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2016 (7) TMI 423 - ANDHRA PRADESH HIGH COURT

2016 (7) TMI 423 - ANDHRA PRADESH HIGH COURT - 2016 (44) S.T.R. 321 (A. P.) - Validity of order of Settlement Commission rejecting their settlement application with respect to service tax liability - Held that:- Viewed from any angle, the Settlement Commission has erred in rejecting the petitionerís application for settlement dated 25.11.2013, by its order dated 14.11.2014, on the ground that the said application was barred by Section 32-(O)(1)(i) of the Act. As noted hereinabove the Explanation .....

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0.10.2013 and 06.11.2013, to determine whether penalty was imposed on the petitioner for concealment of duty liability before the Settlement Commission itself. The order dated 14.11.2014, impugned in W.P. No.38658 of 2015, is set aside and the matter is remanded to the Settlement Commission for its consideration afresh in the light of the law declared and the observations made in this judgement. - Decided in favor of petitioner. - WRIT PETITION Nos.38658, 38728 AND 38751 OF 2015 - Dated:- 2-6-20 .....

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gal, unlawful and violative of principles of natural justice. W.P. No.38728 of 2015 is filed by the petitioner seeking a writ of mandamus to declare Order No.38/2013-ST dated 06.11.2013 passed by the first respondent, in so far as penalty of ₹ 19,00,000/- was imposed without any valid ground or reason, as illegal, arbitrary, unlawful and violative of principles of natural justice. W.P. No.38751 of 2015 is filed by the petitioner seeking a writ of mandamus to declare Order No.36/2013- ST da .....

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services. It is their case that they were unaware of the need to obtain service tax registration for project services, activities relating to mining, industrial construction and erection, commissioning and installation services, construction of complex service, works contract services etc and, consequently, they did not obtain registration; service tax officials, who visited their corporate office in the year 2010, had pointed out, during preliminary scrutiny, that, while some of their business .....

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tax; a second show-cause notice in OR No.137/2011 dated 22.10.2011, relating to the period July, 2010 to September, 2010, was issued demanding ₹ 2,35,52,072; thereafter, a third show-cause notice in OR No.97/2012 dated 24.04.2012 was issued for the period October, 2010 to March, 2012, and ₹ 46,08,66,273/- was demanded as service tax; the petitioner submitted applications to the Settlement Commission with respect to all the three show-cause notices, and paid the entire amount with in .....

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horities; in its Order dated 14.11.2014, the Settlement Commission recorded that the previous two applications were filed on 28.01.2013 and 18.04.2013, by that time the third showcause notice issued on 24.04.2012 was already available in the hands of the petitioner, they could have filed an application for settlement at that time along with the previous applications or at least before the decision on the previous applications as the show cause notices were periodical in nature, and as the third .....

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id not justify rejection of the third application; the three show-cause notices were in respect of a continuous period from 01.08.2008 to 28.02.2012; the respondents could have issued only one notice for the entire period even by the date the third split up notice was issued; there was no reason to issue three notices for identical issues, and for a continuous period invoking the proviso to Sections 73 and 78 of the Finance Act, 1994; the Settlement Commission had settled identical cases arising .....

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nd the Commission was not justified in imposing penalty pursuant to the earlier two show-cause notices, and in refusing to entertain the third application on this ground. In the counter-affidavit filed in W.P. No.38658 of 2015, the Deputy Commissioner, Customs and Central Excise, Hyderabad, stated that the Writ Petition was filed belatedly, more than a year after the order dated 14.11.2014 was passed by the Settlement Commission; the petitioner had obtained registration in March, 2008 for paymen .....

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their registration certificate; after detailed investigation, a show-cause notice in SCN No.57/2011 in OR NO.69/2010 dated 23.08.2011 was issued alleging non-payment of service tax under the service tax categories of (i) mining of mineral, oil or gas services under Section 65(105)(zzzy) of the Finance Act, 1994; (ii) works contract services under Section 65(105)(zzzza) of the Finance Act, 1994, (iii) erection, commissioning or installation services under Section 65(105)(zzd) of the Finance Act, .....

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Service Tax, Hyderabad; subsequently, vide show-cause notice in OR No.137/2011 dated 22.10.2011, the Commissioner had demanded service tax of ₹ 2,68,19,623/-, for the period July, 2010 to September, 2010, based on the information provided by the petitioner to the department by their letters dated 02.08.2010, 30.08.2010 and 17.01.2011; the petitioner had furnished details of payment received by them, for the said period of the show-cause notice, vide their letters dated 19.10.2011 and 20.1 .....

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on the services rendered by them to their service recipients, and the details of the Cenvat credit availed by them during the said show-cause notice period, by their letter dated 23.04.2012; the show-cause notice proposed a demand of interest under Section 75 and penalty under Sections 76, 77 and 78 of the Finance Act; interest on delayed payment of service tax was demanded under Section 75 of the Finance Act; the show-cause notice also demanded payment towards irregular Cenvat credit of ₹ .....

