2006 (7) TMI 548 - Commission - Central Excise

Summary

Issues: Settlement of duty liability under Central Excise Act, 1944 for clandestine removals of ready-made garments, admission of duty liability, deemed credit eligibility, immunities sought, co-operation with proceedings, terms and conditions of settlement.

The judgment pertains to an application filed by M/s. Pothy's Clothing Co., now known as M/s. Pothys Clothing (P) Ltd., seeking settlement under Section 32 of the Central Excise Act, 1944, for duty liability arising from clandestine removals of ready-made garments. The applicant admitted a duty liability of Rs. 1,39,24,412/-, attributing the difference from the demand to accounting errors related to "sales returns." A partial payment of Rs. 95,00,000/- was made voluntarily before the Show Cause Notice, with the balance settled post the Admission Order. During the final hearing, the applicant's representative sought immunities, including waiver of interest, penalty, and prosecution, citing a genuine mistake in understanding duty obligations in 2003, which was rectified through voluntary payment and acceptance of liability.

The Deputy Commissioner representing the revenue acknowledged the payments made and left the grant of immunities to the Bench's discretion. The Bench, after hearing both sides, noted the applicant's proactive approach in admitting duty liability and making payments. The applicant contended that their duty liability would be nil if quantities manufactured by job workers were considered. Despite confusion regarding duty obligations in the initial years of levy introduction, the applicant accepted liability on behalf of job workers and paid the full duty amount. The Bench found the applicant's arguments reasonable, allowing them to avail deemed credit under Notification No. 54/2001-C.E., as they demonstrated a willingness to rectify errors and cooperate with the settlement process.

The Bench recognized the applicant's full cooperation during proceedings and granted immunities based on the significant payment made before the Show Cause Notice. Consequently, the application was settled under Section 32F(7) of the Central Excise Act, 1944. The duty liability was settled at Rs. 1,47,67,522/-, with no further duty payable since the amount was fully discharged. Immunity from interest exceeding 10% p.a., penalty, and prosecution under the Act was granted. The co-applicants were also extended the same immunities as the main applicant. The immunities were provided under Section 32K(1) but subject to withdrawal if any material particulars were withheld or false evidence was presented during the settlement process.

In conclusion, the judgment reflects a comprehensive analysis of the duty liability settlement process, considering the applicant's cooperation, genuine errors, and proactive approach in rectifying mistakes. The granting of immunities and deemed credit underscores the Bench's acknowledgment of the applicant's efforts to comply with the legal obligations and resolve the matter in good faith.