TMI Blog2013 (8) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... A/2012 made by the Settlement Commission, Bombay on 3/1/2012 thereby directing the Settlement Commission to consider and decide settlement application No.SA(E)440/2010 filed by the petitioners for settlement of case arising out of Show Cause Notice F.No.DGCEI/AZU/12(4)19/2007-08 dtd. 8/1/2010 issued by the Additional Director General, DGCEI, Zonal Unit, Ahmedabad, on merits. 2.00. That the petitioner No.1 is a Partnership Firm (hereinafter referred to as the petitioner ). The petitioner No.2 is Partner of the petitioner No.1 firm. The petitioner firm is engaged in the business of manufacture of Patent of Proprietary medicines. That the petitioner firm was availing SSI exemption allowed by virtue of Notification No.8/2003-CE issued by the Central Government. That the respondent No.4 initiated inquiry against the petitioners in the month of July, 2007. That the petitioners were served with the show cause notice by the respondent No.4 dtd. 8/1/2010, by which the petitioners were directed to show cause as to why Central Excise Duty amounting to ₹ 1,34,52,047/- towards Cenvat duty, plus education cess plus Higher Education Cess should not be demanded and recovered from them un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of only ₹ 51,04,783/- as against the total demand of duty of ₹ 1,34,52,047/- raised in the show cause notice. Thus, while the applicants have made a disclosure by admitting part of the duty liability proposed against them in the show cause notice, they have raised several complex and contentious questions of fact to contest the sustainability of balance duty liability on multiple counts. The revenue have, on the other hand, strongly emphasized upon the correctness of duty as calculated and demanded in the show cause notice, mainly stressing upon their contention that various invoices and other documents now proposed to be relied upon by the applicant in the settlement proceedings were never disclosed or produced during the course of investigations into the case. 4.2. The Bench emphasized upon both the sides that the Settlement Commission is not the appropriate forum for resolving contentious disputes involving extensive scrutiny of voluminous facts and evidence for adjudging facts which stand proved or otherwise, since the scope and object of scheme of settlement of cases as enshrined in Chapter V of the Act is settlement and not adjudication of highly disputed que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal applicant was also directed to extend full cooperation so that the matter gets disposed of early. It appears that thereafter in the meantime, 12 months from the date of submitting application has expired, and therefore, the Settlement Commissioner has passed the impugned order of determining proceedings as having been abated and remitting the matter to the adjudicating authority in terms of section 32F of the Act by observing that there is a non-cooperation from the office of the respondent No.4 DGCEI, Ahmedabad. Being aggrieved by and dissatisfied with the impugned order of abatement of the proceedings passed by the Settlement Commission, petitioners have preferred present Special Civil Application challenging the vires of Section 32F(6) of the Central Excise Act, 1944. 3.00. Mr.Paresh Dave, learned advocate appearing on behalf of the petitioners has vehemently submitted that provisions of Section 32F(6) of the Central Excise Act are ultra vires the Constitution and/or violative of Article 14 of the Constitution of India. It is submitted that Section 32F(6) of the Act, which prescribes the time limit for deciding the Settlement application within a period of 9 months ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, would be considered. It is submitted that, however, on declaring the proceedings abated by the Settlement Commission, considering Section 32F(6) of the Act, the Settlement Commission could not pass final order, reasons which are not attributed to the petitioners, the petitioners cannot be made to suffer. It is further submitted that even criteria for abatement as per Section 32F(6) of the Act being inability of the Commission to dispose of the application within stipulated time mentioned in the said provision, is not a valid and reasonable one in the eyes of law and suffers from vice of inoperative and violative of Article 14 of the Constitution of India. 3.03. It is further submitted by Mr.Dave, learned advocate appearing on behalf of the petitioners that in the present case as observed by the Settlement Commission, there was noncooperation on the part of the revenue and therefore, the Settlement Commission was handicapped in passing final order within stipulated time as mentioned in Section 32F(6) of the Act and therefore, the Settlement Commission was compelled to pass an order of abatement of settlement proceedings. It is submitted that if that be so, and in such a si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant, meaning thereby the failure on the part of the Settlement Commissioner in not passing final order within stipulated time prescribed under Section 32F(6) of the Act are attributable to revenue and/or failure is not owing to reasons attributable to the applicants. By making above submissions and relying upon above decision, it is requested to declare Section 32F(6) of the Act as unconstitutional and in the alternative to read down Section 32F(6) of the Act as submitted hereinabove. 4.00. Present petition is opposed by Mr.P.S. Champaneri, learned Assistant Solicitor General of India appearing on behalf of the Union of India, Mr.R.J. Oza, learned counsel appearing on behalf of the respondent No.4 and Dr.Amee Yajnik, learned counsel appearing on behalf of the respondent No.3. 