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ted 23.08.2011 and 22.10.2011 respectively; the first respondent, after a detailed hearing, passed orders in Order No.38/2013-ST dated 06.11.2013 and Order No.36/2013-ST dated 30.10.2013 respectively; the first respondent directed the petitioner to pay ₹ 19,00,000/- and ₹ 2,35,000/- respectively; the petitioner was informed that these penalties were being imposed on them under the penal provisions invoked in the show-cause notice, and for granting them immunity from penalty in excess .....

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ion 83 of the Finance Act, 1994; the Settlement Commission, after a detailed hearing, observed that the application was hit by the bar in terms of the express provisions of Section 32-O of the Act; and the application filed by the petitioner was rejected by order dated 14.11.2014. It is further submitted, in the counter-affidavit filed on behalf of the 2nd respondent, that the orders passed by the Settlement Commission are the culmination of judicial proceedings under the provisions of Section 3 .....

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provided by them to their clientele, cannot claim ignorance of the other services being provided by them for which they are liable to pay service tax; the Writ Petition as filed is only an afterthought to delay proceedings in the case; the initial show-cause notice, for the period 01.08.2008 to 30.06.2010, was issued on the basis of the statements given by the petitioner; the second show-cause notice, covering the period 01.07.2010 to 30.09.2010, was issued on the basis of the information provi .....

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.08.2010 and 17.01.2011, and the details of payments received by them for the said period of the show-cause notice by their letter dated 23.04.2012; after having accepted liability to pay service tax, the petitioner had approached the Settlement Commission to settle the case after filing truthful declaration before them; in its order, the Settlement Commission had clearly explained the basic fallacy of the petitioner s case; in the Order, the Settlement Commission incorporated facts relating to .....

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it Petitions; one of the Writ Petitions has been filed after a lapse of more than one year from the date of the order dated 14.11.2014; the petitioner was attempting to confuse judicial proceedings before this Court, and to gain benefit by getting a favourable decision in the other two Writ Petitions after a lapse of two years; it could not be said that the petitioner, after a lapse of two years, had suddenly realized that the orders of the Settlement Commission were not judicious, and required .....

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the case. The decision of the Settlement Commission is final and conclusive. It is not an appealable order in terms of Section 32-M of the Act; and (3) the object of the Settlement Commission is to settle an issue which has been brought before it at the instance of an assessee, and the function of the Settlement Commission is not an adjudicatory function. In its order dated 30.10.2013 the Settlement Commission observed that the applicant had filed an application for settlement admitting service .....

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of the order from the Bench; in the facts and circumstances of the case, the Bench considered the additional amount of ₹ 2,68,19,623/- to be the applicant s true and full disclosure, besides applicable interest liability thereon; the Bench, therefore, considered it to be a fit case for settlement of service tax liability at ₹ 2,68,19,623/-; the applicant had paid ₹ 11,90,340/-towards interest; and additional interest, if any, required to be paid should be worked out by the jur .....

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ous activities, which rendered them liable for payment of service tax, was not informed to the Department; nonpayment of service tax attracted penalty under the relevant legal provisions relating to service tax; the Bench considered the applicant liable for penal action; however, as the applicant had made a full and true disclosure of additional service tax liability and had co-operated during the proceedings, the Bench considered the applicant eligible for partial immunity from penalty. Consequ .....

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lse evidence had been given. In its order dated 06.11.2013, the first respondent observed that the petitioner had not paid service tax, for the period August, 2008 to June, 2010, for various services rendered within the due dates; they had also not filed ST-3 returns in time; they had not even taken registration for works contract service, erection, commissioning and installation service, and mining service; the fact of providing various services, which rendered them liable for service tax, was .....

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period October, 2010 to March, 2012, the first respondent (i.e. the Settlement Commission) observed that the petitioner had filed three applications covering three show-cause notices (1) SCN No.57/2011 dated 23.08.2011 for the period August, 2008 to June, 2010, (2) SCN No.137/2011 dated 22.10.2011 for the period July, 2010 to September, 2010, and (3) SCN No.97/2012 dated 24.04.2012 for the period from October, 2010 to March, 2012; orders were passed in the first show-cause notice on 30.10.2013, .....

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March, 2012, on 25.11.2013; during the course of hearing on 13.08.2014, the petitioner s counsel had submitted that the bar under Section 32-O of the Act was not applicable in this case, as they had approached the Commission on an identical matter for the subsequent period; this submission was not supported by the provisions of Section 32-O of the Act; applications, in respect of the first two show-cause notices, were filed by the petitioner on 28.01.2013 and 18.04.2013 both of which was only af .....

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-cause notices, penalty was proposed on the ground of suppression of facts with an intention to evade payment of service tax; subsequently penalty was imposed on them in each of the two orders dated 30.10.2013 and 06.11.2013; the third application filed by the petitioner was hit by the express bar under Section 32-O of the Act as made applicable to service tax matters; and, consequently, the petitioner s claim application was liable to be rejected. Elaborate oral submissions were put forth by Sr .....

