TMI Blog2005 (6) TMI 546X X X X Extracts X X X X X X X X Extracts X X X X ..... demanded amount, ₹ 2,27,962/- by way of deeming their price as cum-duty price and extending permissible deduction therefrom to re-determine correct assessable value and a further deduction of ₹ 2,18,876/- on account of Modvat credit. As such, the applicant prayed for settlement of the case accepting the duty liability as ₹ 12,05,887/-. The application was heard for admission by the Additional Bench, Mumbai on 25-11-2004. (b) The issue involved in the case was that the noticee M/s. Branson Ultrasonics [Division of M/s. Emerson Electric Company (India) Pvt. Ltd.], were engaged in the activities of trading of Ultrasonic Plastic Welding and Cleaning Machines as well as manufacturing of Horns of Fixtures made out of Aluminium Titanium materials. They affixed the brand name BRANSON on the Horns. They were active since 1996-97 and cleared the branded goods without following Central Excise procedure and without paying the Central Excise duty. They were also not registered with Central Excise and were not filing return showing production, clearance and amount of duty paid. They, however, filed one RT-12/E.R.-1 return for each financial year covering the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the following case laws reg. Kullu Valley Transport reported in 77 ITR 518, passed by the Hon ble Supreme Court : State of Andhra Pradesh v. Donthala Rajaiah reported in (1960) 11 STC 819 (AP). They also quoted the Circular No. 2/93-CX.6, dated 15-1-1993 issued by the Central Board of Excise Customs permitting submission of belated return in cases of evasion by bulk drug manufacturers in order to substantiate that filing of return belatedly is also to be treated as return filed. It was observed in that case that in the said return, which was not accepted by Revenue for the reason that the applicant was not registered with Central Excise, the applicant had declared certain amount of duty as payable but in the application for settlement did not declare anything more, and hence they did not fulfil one of the conditions enabling an assessee to seek settlement. The application was rejected. 2.2 In the case of M/s. Bharat Industrial Works, it had been pleaded that the applicant undertook job work on site and was under the impression that their activities did not fall under the purview of manufacture and that is why they did not file declaration nor applied for registration be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbai, manufacturer of garments from handloom fabrics and exporter, was also admitted under Admission Order A-127 to 129/CE/03-SC(PB), dated 14-7-2003. In the case, the applicants pleaded that since C.E. duty was imposed w.e.f. 1-5-2001, the applicant took some time to understand the implications of the levy and before they could develop/install appropriate accounting systems for all its shops located at different places, their premises were raided and show cause notices were issued. 2.5 Another similar case was of M/s. Search Pharma Pvt. Ltd., Gurgaon Anr., engaged in manufacture of Ayurvedic Medicine, some of which were affixed with brand names belonging to other persons. The main applicant was not registered with the C.E. department. It was pleaded in that case that they were under the bona fide belief that being a SSI unit, they were not required to pay C.E. duty nor were they required to take even the registration till the visit of the Officers of C.E. Immediately thereafter, they obtained C.E. registration and started complying with the provisions of law. The Revenue objected to admission of the case on the ground that at the time of detection of evasion, the applicant w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 8/2002-C.E., dt. 1-3-2002. 3.0 The Chairman, Customs and Central Excise Settlement Commission, New Delhi in his reference F. No. C-18/Tech/02-SC(PB), dated 12-1-2005 constituted a Special Bench under sub-section (7) of Section 32A of Central Excise Act, 1944, read with Section 127N of the Customs Act, 1962 (hereinafter referred to as the Act in this order) comprising (1) Shri K.P. Sridhara Raman, Chairman, Customs Central Excise Settlement Commission, New Delhi - Presiding Officer; (2) Shri M.V.S. Prasad, Vice-Chairman, CCESC, Chennai - Member; (3) Shri R. Mukhopadhyay, Member, CCESC, Kolkata - Member; (4) Shri V.K. Sharma, Vice-Chairman, CCESC, Mumbai; - Member; and (5) Shri B.N. Das, Member, CCESC. Mumbai - Member. 4.0 The following issues were referred to the Special Bench for decision : (a) Whether the yearly declaration filed by a small scale manufacturer can be treated as a return under Section 32E(1) of the Central Excise Act, 1944? (b) Whether a consolidated return filed just before filing the application or along with the application by a person who is not registered with C. Ex and did not obtain ECC No., can be considered as satisfying the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat a person who has filed the annual declaration and disclosed his existence to the Revenue as also all the relevant particulars such as location of the factory, nature of goods manufactured, estimated clearance for the current year, and value of past clearances cannot be placed on the same footing as someone who has totally failed to disclose his existence and thereby escaped the liability to pay duty. It is submitted that when the law itself has provided that a person who opts for SSI exemption may file such a declaration annually, it must not be converted into a disability for approaching this Hon ble Commission for settling the dispute. It is therefore submitted that the yearly declaration filed by SSI who are under total exemption is liable to be treated at par with periodic returns filed by the other assessees. [II] Whether consolidated return filed before or along with the application without obtaining registration of ECC be treated as valid returns? It is submitted that a person who has not obtained C.E. registration or ECC would not have disclosed his existence