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2015 (10) TMI 374 - ALLAHABAD HIGH COURT

2015 (10) TMI 374 - ALLAHABAD HIGH COURT - 2016 (343) E.L.T. 13 (All.) - Challenge to the order of Settlement Commission - in so far as it denied the benefit of proviso to Section 11-AC - reduction of penalty - further prayed for a writ of mandamus commanding the respondents to refund the excess amount of 75% deposited towards penalty. - Clandestine removal - Pan Masala, commonly known as Gutka - Held that:- the adjudicating order requires the quantification of the penalty to be made in terms of .....

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Act. - The Commission is required to pass orders in consonance with the provisions of the 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, .....

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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. On 8.6.2002 the Central Excise Department conducted a detailed search at the petitioner's premises and found certain quantity of the excisable goods in excess of the recorded stock. Cash amounting to ₹ 58,50,750/- .....

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tlement Commission praying for the settlement of the dispute. The application for settlement of the case was processed and the Commission passed an order holding that the conditions prescribed under the Act were fulfilled and, accordingly, admitted the application to be processed under Section 32 F of the Act. The Settlement Commission after taking into the facts and circumstances of the case passed an order dated 28.2.2008 holding that petitioner No.1 was liable to pay excise duty to the tune o .....

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itioner within 15 days from the receipt of such communication from the Department. On the question of penalty, the Commission found that the case being one of the clandestine removal, the Commission declined to grant immunity to the petitioners from penalty leviable under the provisions invoked in the show cause notice. The Commission, however, directed that the total penalty imposed on the petitioners, which was equal to the penalty imposable under Section 11AC of the Act was liable to be paid. .....

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tained 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 .....

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ble as there was no such direction by the Settlement Commission and that the petitioners were required to pay the balance amount of ₹ 7,42,454/-. On 25.11.2008, the petitioners informed the Superintendent that the amount of ₹ 7,42,454/- has been deposited by them. On 19.1.2009 the Superintendent Central Excise quantified the interest and communicated the petitioners that an amount of ₹ 12,29,898/- was payable. According to the petitioners, the said amount was deposited on 9.2.2 .....

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of mandamus commanding the respondents to refund the excess amount of 75% deposited towards penalty. 5. In this back drop, we have heard Sri Pankaj Bhatia along with Sri Gopal Verma, the learned counsel for the petitioner and Sri Ashok Singh, the learned counsel for the respondents. 6. The learned counsel contended that the Settlement Commission has to pass an order determining the quantum of penalty which has to be in accordance with the provisions of the Act and has no power to settle the cas .....

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Excise Officer determining such duty in which case the amount of penalty liable to be paid would be 25% of the duty so determined. In the instant case the penalty imposed was almost 100% of the duty assessed and, therefore, the order of the Commission demanding penalty to the extent 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 pena .....

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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 application before the .....

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the investigation involved therein, the Settlement Commission may allow or reject the application. If the application is processed, the Commission after examining the record and the report of the Commissioner and, after examining such other evidence, would pass an order providing the terms of settlement including any demand by way of duty, penalty or interest and the manner in which such sums would be paid. In the event, the duty interest, penalty etc. is not paid within the stipulated period, i .....

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hereunder. (2) Where an application made under section 32E has been allowed to be proceeded with under section 32F, the Settlement Commission shall, until an order is passed under sub-section [(5)] of section 32F, have, subject to the provisions of sub-section [(4)] of that section, exclusive jurisdiction to exercise the powers and perform the functions of any Central Excise Officer, under this Act in relation to the case. (3) In the absence of any express direction by the Settlement Commission .....

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r 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 t .....

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2; Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined : [Provided th .....

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etermined has also been paid within the period of thirty days referred to in that proviso : ................." 12. A perusal of the aforesaid provision indicates that where duty is determined under Section 11 A(2) of the Act and interest payable under Section 11 AB of the Act is paid within 30 days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid would be 25% of the duty so determined. The second proviso .....

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s power of settlement has to be exercised in accordance with the provisions of the Central Excise Act. Though the Commission has power to make such order as it thinks fit on the matters covered by the application under Section 35(5) of the Act, however, the Commissioner cannot make an order making a settlement which would be in conflict with the provisions of the Act such as the quantum and payment of penalty. 15. The object of the legislature in introducing Sections 32E and 32F in the Act was t .....

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r 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 .....

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nt provisions of the Act. The Settlement Commission has no power to settle the case "dehors" the provision of the Act. 16. In the light of the aforesaid, the Settlement Commission while passing orders under Section 32F of the Act is vested with the powers of the Central Excise Officer, who is empowered to determine the duty and the interest payable on it. Once such duty is determined under Section 11A(2) and interest is determined under Section 11AB of the Act, the first proviso to Sec .....

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t event, the assessee would be liable to pay 25% of the duty amount by way of penalty otherwise he would be liable to pay 100% of the duty amount by way of penalty. 17. In K.P. Pouches (P) Ltd. vs. Union of India, 2008 (228) E.L.T. 31, the entire duty amount was paid well before the show cause notice. The adjudicating authority while determining the duty directed the assessee to pay 100 of the duty amount by way of penalty. The Delhi High Court held, that where the assessee had deposited the ent .....

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nt of India Ministry of Finance Department 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 invi .....

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ction 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 determining such duty, the amount of penalty liable to be paid by such persons under this section shall be twenty-five percent. of the duty so determined: Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirt .....

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ailable to him. 3. In view of the points as discussed above, Board has decided that in all the cases, wherein penalty under section 11AC of the Act is imposed, the provisions contained in first and second proviso to section 11AC should be mandatorily mentioned in the Order-in-Original itself by the adjudicating authority. 4. The field formation may be suitably informed . Yours faithfully , ( Rahul Nangare ) Under Secretary to the Government of India" 18. The Central Board of Excise and Cust .....

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ion in the adjudication order itself. 19. Similarly in Exotic Associates vs. Commissioner of Central Excise, 2010 (252) E.L.T. 49 (Guj.), the Gujrat High Court held that the adjudicating authority in its adjudication order should explicitly set out the options available to the assessee under Section 11AC of the Act and if the assessee thereafter does not take advantage of the first proviso to Section 11AC of the Act, it would be entirely at its own peril. 20. In Commissioner of Central Excise an .....

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j.). 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 .....

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stipulated period of 30 days. 24. As we have already held, the Commission is required to pass orders in consonance with the provisions of the 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. 25. We also .....

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this benefit by making the payment within the reduced period. The period mentioned in the proviso is a mandatory provision, which cannot be reduced by the Commission. 26. We also find that a cash of ₹ 58,50,650/- was seized at the time of search and before issuance of the show cause notice. Substantial amount was paid which covers the duty so determined. In any case, if it does not cover the duty imposed upon petitioner Nos.1 and 2, it definitely covers the imposition of duty on one of th .....

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