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ause Notice O.R. No. 69/2010 dated 23-8- 2011, for the period 01.08.2009 to 30.06.2010, was accepted by the Settlement Commission by its final order dated 6-11-2013 passed under Section 32F(5) of the Act; the settlement application dated 28.01.2013, seeking settlement of the case arising out of Show-Cause Notice O.R. No. 137/2011 dated 22-10-2011, for the period July, 2010 to September 2010, was accepted by the commission by its final order dated 30-10-2013 passed under Section 32F(5) of the Act .....

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ers; the third Settlement Application dated 25.11.2013 seeking settlement of the case arising out of Show-Cause Notice O.R. No. 97/2012 dated 24.04.2012, for the period October 2010 to March 2012, came to be rejected by order dated 14.11.2014; it is this order which is under challenge in W.P. No.38658 of 2015; and the ground on which the Commission rejected the application dated 25-11-2013 was that Section 32-O of the Act, as it applied to Service Tax proceedings by virtue of Section 83 of the F .....

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ication would be rejected on the hyper-technical ground that it was filed after orders were passed on the earlier two applications; the third application was rejected on the ground that it was barred under Section 32-O of the Act; as the third application was filed on 25.11.2013, the Explanation to Section 32-O of the Act (which came into force on 06.08.2014) has no application; the petitioner had submitted their application prior to insertion of the Explanation to Section 32-O; before the Expla .....

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ses is - whether the penalty contemplated under the said provision, prior to its amendment, was a penalty imposed for concealment of particulars before the Central Excise Officer or for concealment of particulars of liability before the Commission; the Commission has the powers of an assessing officer as declared under Section 32-I of the Act; the power to grant immunity is contained in Section 32K; the very application, under Section 32E(1) of the Act, pre-supposes suppression of facts before t .....

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ust hold the newly inserted Explanation to be a mere surplusage; if, on the other hand, the pre-amended Section 32-O contemplated penalty having been imposed only for concealment of particulars before the Central Excise Officer, the Explanation could be interpreted to be clarificatory in nature; such an interpretation, in the first instance, would mean that no subsequent application is maintainable as Section 32E(1) contemplates applications being made only if the Central Excise Officer has foun .....

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r even in respect of cases of concealment before the Central Excise Officer. On the other hand Sri Jalakam Satyaram, Learned Standing Counsel for Central Excise, would submit that pursuant to the show cause notice issued on 24.04.2012 by the Jurisdictional Commissioner, covering the period from October, 2010 to March, 2012, the petitioner had filed the third application before the Settlement Commission on 25.11.2013; by the time the said application was decided by the Settlement Commission on 14 .....

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ommission indisputably reflects concealment of duty liability from the Central Excise Officer; even in the third show cause notice, there was concealment of duty liability from the Central Excise Officer in as much as the petitioner did not file the returns, for the relevant period, before him; and, in the instant case, the impugned Order was passed taking the amendment into consideration. Learned Standing Counsel would submit that the issue of suppression/concealment was raised before the Commi .....

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third application, that it has implicitly taken into consideration the Explanation, inserted to Section 32-O(1)(i) in the year 2014, while passing the impugned order; the Commission had found that there was concealment of duty liability from the Central Excise Officer in the previous proceeding before it; the earlier cases were found fit only for partial immunity from penalty; and the Commission had imposed 1% of the tax liability, concealed from the Central Excise Officer, as penalty . Learned .....

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Settlement Commission for readjudication on the amended 32-O of the Act. Learned Standing Counsel would submit that, by taking his written and oral submissions and counter into the consideration, the writ petitions may be dismissed with exemplary costs. The show-cause notice in OR No.69/2010 dated 23.08.2011 related to the period 01.08.2008 to 30.06.2010 for failure on the part of the petitioner to pay service tax on mining of minerals service, oil and gas service under Section 65(105)(zzzy), tr .....

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under challenge in W.P. No.38728 of 2015. Another show-cause notice was issued to the petitioner in O.R.No.137 of 2011 dated 22.10.2011 for the period July, 2010 to September, 2010 for failure to pay service tax on mining of minerals service, oil and gas service under Section 65(105)(zzzy), and works contract service under Section 65(105)(zzzza) of the Finance Act, 1994. After receipt of the show-cause notice dated 22.10.2011, the petitioner submitted an application to the Settlement Commission .....

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contract service under Section 65(105)(zzzza) of the Finance Act, 1994. After receipt of the show-cause notice dated 24.04.2012, the petitioner submitted an application to the Settlement Commission on 25.11.2013 which culminated in an order being passed on 14.11.2014. It is this order of the Settlement Commission dated 14.11.2014 which is under challenge in W.P. No.38658 of 2015. In this context, it is necessary to note that the third show-cause notice, in O.R.No.97/2012 dated 24.04.2012, was i .....