or the nature of his activities to the Revenue. Even at the time of filing the application before this H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ECC and has also disclosed all the past affairs by filing consolidated return, must be treated as bona fide act without any trace of malice. This would be in keeping with the spirit of settlement and making of full and true disclosure. [IV] A case where one Division of a company or firm discloses its affairs and another Division does not do so. It is submitted that under Section 6 of the C.E. Act 44, as well as under erstwhile Rule 174 of the C.E. Rules, 1944 as also Rule 9 of the C.E. Rules, 2002, the assessable entity under the Central Excise Act is either a factory as defined under Section 2(e) of the said Act or a warehouse , or the place of registered dealer . The term assessee as defined in Rule 2(c) of the C.E. Rules, 2002 applies to every person who carries on production or manufacture or trade in excisable goods. Further, a combined reading of these provisions with Rule 4 of the C.E. Rules, 2002 (or Rule 9 of the Rules of 1944) would show that the place of removal is the point at which the statute exercises control over a manufacturer or warehouse keeper or trader for collection of duty. In contradistinction with other laws, such as Income-tax, where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Income-tax Act, 1961 would approach Settlement Commission without filing return for the previous year in dispute. Hon ble Kerala High Court had held in the case Re : Thoppil Kutty Eroor v. CIT 1958 (34) ITR 850 (Ker.), that penalty for concealment of income cannot be imposed under Section 271(1)(c) of the Income-tax Act, 1961 or corresponding provision thereof in Income-tax Act, 1922 or other similar Acts, when the assessee had not furnished a return of income relevant for the previous year. Therefore, even if the Settlement Commission came to a finding that the assessee had concealed particulars of income and the Settlement Commission is desirous of imposing penalty, the Settlement Commission was not empowered to impose penalty under Explanation 3 to Section 27l(1)(c) of the Income-tax Act, 1961. In other words, the Settlement Commission was handicapped by non-filing of return for the previous year in dispute, by the applicant-assessee who has been previously assessed under Income-tax Act, 1961. Accordingly, the Finance Act, 1987 amended the proviso to Section 245C of the Income-tax Act, 1961 which required that the applicant assessee should have filed a return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision of Section 35E(1) of C.E. Act '44 speaks of the word return , and not declaration , declaration filed under the earlier Rule 174 of the C.E. Rules, 1944 cannot be treated as return for the purpose of Section 35E(1). (2) No. As per the provisions of Rule 12 of the C.E. Rules, 2002 a return is required to be filed by an assessee . The word assessee is defined under Section 31 of the C.E. Act 44 and in Rule 2(c) of the C.E. Rules, 2002 as any person who is liable for payment of duty assessed or a producer or manufacturer of excisable goods or registered person of a private warehouse in which excisable goods are stored and includes an authorised agent of such person . In view of the above explicit definition of the word assessee in the C.E. Law, the person who is not registered with Central Excise and did not obtain ECC, cannot be called as assessee and, therefore, he is not required to file a return under the Excise Law. Non-filing of return by such person will not satisfy the conditions of Section 32E(1) of C.E. Act 44. (3) After obtaining registration under C.E. Law, a person can be called as assessee . Returns filed by suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect while dealing with cases. (iv) Under the Customs Law there are different types of importers/exporters. They may be one time individual importer/exporter or regular exporters/merchant exporters/star trading houses, export oriented units etc. Under the Customs law filing of Bill of Entry for import and Shipping Bill for export of goods is mandatory in terms of provisions of Section 46 and Section 50 of the Customs Act, 1962 respectively and no relaxation is permissible as in the case of the Central Excise law, which under certain circumstances exempts the assessees from obtaining registration/filing periodical returns. (v) Section 245C of the Income-tax Act, 1961 deals with application for settlement of cases. 1st proviso to Sec. 245C of the Act, reads as follows - the assessee has furnished the return of income which he is or was required to furnish under any of the provisions of the Act (emphasis supplied). The above provision under the Income-tax Act is specific as to the point that an assessee who approaches the Settlement Commission has furnished the return of income, which he is or was required to furnish under any of the provision of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Act. The provision of filing of return under the Central Excise Act, 1944 is not compulsory, but optional in terms of the notifications issued under Rule 9 of the CER 02 which exempts units availing of the Notification No. 36/2001, dated 26-6-2001 from registration. When the statute exempts such unit from taking out a Central Excise Registration, and such units either come under the ambit of the definition of assessee or under the control of the department, obviously no return need be filed by such units. (ix) In the backdrop of foregoing the queries to the issue raised are answered below :- 1. Yes. The yearly declaration filed by SSI unit under Rule 174/rule 12 can be treated as a return under Section 32E(1) of the CEA 44 inasmuch as the fact that the said declaration is filed in terms of the provision of the C. Ex. law, which exempts such limit from taking out registration. When there is specific provision in law exempting a unit from taking out C.E. Registration/filing of periodical return, insisting for a return virtually excludes Application under Section 32E of the C.E. Act, which is not correct in law. 2. Yes. Obtaining of ECC etc are procedur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of different jurisdiction, which may not be the intent of the statutes. This is further complicated when the company maintains common records and has common accounts. Hence, considering the facts and circumstances of the matter, and taking into consideration the larger interest of Revenue the Settlement Forum is advised to carefully consider and may admit the issues for redressal before the Settlement Commission. 