TMI Blog2015 (10) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and cannot settle the case "dehors" the provisions of the Act. The Commission has the powers to waive the penalty, but, if it does not do so and imposes penalty, it can only do so in consonance with the provisions of the Act. The Commission cannot pass an order of penalty which over rides the provision of Section 11AC of the Act. The order of the Commission stands modified to the extent that, in the event, the petitioners pays the duty and interest determined within the stipulated period as provided under the first and second proviso to Section 11AC of the Act and the petitioners also pays 25% of the penalty so determined within the stipulated period as provided in the second proviso, in which case the petitioners would be entitled for the refund of the excess amount. - Decided in favor of assessee. - Civil Misc. Writ Petition (Tax) No. 1661 of 2009 - - - Dated:- 30-9-2015 - Hon'ble Tarun Agarwala And Hon'ble Surya Prakash Kesarwani, JJ. ORDER ( Per: Tarun Agarwala, J. ) 1. The petitioner No.1 is a proprietorship firm and petitioner No.2 is a private limited company and are engaged in the manufacture and sale of Pan Masala, commonly known as Gutka. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner from prosecution under the Customs Act, 1962 subject to payment of duty, interest, fine and penalty. 3. Since the order of the Settlement Commission contained clerical errors, the petitioners moved an application dated 19.3.2008 for rectification of the mistake. The Settlement Commission found that its order contained certain calculation mistakes and, accordingly, issued a corrigendum dated 11.9.2008 revising the duty payable. As per the corrigendum dated 11.9.2008 the revised duty that become payable by petitioner No.1 was ₹ 41,22,036/- and penalty was revised to ₹ 20,61,018/-. The Commission directed the revised duty and penalty to be payable within 15 days and interest to be paid within 10 days from the date of communication of the order. 4. Immediately thereafter the petitioner moved an application indicating that as per the order of the Settlement Commission the petitioners are liable to pay the duty and penalty as per the chart indicated therein. The petitioners also requested the Department to communicate the quantum of interest so that the same could be paid. Similar application was again moved on 13.10.2008. The Superintendent Central Excise by an ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt indicated in the order as modified by the corrigendum is patently erroneous and against the provisions of the Act. 7. On the other hand, Sri Ashok Singh, the learned counsel for the Department contended that the penalty imposed by the Settlement Commission under Section 11AC of the Act is to be paid full in compliance of the order passed by the Settlement Commission. It was contended that under Section 32(8) of the Act, the order passed by the Settlement Commission under sub section (5) of Section 32 of the Act provides for terms of settlement which includes any demand by way of duty, penalty and interest and the manner in which sums under the settlement is required to be paid. It was therefore, contended that the sum of penalty determined by the Commission is required to be paid and no immunity with regard to waiver under the proviso to Section 11AC of the Act could be given since no such waiver was provided by the Commission. 8. In order to appreciate the controversy involved in the present writ petition and the submissions made at the Bar, it would be appropriate to consider a few provisions of the Act. Under Section 32-E of the Act, an assessee could make an applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g out of the exercise of its powers, or of the discharge of its functions, including the places at which the Benches shall hold their sittings. 10. Sub Section (1) of Section 32-I of the Act provides that the Settlement Commission shall have all the powers which are vested in the Central Excise Officer under the Act or the Rules. Sub-section (2) of Section 32-I of the Act provides that the Settlement Commission while passing an order under Section 32F(5) will have exclusive jurisdiction to exercise the powers and perform the function of any Central Excise Officer under this Act in relation to the case. Section 32K of the Act gives power to the Settlement Commission to grant immunity from prosecution and for imposition of any penalty either in whole or in part. The Central Excise Officer has been defined under Section 2(b) of the Act. 11. In the light of the aforesaid provision one has to consider and take a look at the first and second proviso to Section 11AC of the Act. The relevant extract of the provision is extracted hereunder: [11AC. Penalty for short-levy or non-levy of duty in certain cases.─ Where any duty of excise has not been levied or paid or has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure in introducing Sections 32E and 32F in the Act was to ensure that protracted proceedings before the authorities or in Courts are avoided by resorting to settlement of cases. In this process, an assessee was not expected to get any reduction in the amount which was statutorily required to be paid under the Act. However under Section 32K of the Act, the Commission had the power to grant immunity from prosecution and penalty. The immunity extended only to the penal provision of the Central Excise Act. The Commission was also empowered to waive either whole or in part from the imposition of any penalty with respect to the case covered by the settlement. In our opinion, the Settlement Commission has an exclusive jurisdiction to exercise all powers of the regular authority especially that of the Central Excise Officer in view of the provision of Section 32-I of the Act which specifically provides that the Settlement Commission shall have exclusive jurisdiction to exercise the power and perform the function of any Central Excise Officer under this Act. This exclusive jurisdiction, which the Settlement Commission derives under Section 32-I is also in accordance with the provision of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment of Revenue Central Board of Excise Customs *** New Delhi dated the May 22 , 2008 To The Chief Commissioner of Central Excise (All) The Chief Commissioner of Customs and Central Excise (All) The Director Generals (All) The Commissioner of Central Excise (All) The Commissioner of Central Excise (Appeals) (All) Subject: Observation of Delhi High Court regarding first proviso to section 11AC . Sir/Madam, A reference has been received by the Board inviting its attention to the Delhi High Court judgment in the case of K.P. Pouches (P) Ltd [2008-TIOL-240-HC-DEL-CX]. In para 27 of the order, the High Court has opined that the adjudication authority should explicitly state the option available to the assessee under section 11AC of the Act in its adjudication order. 2. The matter has been examined . The first and second proviso to section 11AC of the Act read as follows; Provided that where such duty as determined under sub-section (2) of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010 (256) E.L.T. 10, the Gujrat High Court after considering the circular dated 22.5.2008 held, that wherever penalty under Section 11AC of the Act was imposed, the provisions contained in first and second proviso of Section 11AC should be mandatorily mentioned in the order passed by the adjudicating authority. 21. Similar view was again reiterated in Commissioner of Central Excise and Customs, Surat-I vs. Bhagyodaya Silk Industries, 2010 (262)E.L.T. 248 (Guj.). 22. In the light of the aforesaid, the adjudicating order requires the quantification of the penalty to be made in terms of the first and second proviso of Section 11AC of the Act so that an incentive is given to the assessee to pay the duty and interest within the stipulated period in order to avail payment of duty at reduced rate of 25%, failing which, the total amount of penalty becomes payable. This option was not given in the instant case by the Settlement Commission and, therefore, to that extent the order of the Settlement Commission imposing penalty is in violation of the first proviso to Section 11AC of the Act. 23. We also find that the quantum of penalty so determined by the Commission was almost equival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners have not come out with clarity as to when they had actually paid the amount and whether they had paid the amount within the stipulated period contemplated under first and second proviso to Section 11AC of the Act. We also find that the petitioners' application for refund of the 75% of duty is pending consideration, namely, the application dated 2.7.2009. 28. In the light of the aforesaid, we allow the writ petition in part and dispose of the writ petition holding that the order of Settlement Commission quantifying the amount of penalty almost to the extent of 100% of the duty determined was incorrect and was not in consonance with the first and second proviso to Section 11AC of the Act. The order of the Commission stands modified to the extent that, in the event, the petitioners pays the duty and interest determined within the stipulated period as provided under the first and second proviso to Section 11AC of the Act and the petitioners also pays 25% of the penalty so determined within the stipulated period as provided in the second proviso, in which case the petitioners would be entitled for the refund of the excess amount. 29. We, accordingly, direct the Assis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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