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012. Even if the third application had been submitted just one month earlier i.e. at any time before the final order was passed by the Settlement Commission on the first of the earlier two show-cause notices on 30.10.2013, the bar under Section 32-O(1)(i) of the Act would, even according to the revenue, not have been attracted. It is only because the petitioner filed the third application before the Settlement Commission on 25.11.2013, with respect to the show-cause notice in O.R.No.97/2012 date .....

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on which necessitates examination is whether the Explanation added to Section 32-O(1)(i) of the Act, by Section 101 of Finance Act 2 of 2014 w.e.f. 06.08.2014, is prospective or retrospective in its application. If it is the latter, the Settlement Commission was then justified in rejecting the petitioner s application by its Order dated 14.11.2014 on the ground that they had, by the earlier Orders dated 30.10.2013 and 06.11.2013, suffered penalty for concealment of particulars of their duty liab .....

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of the Act both prior to, and after addition of the Explanation thereto. Section 83 of the Finance Act, 1994 makes certain provisions of the Central Excise Act, 1944, as in force from time to time, applicable in relation to service tax as they apply in relation to a duty of excise. The provisions referred to in Section 83 of the Finance Act include, among others, Sections 32, 32-A to 32-P of the Central Excise Act, 1944 (both inclusive). Consequently, the provisions of Chapter-V of the Central E .....

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ment, on the ground of concealment of particulars of his duty liability; then, he shall not be entitled to apply for settlement under Section 32-E in relation to any other matter . By Section 101 of Finance Act No.2 of 2014, effective from 06.08.2014, the following Explanation was inserted to Section 32-O(1)(i) of the Act: In this clause, the concealment of particulars of duty liability relates to any such concealment made from the Central Excise Officer. Section 32-O(1)(i) of the Act, after its .....

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nt under Section 32-E in relation to any other matter. Explanation: In this clause, the concealment of particulars of duty liability relates to any such concealment made from the Central Excise Officer. I. EXPLANATION TO A STATUTORY PROVISION : ITS PURPOSE: Before examining whether Parliament intended to apply the Explanation to Section 32-(O)(1)(i) of the Act retrospectively, it is useful to note the There is no general theory, as to the effect and intendment of an Explanation, except that the .....

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he incidence of a levy. (M.P. Cement Manufacturers Assn. v. State of M.P., (2004) 2 SCC 249 ). An Explanation may also be introduced by way of abundant caution in order to clear any mental cobwebs surrounding the meaning of a statutory provision spun by interpretative errors, and to place what the legislature considers to be the true meaning beyond controversy or doubt. (Keshavji Ravji & Co. (1990) 2 SCC 231). An Explanation may also be inserted ex abundanti cautela because of a groundless a .....

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s an exception or a proviso . (Aphali Pharmaceuticals Ltd. v. State of Maharashtra (1989) 4 SCC 378 ; Bihta Co-operative Development and Cane Marketing Union Ltd. v. Bank of Bihar AIR 1967 SC 389 ; State of Bombay v. United Motors (India) Ltd. AIR 1953 SC 252; Collector of Customs v. G. Dass & Co. AIR 1966 SC 1577 ; Burmah Shell Oil Ltd. [1961] I SCR 902; Dattatraya Govind Mahajan v. State of Maharashtra AIR 1977 SC 915 ; United Motors (India) Ltd AIR 1953 SC 252). Even if, on a true reading .....

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onsideration . (Aphali Pharmaceuticals Ltd. (1989) 4 SCC 378; United Motors (India) Ltd. AIR 1953 SC 252; Hiralal Ratanlal v. State of U.P. (1973) 1 SCC 216 ; D.G. Mahajan v. State of Maharashtra AIR 1977 SC 915; S. Sundaram Pillai (1985) 1 SCC 591. Mere description of a certain provision as an Explanation is not decisive of its true meaning. Ultimately it is the intention of legislature which is paramount, and mere use of a label cannot control or deflect such an intention. The interpretation m .....

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5). The object of an Explanation to a statutory provision is (a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part th .....

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tion must be read so as to harmonise with and clear up any ambiguity in the main provision. (M/s. Oblum Electrical Industries Pvt. Ltd., Hyderabad v. Collector of Customs, Bombay AIR 1997 SC 3467 ; Bihta Cooperative Development Cane Marketing Union Ltd. AIR 1967 SC 389). It should not, ordinarily, be so construed as to widen the ambit of the Section. (S. Sundaram Pillai (1985) 1 SCC 591; Bihta Cooperative Development Cane Marketing Union Ltd. AIR 1967 SC 389). An Explanation appended to a Sectio .....

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constituting a single scheme. (M.P.V. Sundararamier & Co. v. State of Andhra Pradesh AIR 1958 SC 468). On a conjoint reading of Section 32-O(1)(i) of the Act, and the Explanation thereto, it is clear that, if penalty is imposed on the applicant by an order passed by the Settlement Commission under Section 32-F(5) of the Act for concealment of particulars of their duty liability from the Central Excise Officer, the applicant is thereafter not entitled to apply for settlement under Section 32 .....