8. Submission by Shri C. Natarajan, Senior Advocate, Chennai (i) A right to apply to the Settlement Commission is a statutory right conferred upon an assessee by Section 32E of the C.E. Act 44 (hereinafter referred to as the Act). An assessee does not have any right in common law, equity or an inherent right to seek a settlement of his case. Therefore, the right of the assessee is clearly subject to the satisfaction of conditions and limitations imposed by Section 32E of the Act. Re: AIR 1962 SC 1320 at 1323 (para 6) Burmah Construction Company v. State of Orissa. Therefore an assessee asking a settlement of his case must satisfy every condition or requirement of the statute in question. Thus, if a return is not filed, then an application for sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return required to be filed by Rule 12 of the Central Excise Rules, 2002, an application cannot be preferred before the Settlement Commission. C. Discussion and Order 9. The Special Bench has considered the oral and written submissions of the counsels and perused the relevant documents, including the citations referred to and relied upon. 10. The basic issues referred to the Special Bench appear to revolve around clause (a) of the first proviso to Section 32E(1) of the Central Excise Act, 1944. For easy reference, the provisions of Sub-section (1) of Section 32E with its first proviso is reproduced below :- SECTION 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 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 particular as may be prescribed including the particulars of such excisable goods in respect of which he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the form of coma after the words duty paid and before the phrase in the prescribed manner , the words in the prescribed manner should qualify the act of payment of duty. That is, the duty paid in the prescribed manner should have been shown, amongst other things, in the said returns . This would be more relevant, considering the fact that according to the said proviso no application shall be made unless the additional amount of duty accepted by the applicant in his application exceeds ₹ 2 lakhs , thereby, implying that a payment in the prescribed manner has already taken place and an additional amount of duty exceeding ₹ 2 lakhs over and above that is to be accepted in the settlement application. The Commission has already been taking a consistent view that the additional duty liability to be disclosed and accepted by an applicant is not a liability in addition to the proposed demand in the SCN, but a liability in excess of what had been disclosed before the proper officer and, therefore, would have been discharged also. 10.3 Further, it is also observed by the Bench that the person eligible to apply to the Settlement Commission is an assessee . Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 2002 which deals with, and, provides for filing of, monthly returns in a specified form by every assessee about their production and removal of goods and other relevant particulars within ten days after the close of the month to which the return relates. The format of the return is specified. In the case of a small scale manufacturer, availing (partial) exemption under a notification based on value of clearances in a financial year, he has to file the said return quarterly, and others on monthly basis, again in the specified form. Therefore, even if it is presumed that the requirement of filing returns showing production, clearance and Central Excise duty paid in the prescribed manner refers to filing returns in the prescribed manner, it can only mean filing in the prescribed format, monthly or quarterly, depending on the status of the manufacturer, as provided for under the aforesaid Rule 12. 10.5 Therefore, there can be no doubt on the entitlement of an assessee, which term includes producer or manufacturer of excisable goods, as also a person liable for payment of duty assessed, who is registered with the Department and files returns in terms of Rule 12 cited supra, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the forerunner to the later Customs and Central Excise Settlement Commission, had proposed settlement as a means of compromise with errant tax payer in the administration of fiscal law whose primary objective (of the administration) is to raise revenue. He appears to have been influenced by the confession method in the U.K. and the compromise method available in the U.S.A. Thus, the settlement provisions are certainly intended to advance revenue collection, and resolve pending disputes, but more importantly, by giving room for an errant tax payer to come clean and get immunities in exchange for truthful admission of his duty liability. The Commission provides amnesty to the errant tax payers, who failed at the appropriate time to comply with the provisions of tax laws, so that they can get back to the mainstream after a candid admission of their lapse, admitting and accepting true duty liability and disclosing how it arose. This is a permanent amnesty scheme. In the words of the Wanchoo Committee Report A provision of this type facilitating settlement in individual cases will have this advantage over general disclosure scheme that misuse thereof will be difficult and the disclosur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. SI Tripati [1993 (202) ITR 74 (BOM)]. It was observed therein that The proceeding before the Settlement