identical to provisions of Section 245C and other provisions of the Income Tax Act contained in Chapter XIX-A, which have been considered from time to time by the Hon'ble Supreme Court. It was noticed that the said provisions are meant for those assessees who want to disclose income and the manner in which income is derived and not for those who come after discovery of the particulars of CWP No.17476 of 2005 9
income and its source or discovery of fraud perpetrated by the assessee, nor to those who come to the Commission to forestall the investigation/enquiries which have reached the stage where the department is in possession of material which is likely to establish concealment or fraud. The assessee should not be allowed to take advantage of comparatively easy course of settlement and should be allowed to face normal channels of assessment/appeal.
It was observed by the Hon'ble Supreme Court in Commissioner of Income-tax (Central), Calcutta v. B.N.
Bhattacharjee & another AIR 1979 SC 1725:- "66. It is not inappropriate to state that the policy of the law as disclosed in Chapter XIXA is not to provide a rescue shelter for big tax-dodgers who indulge in criminal activities by approaching the Settlement Commission. The Settlement Commission will certainly take due note of the gravity of economic offences on the wealth of the nation which the Wanchoo Committee had emphasized and will exercise its power of immunization against criminal prosecutions by using its power only sparingly and in deserving cases: otherwise such orders may become vulnerable if properly challenged." (underling supplied).
In Ashirvad Enterprises & Others v. State of Bihar & another (2004) 3 SCC 624, it was observed:- "6. .....reasons are envisaged in CIT v. B.B.
Bhattacharjee (1979) 4 SCC 121, wherein it was observed that Section 245-H is a magnet which attracts large tax-dodgers, and it was emphasized that power of immunization against criminal prosecution should be used in deserving cases. Whether grant of immunity is called for in a given case is to be decided by the Commission on the facts of each case and no straitjacket formula for any universal application can be laid down." In Commissioner of Income Tax v. Express Newspapers CWP No.17476 of 2005 10
Limited, (1994) 206 ITR 443 (SC), it was observed:- "....It is neither possible nor advisable to seek to lay down exhaustively the several situations in which the Commission would decide to allow the application to be proceeded with or in which the application has to be rejected. A case may be a complex one; it may involve prolonged or cumbersome investigation. Another situation may be where having regard to the nature of the case and other circumstances, the Commission may feel in the interest of the Revenue and in the interest of justice that it is better to give a quietus to the case once for all instead of allowing it to be fought through the usual channels. The decision has to be taken by the Commission having regard to all the facts and circumstances before it, in the light of the object, purpose and scheme of the enactment. It is precisely because such wide discretion is given to the Commission that the Act requires that it should be manned by men of integrity and outstanding ability, having special knowledge of direct taxes and business accounts.....
"The idea underlying the said words (in the main limb of sub-section (1A) is self-evident. The disclosure under section 245C must be of an income not disclosed before the Assessing Officer. If the Assessing Officer (or the income-tax authority) has already discovered it and has either gathered the material to establish the particulars of such income or fraud fully or is at a stage of investigation/enquiries where the material gathered by him is likely to establish the particulars of such income or fraud, the assessee cannot be allowed to defeat or forestall, as the case may be, the entire exercise of the income-tax authorities just by approaching the Commission. In such a case, it cannot be said that he is acting voluntarily or in good faith. He should not be CWP No.17476 of 2005 11
allowed to take advantage of the comparatively easy course of settlement. He must be allowed to face the normal channels of assessment/appeal, etc. Section 245C is meant for those assessees who seek to disclose income not disclosed before the officer including "the manner in which such income has been derived". If the Department already knows and has gathered particulars of such income and the manner in which it has been derived, there is no "disclosure" by the assessee. Let it be remembered that the words in question in section 245C (A) are not words of limitation nor are they meant to help unscrupulous assessees. Chapter XIX-A is a part of the Income-tax Act and must be construed consistent with the overall scheme and object. The chapter is meant for those assessees who want to disclose income not disclosed till then together wit the manner in which the said income is derived. It is not meant for those who come after the event, i.e., after the discovery of the particulars of income and its source, or discovery of particulars of fraud perpetrated by the assessee, as the case may be nor even to those who come to the Commission to forestall the investigation/enquiries which have reached a stage where the Department is in possession of material which though not sufficient to establish such concealment or fraud, is such that it is likely to establish it may be some more material is required to establish it fully. The Commission has to keep all this in mind while deciding whether to allow the application to be proceeded with before it or to reject it." In the present case, the petitioner was not candid in its confession of guilt before the Commission at the first instance and seek settlement thereof once for all. The petitioner firstly contested the case upto the Tribunal and on remand by the Tribunal, did not cooperate in the proceedings before the adjudicating authority and approached the CWP No.17476 of 2005 12
Commission only when adjudication order was passed against the petitioner.
Such an attempt cannot be held to be bonafide.
In exercise of power of judicial review, this court does not act as an appellate court by substituting its own opinion for the opinion of Settlement Commission arrived at after following due procedure under the law.
In view of the above, we are of the view that the rejection of application under section 32E of the Act by the Settlement Commission cannot be held to be illegal or arbitrary.
The petition is dismissed.
(Adarsh Kumar Goel)
August 25, 2006 (Rajesh Bindal)
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