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ication for settlement dated 25.11.2013. II. DOES THE EXPLANATION TO SECTION 32-O(1)(i) OF THE ACT OPERATE PROSPECTIVELY OR RETROSPECTIVELY? The fact, however, remains that both the events firstly of a show cause notice being issued to the petitioner on 24.04.2012, and secondly which resulted in the petitioner submitting an application to the Settlement Commission on 25.11.2013, were before the Explanation was inserted to Section 32-O(1)(i) of the Act with effect from 06.08.2014. Retrospectivity .....

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ectively and, in that behalf, tax legislation is no different from any other legislation. The power to tax can be competently exercised by the legislature either prospectively or retrospectively. (Jawaharmal v. State of Rajasthan AIR 1966 SC 764 = (1966 (1) SCR 890 ; M/s. Satnam Overseas (Export) AIR 2003 SC 66). While clarificatory provisions have retrospective application, a provision cannot be said to be clarificatory if it neither supplies an obvious omission in the Act nor purports to expla .....

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provisions of Chapter V of the Act. As the right to make an application for settlement, like a right of appeal, is a creature of a statute, the remedy must be legitimately traceable to the statutory provisions. (Super Cassettes Industries Ltd. V. State of U.P. (2009) 10 SCC 531 ; Competition Commission of India v. SAIL (2010) 10 SCC 744 ). It is for the legislature to decide whether the said right should be unconditional or conditional. (SAIL (2010) 10 SCC 744; Kondiba Dagadu Kadam v. Savitribai .....

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ght of the relevant statutory provisions. Section 32E, in Chapter-V of the Act, refers to the application for settlement of cases and, under sub-section (1) thereof, an assessee may, in respect of a case relating to him, make an application, before adjudication, to the Settlement Commission to have the case settled, 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 ha .....

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proviso thereto 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; (c) the additional amount of duty accepted by the applicant in his application exceeds three lakh rupees; and (d) the applicant has paid the additional amount of excise duty accepted by him along with int .....

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t. The fourth proviso stipulates that no application under Section 32-(E)(1) shall be made for the interpretation of the classification of excisable goods under the Central Excise Tariff Act, 1985 (5 of 1986). Section 32E(4) provides that an application, made under Section 32-E(1), shall not be allowed to be withdrawn by the applicant. The ingredients of Section 32E(1), which relate to the application for settlement of cases, are: (a) an assessee is entitled, in respect of his case, to make an a .....

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st be submitted in such form and in such manner as may be prescribed by Rules; (d) the application should contain a full and true disclosure of the assessee s duty liability; (e) the full and true disclosure made by the assessee, in its application to the Settlement Commission regarding their duty liability, must not have been disclosed earlier before the Central Excise Officer having jurisdiction; (f) the applicant should disclose to the Settlement Commission the manner in which such liability .....

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f making an application to the Settlement Commission only after receipt of a show-cause notice from the Central Excise Officer for recovery of duty, additional restrictions are placed thereby on the applicant invoking the jurisdiction of the Settlement Commission i.e., (1) the applicant should have filed returns showing the particulars stipulated under clause (a) of the proviso. Even a person, who has filed returns for a certain duration, would fall within the ambit of Clause (a) of the first pr .....

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The third proviso to Section 32-E bars an application being entertained by the Settlement Commission in cases which are pending before the Appellate Tribunal or any Court. The fourth proviso to Section 32E(1) discourages any attempt by an applicant to have a classification dispute settled by the Commission since there cannot, ordinarily, be any settlement with regards classification of goods which must be uniform for all manufacturers of identical goods. Unlike the adjudicatory process, settlem .....

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remedy of a settlement of the dispute is for the assessee to disclose their full and true duty liability and the manner in which it arose. Section 32E(1) emphasises the need for the assessee to fully and truly disclose their duty liability to the Settlement Commission which they had not earlier disclosed to the Central Excise Officer. The onus is on the assessee to satisfy the Settlement Commission with credible evidence/documents that the duty liability disclosed by them is full and true, irre .....

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GOVERNED BY THE LAW IN FORCE WHEN THE SETTLEMENT PROCEEDINGS COULD HAVE BEEN INSTITUTED: The statutory right to make an application to the Settlement Commission, like a right of appeal, vests in an applicant at the time the original proceedings could have been instituted i.e., soon after a show cause notice for recovery of duty, issued by the Central Excise Officer, is received by them. Just as depriving a suitor in a pending action, of an appeal to a superior tribunal which belonged to him as o .....

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e actually exercised when the adverse judgment is pronounced, the right to make an application for settlement is also a right governed by the law prevailing on the date when the settlement proceeding could have been instituted, and not by the law that prevails at the date of the decision of the Settlement Commission, (Garikapati Veeraya v. N. Subbiah Choudhry AIR 1957 SC 540 = 1957 SCR 488 ; Nahar Industrial Enterprises Ltd. (2009) 8 SCC 646; Dilip S. Dahanukar v. Kotak Mahindra Co. Ltd. (2007) .....