Commission are in the nature of concession given to an assessee who has suppressed income and the Settlement Commission has been authorised to give immunity to such assessees. [Emphasis Supplied] 10.10 The Bench, therefore, holds that unlike a court of law (even CESTAT and other Tribunals), which is concerned with rendering of justice and has to, therefore, ensure that no one is deprived from approaching it for relief, the Settlement Commission is intended to extend relief/concession to errant tax payers by way of amnesty or immunities in return for candid admission of commissions and omissions resulting in failure to discharge fully the duty liability. Therefore this relief has to be extended only to the actually targeted persons i.e. persons intended to be so granted by the law, and in deserving cases. Particularly, settlement being a permanent amnesty scheme, the responsibility of the Commission is all the more grave to ensure that it is not perceived as an alternate revenue collecting machinery, which perception would only embolden persons liable to discharge duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench cannot also overlook the oft repeated principle of interpretation that in interpreting a fiscal statute, one can not go beyond the plain and simple words of the statute to ascertain the intention, when there is no ambiguity. The Bench also takes note in this context that one of the counsels Shri C. Natrajan, Sr. Advocate, Chennai, has referred in his written views filed before the Bench to the following two decisions and has stated that an assessee does not have any right in common law or equity or an inherent right to seek a settlement and the right of the assessee is clearly subject to the satisfaction of the conditions and limitations imposed by Sec. 32E of the Central Excise Act. (1) Jyoti Basu v. Debi Ghosal (AIR 1982 SC 1983) (2) Burmah Construction Co. v. State of Orissa (AIR 1962 SC 1320) 10.13 Therefore, the Commission is duty bound to examine whether the applicant satisfies statutory conditions laid down in Sec. 32E for filing an application, before admission of the application. Accordingly, filing of return being a statutory requirement in terms of Clause (a) of the first proviso to Section 32E(i) the same would have to be insisted upon. The Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion can be taken to serve the purpose of a return as the applicant has disclosed through his declaration that he is within the exemption limit and that his estimated manufacture and clearance are only to the extent mentioned therein. In any case, filing of a declaration keeps the declarant in the knowledge of the Department and his additional disclosure in the settlement application can be compared with the base disclosure of the estimated production and clearance furnished in the declaration. 10.15 Finally, the Bench also notes that in the case of M/s. Bharat Industrial Works, New Delhi, the Principal Bench had vide its order No. A-116/CE/2003-SC(PB), dated 4-6-2003 observed that ..........the Applicant s submission to ignore the condition relating to filing of returns is not convincing. The proviso (a) of Section 32E(1) is categorical that no application is entertainable unless returns have been filed. There is no room for relaxing this condition. Hence, the Applicant s request to take a broader view for admitting the case on the ground that the necessary documents regarding the production of goods is not admissible. The Hon ble High Court of Delhi in its order dated 30-7-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return can be deemed to be the return referred to in Section 32E(1). Therefore, even if the views of the counsels that clause (a) of the first proviso to Section 32E(1) lays down for filing of returns in the prescribed manner are to be accepted, then too as per Rule 12 of the Central Excise Rules, 2002, returns are to be filed by an assessee on a monthly/quarterly basis. There is no provision for filing of these returns in a consolidated manner covering more than one month. Though there is no specific bar against filing of belated returns relating to a particular month, there is no provision for consolidating the returns for any number of months. But going by the earlier stated view that the said Section 32E(1) only refers to mention of the duty paid in the prescribed manner in the return, the Bench observes that if the applicant is to file a consolidated return belatedly without ECC Number, and covering more than one month, such return cannot, naturally, contain the details of any duty paid in the prescribed manner, as no duty would have been paid at nil till then. Further, if the assessee is to file a consolidated return before filing an application or along with the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions at two different locations, one of which pays duty and files returns and another neither pays duty nor files returns, can be said to have complied with the conditions of filing the returns as per Sec. 32E(1) of the CEA, 1944. Answer : No. Unlike direct taxes, in the case of excise levy, the registration by an assessee is premises - specific, i.e. a corporate or a firm or an individual having more than one premises for manufacturing excisable goods, is enjoined under Rule 9 of the C.E. Rules, 2002 to register each place of manufacture of the excisable goods and to maintain accounts and registers separately in respect of each premises. The said manufacturer is also to file return specifically for each of the said manufacturing premises registered separately, and as a corollary in case total exemption is to be availed declaration in lieu of registration is also required in respect of each premises. It may be a different issue that in the application for registration, or in the declaration form, the assessee is directed to furnish the details of all other manufacturing premises that they have and the addresses of such places. But this does not, and cannot, substi ..... 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