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ecessary intendment. It is settled law that a right of appeal, being a substantive right, preserves all successive appeals available under the law then in force to the parties to the Suit throughout the rest of the career of the suit. Likewise the right to make an application to the Settlement Commission is preserved from the date on which the show cause notice is received by the applicant. There are two exceptions to the application of this rule, viz, (1) when, by competent enactment, such righ .....

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such a right, after the lis has commenced, unless the repealing enactment either expressly or by necessary implication takes away such a remedy, (Maria Cristina De Souza Sadder v. Amria Zurana Pereira Pinto (1979) 1 SCC 92; SAIL21), the remedy of seeking settlement also accrues to an applicant when he receives the show cause notice and, save abolition of the Settlement Commission itself, would not be affected by a subsequent amendment. This substantive right is governed by the law prevailing at .....

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EMEDY OF SETTLEMENT SHOULD BE GIVEN A LIBERAL CONSTRUCTION: Chapter-V of the Act places emphasis on settlement of cases as, unlike adjudication which is lengthy and cumbersome, a settlement brings about a finality to the entire dispute. The provisions of Chapter-V are attracted only when an assessee desires to avail the option of a settlement. The scheme of Chapter-V of the Act is for the Settlement Commission to exercise complete jurisdiction over the case after it is admitted till it is finall .....

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Super Cassettes Industries Ltd. (2009) 10 SCC 531; V.C. Shukla v. State AIR 1980 SC 962 = 1980 Supp SCC 92; Crawford : The Construction of Statutes). As the Explanation to Section 32-O(1)(i) was inserted with effect from 06.08.2014 long after the petitioner received the show cause notice dated 24.04.2012, which resulted in their making an application for settlement on 25.11.2013, the Explanation cannot be applied retrospectively to deny the petitioner the right to make an application to the Sett .....

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e clauses to be construed but to the entire statute. It must compare the clause with other parts of the Law, and the setting in which the clause to be interpreted occurs. (State of West Bengal v. Union of India AIR 1963 SC 1241). It is necessary, therefore, to note the provisions of the Act, including those in Chapter V thereof, to the extent relevant albeit in brief. Section 11A of the Act relates to recovery of duties not levied or not paid or short-levied or shortpaid, and sub-section (1) the .....

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ession of facts, (e) contravention of any of the provisions of the Act or of the rules made thereunder with intent to evade payment of duty, by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant date, serve notice on such person requiring him to show-cause why he should not pay the amount specified in the notice along with interest payable thereon under Section 11-AA, and a penalty equivalent to the duty specified in the notice. Section 11- .....

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requiring him to show-cause why he should not pay the amount specified in the notice along with interest under Section 11AA and penalty equivalent to fifty per cent of such duty. Under Section 11- A(10) the Central Excise Officer shall, after allowing the concerned person an opportunity of being heard and after considering the representation if any made by such person, determine the amount of duty of excise due from such person not being in excess of the amount specified in the notice. Section .....

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a Central Excise Officer or Central Government. Section 32(1) of the Act requires the Central Government, by notification in the Official Gazette, to constitute a Commission to be called the Customs and Central Excise Settlement Commission for the settlement of cases under Chapter-V of the Act. Section 32A relates to jurisdiction and powers of the Settlement Commission and under sub-section (1) thereof, subject to the other provisions of Chapter-V, the jurisdiction, powers and authority of the .....

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s required either to pass an order allowing the application to be proceeded with, or to reject the application in which event the proceedings before the Settlement Commission abates. Section 35-F(2) requires a copy of every such order to be sent to the applicant, and to the Commissioner of Central Excise having jurisdiction. Section 32F(3) requires the Settlement Commission to call for a report, along with the relevant records, from the Principal Commissioner of Central Excise or the jurisdictio .....

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g to the case. Section 32F(5) enables the Settlement Commission, after examination of the records, the report under sub-section (3), the reports under sub-section (4), and after giving an opportunity of being heard to the applicant and to the Principal Commissioner or the Commissioner of Central Excise having jurisdiction, and after examining such further evidence as may be placed before it or obtained by it, to pass such orders as it thinks fit on the matters covered by the application and any .....

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h the case, but which has been completed under the Act before an application for settlement under Section 32E was made. Section 32-I (1) confers on the Settlement Commission all the powers which are vested in a Central Excise Officer under the Act or under the Rules made thereunder. During the pendency of proceedings before it, i.e., during the period after an application has been submitted to it and before an order is passed under Section 32-F(5), the Settlement Commission has exclusive jurisdi .....

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Commission in the proceedings before it; and (2) the applicant must have made a full and true disclosure of his duty liability. The power to grant immunity can be exercised by the Settlement Commission subject to such conditions as it may think fit to impose. In addition to the power to grant immunity, Section 32K(1) confers power on the Settlement Commission to, either wholly or partially, grant immunity to the applicant from imposition of penalty, and fine under the Act, with respect to the c .....

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declared that applications filed before the Settlement Commissioner on or before 31.05.2007 shall be disposed of as if the amendment in this section had not come into force . Section 32K(2) stipulates that the immunity granted to a person under Section 32-K(1) shall stand withdrawn if such person fails to pay the sum specified in the order, or fails to comply with any other condition subject to which immunity has been granted, and thereupon the provisions of the Central Excise Act shall apply as .....

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ction with the settlement. He shall also become liable for imposition of any penalty under the Act to which such person would have been liable had no such immunity been granted. Section 32L(1) confers power on the Settlement Commission, if it is of the opinion that any person who made an application for settlement under Section 32E has not co-operated in the proceedings before it, to send the case back to the Central Excise Officer having jurisdiction. The Central Excise Officer is empowered to .....

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32F(5), may be recovered and any penalty, for default in making payment of such sum, may be recovered as sums due to the Central Government. Section 32P stipulates that any proceedings, under Chapter V before the Settlement Commission, shall be deemed to be a judicial proceeding within the meaning of Section 193 and 228, for the purpose of Section 196 of the Indian Penal Code. VIII. DECLARATORY OR CURATIVE PROVISIONS HAVE RETROSPECTIVE APPLICATION: On a reading of the aforesaid provisions, it is .....

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Srimathi Jaikaur (1969) 2 SCC 429). A declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. ('Craies on Statute Law'; M/s. Satnam Overseas (Export) AIR 2003 SC 66). The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such a declaratory Act co .....

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two distinct provisions, this Court cannot presume the effect of both the Explanations to be the same. If both the Explanations were meant to have the same effect, and to have retrospective application, it was unnecessary for Parliament to use two different expressions in the Explanations to Section 32-K(1) and Section 32-O(1)(i) of the Act, as use of the same words would have sufficed. When two different expressions are used by the same statute, one has to construe these different expressions a .....

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ame sense, and the conclusion must follow that the two expressions have different connotations. (Member, Board of Revenue v. Arthur Paul Benthall AIR 1956 SC 35 = (1955) 2 SCR 842). When the legislature has taken care of using different phrases in different Sections, normally different meaning is required to be assigned to the language used by the legislature, and there is a presumption that they are not used in the same sense. (Arthur Paul Benthall41; Oriental Insurance Co. Ltd. v. Hansrajbhai .....

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ation has been differently expressed the legislature must be taken to have intended to express a different intention. (CIT v. East West Imports and Exports (P) Ltd., (1989) 1 SCC 760). X. REMEDIAL ACTS, ORDINARILY, OPERATE PROSPECTIVELY: As the newly inserted Explanation to Section 32-O(1)(i) does not indicate that it was enacted to remove any doubt or declare what the law has always been, it must be construed to be an ordinary remedial piece of legislation which would come into effect from the .....

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the Act has retrospective effect even prior to 06.08.2014 when it was introduced into the Act. Consequently Section 32-O(1)(i) of the Act, (prior to 06.08.2014 when an Explanation was inserted thereto), did not, when it spoke of concealment of particulars of duty liability, mean only concealment of particulars of duty liability before the Central Excise Officer. XI. COURTS CANNOT MAKE UP DEFICIENCIES IN THE ACT AS A RESULT OF DEFECTIVE PHRASING: As it is clear that the Explanation to Section 32 .....

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ility, then every subsequent application for settlement is barred, and the applicant is not entitled to avail the statutory remedy of a settlement, by moving an application before the Settlement Commission thereafter. As noted hereinabove, Section 32E(1) of the Act enables an application to be made to the Settlement Commission only in cases where the assessee has not disclosed its duty liability to the Central Excise Officer. The said provision however requires the applicant, which has failed to .....

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(O)(1)(i) by the revenue would bar an applicant from availing the statutory remedy of a settlement, before the Settlement Commission, in terms of Chapter V of the Central Excise Act if the Settlement Commission had earlier imposed penalty for concealment of duty liability only before the Central Excise Officer, and not before itself. The ambiguity in the language used in Section 32-O(1)(i) has resulted in two opposite construction being placed thereon, one on behalf of the assesee, and the other .....

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ruction make up deficiencies which are left there. (SAIL21; State of Gujarat v. Dilipbhai Nathjibhai Patel (1998) 3 SCC 234; Crawford v. Spooner (1846) 4 MIA 179 = 6 Moo PC 1 (PC)). Rules of interpretation do not permit Courts to read words into an Act unless the provision as it stands is meaningless. Courts are not entitled to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself. (SAIL21; Vickers Sons and Maxim Ltd. v. Evans (1 .....

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y, Section 32-K(3) confers power on the Settlement Commission to withdraw immunity to an assessee who had concealed material particulars before it. Section 32(L)(i) confers power on the Settlement Commission to send the case back to the Central Excise Officer if the applicant has not co-operated in the proceedings before it. Other than Section 32-O(1)(i), there is no other provision in Chapter V of the Act which confers power on the Settlement Commission to reject a subsequent application for se .....

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dictionary but remember that statutes always have some purpose or object to accomplish, and imaginative discovery is the surest guide to their meaning. (Commissioner of Income Tax, Bangalore v. J.H.Gotla Yadgari (1985) 4 SCC 343 = (1985) 156 ITR 323 ). A reasonable construction of Section 32-(O)(1)(i), prior to the Explanation being added thereto with effect from 06.08.2014, would be that the Settlement Commission is barred from entertaining a subsequent application where a penalty has been impo .....

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is difficult to accept. We find force in the alternative construction placed thereon by Sri S. Ravi, Learned Senior Counsel, that, prior to insertion of the Explanation with effect from 06.08.2014, the concealment referred to in Section 32-O(1) (i) of the Act related only to concealment of particulars of duty liability before the Settlement Commission, and not for concealment of such particulars before the Central Excise Officer, as that would accord with the other powers conferred on the Settle .....

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s been imposed by the Settlement Commission on the ground of such concealment, then a second application before the Settlement Commission is barred under Section 32-O(i) of the said Act; if penalty has not been imposed on the applicant, in an application for settlement under Section 32E, on the ground of concealment of particulars of their duty liability in that application, then the Commission should proceed to consider the applicant s case on merits. XIII. EXPLANATION TO SECTION 32-O(1)(I) CAN .....

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ithout the Explanation, Section 32-O(1)(i) should be held to have conveyed the same meaning. Courts have adhered to the principle that effort should be made to give meaning to each and every word used by the legislature, and it is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage if they can have a proper application in circumstances conceivable within the contemplation of the statute. (Gurudevdatta VKSSS Maryadit v. State of Maharashtra 2001 .....

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, the said provision was presumed, even by the legislature, to suffer from ambiguity necessitating legislative intervention and an Explanation being added thereto. Further even if it is presumed that Section 32-O(1)(i) is capable of more than one construction and the construction placed thereon, that concealment of particulars of duty liability relates to concealment either before the Settlement Commission or the Central Excise Officer, were to be held also to be a possible interpretation, it is .....

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. v. Union of India AIR 1970 SC 1173 = (1969) 2 SCR 481). A taxing statute must be construed strictly, and if two meanings are equally possible, the meaning in favour of the subject must be given effect to. (Board of Revenue v. Rai Saheb Sidhnath Mehrotra AIR 1965 SC 1092 = (1965) 2 SCR 269). In construing the words of a tax statute if there are two possible interpretations then effect is to be given to the one that favours the citizen and not the one that imposes a burden on him. (Central India .....

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C 1214). In case of doubt or dispute, a construction should be made in favour of the taxpayer and against the Revenue. (Manish Maheshwari v. CIT (2007) 3 SCC 794 ; J. Srinivasa Rao v. Govt. of A.P. (2006) 12 SCC 607 ). If a provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee, should be accepted, (I.T. Commissioner, W.B. v. N.H. Tea Co. AIR 1973 SC 2524), and against the Revenue. (Sneh Enterprises v. Commr. of Customs (2 .....

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SC 1080, the Supreme Court held that, from 01.07.1995, Section 194-C of the Income Tax Act was applicable to transport contracts as well; the question, however, was whether the explanation was only clarificatory or it made applicable the provisions of Section 194-C to the types of contracts in question for the first time from the date of insertion of the explanation, i.e., 01.07.1995; two interpretations were reasonably possible on the question whether or not the contract for carrying of goods w .....

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on of Explanation III, was not applicable to transport contracts, i.e., contracts for carriage of goods. XV. IS THE DELAY OF ONE YEAR, IN FILING W.P.NO.38658 OF 2015, FATAL? W.P. No.38658 of 2015, wherein the validity of the order of the Settlement Commission dated 14.11.2014 is put in issue, was filed before this Court on 26.11.2015, a little over one year from the date on which the impugned order was passed. The rule which says that the Court may not enquire into belated and stale claims is no .....

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planation for the delay. The real test to determine delay in such cases is that the petitioner should come to the writ court before a parallel right is created, and lapse of time is not attributable to any negligence on their part. The test is not as to the physical running of time. Where the circumstances justifying the conduct exist, the illegality which is manifest cannot be sustained on the sole ground of laches. (Dehri Rohtas Light Rly. Co. Ltd. v. District Board, Bhojpur (1992) 2 SCC 598). .....

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, just a little more than a year after the impugned order was passed, we are satisfied that the delay is not so inordinate as to necessitate dismissal of the Writ Petition or to deny the petitioner the relief sought for. This contention, urged on behalf of the Revenue, must also fail. XVI. CONCLUSION: Viewed from any angle, the Settlement Commission has erred in rejecting the petitioner s application for settlement dated 25.11.2013, by its order dated 14.11.2014, on the ground that the said appl .....

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