5.00. The learned counsel appearing on behalf of the respondents have vehemently submitted that on the grounds submitted on behalf of the petitioners, Section 32F(6) of the Act cannot be declared ultra vires and/or unconstitutional. It is submitted that earlier there was no specific time limit provided in Chapter-V and in providing applications by the Settlement Commission. It is submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having jurisdiction and it further provides that the Commissioner shall furnish the report within 30 days of the receipt of communication from the Settlement Commissioner. It is submitted that proviso to subsection (3) further provides that where the Commissioner does not furnish the report within the aforesaid period of 30 days, the Settlement Commissioner shall proceed further in the matter without the report of the Commissioner. It is further submitted that sub-section (4) of Section 32F(6) of the Act further provides that where a report of the Commissioner is called for under sub-section (3) has been furnished within the period specified in that sub-section, the Settlement Commissioner may, after examination of such report, if it is of the view that any further inquiry or investigation in the matter is necessary direct, for the reasons to be recorded in writing, the Commissioner (Investigation) within 15 days of the receipt of the report of the Commissioner, to make or cause to be made such further inquiry or investigation and furnish a report within 90 days of the receipt of the communication from the Settlement Commissioner, on the matters covered by the application and any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested to uphold the constitutionality of Section 32F(6) of the Act : (1) 2011 (265) ELT 3 (S.C.) (Union of India Vs. IND Swift Laboratories Ltd.) (2) (2012) 1 SCC 226 (Union of India and others Versus Nitdip Textile Processors Private Limited and another) (3) (1981) 4 SCC 675 (R.K. Garg Vs. Union of India) (4) 1989 Supplementary (1) SCC 79 (P.M. Ashwathanarayana Setty Vs. State of Karnataka) 5.01. Now, so far as reliance placed upon the decision of the Bombay High Court in the case of Star Television News Ltd. (supra) is concerned, it is submitted by Dr.Yajnik that the said decision would not be applicable to the facts of the present case. It is submitted that in the case before the Bombay High Court, the High Court was considering the cut off date of 31st March, 2008 for Settlement Commission to complete the proceedings by virtue of 245D(4A) of the Income Tax Act,1961. It is submitted that on facts and considering the material on record it was found that it was the duty imposed upon the Settlement Commissioner to dispose of the complete proceedings on or before 31/3/2008 and therefore, it was found that fixing of such an cut off date is arbitrary and violative of Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has disclosed material along with the settlement application, which is subsequently known to the Assessing Officer, which after abatement can be used against him. It is submitted that on the aforesaid ground Section 32F(6) of the Act cannot be declared ultra vires and/or unconstitutional. 5.03. It is further submitted by Mr.R.J. Oza, learned counsel appearing on behalf of the respondent No.4 that as such the observations made by the Settlement Commission in the impugned order that there was non-cooperation by the respondent No.4 is factually incorrect. It is submitted that all throughout the respondent No.4 and/or representative appeared before the Settlement Commissioner and made submissions. However, there was an insistence for granting SSI exemption under the Notification No.8/2003-CE which the petitioners are not entitled, which is considered to be noncooperation by the Settlement Commission. In support of his above submission, he has relied upon the Affidavit-in-reply filed on behalf of the respondent No.4. 5.04. Mr.Champaneri, learned Assistant Solicitor General of India has further submitted that settlement of case is an alternative dispute resolution mechanism that ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the respective parties at length. 7.00. At the outset, it is required to be noted that in the present petition the petitioners have prayed for an appropriate writ, order and/or direction striking down Section 32F(6) of the Central Excise Act, 1944 which provides abatement of the proceedings in case the Settlement Commission does not pass a final order within time limit specified under Section 32F(6) setting the case in respect of the application filed on or after the 1st day of June, 2007. 7.01. To consider the aforesaid provision of law original and after amendment and its object and purpose is required to be considered. 7.02. It appears that the object and purpose of approaching the assessee before the Settlement Commission is to minimize the litigation and to realize the arrears of tax by way of settlement in an expeditious manner. The basic objective of setting up of the Settlement Commission is to expedite the payments of customs and excise duties involved in disputes by avoiding costly and time consuming litigation process and to give an opportunity to taxpayers to come clean who may have evaded payments of duty. It provides a forum for the assessees to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission to the applicant and the Commissioner of Central Excise within a period not exceeding two months from the date of receipt of such application, unless the presiding officer of the Bench extends the time, recording the reasons in writing. (2) A copy of every order under sub-section (1) shall be sent to the applicant and to the Commissioner of Central Excise having jurisdiction. (3) Subject to the provisions of sub-section (4), the applicant shall within thirty days of the receipt of a copy of the order under sub-section (1) allowing the application to be proceeded with, pay the amount of additional duty admitted by him as payable and shall furnish proof of such payment to the Settlement Commission. (4) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee that he is unable for good and sufficient reasons to pay the amount referred to in subsection (3), within the time specified in that subsection, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by installments, if the assessee furnishes adequate security for the payment thereof. (5) Where the additional amount of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall provide for terms of settlement including any demand by way of duty, penalty or interest, the manner in which any sums due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commissioner that it has been obtained by fraud, or misrepresentation. (10) Where any duty payable in pursuance of an order under sub-section (7) is not paid by the assessee within thirty days of the receipt of a copy of the order by him, then, whether or not the Settlement Commission has extended the time for payment of such duty or has allowed payment thereof by installations, the assessee shall be liable to pay simple interest at the rate eighteen per cent per annum or at such other rate as notified by the Central Board of Excise and Customs on the amount remaining unpaid from the date of expiry of the period of thirty days aforesaid. (11) Where a settlement become void as provided under sub-section (9) the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny further enquiry or investigation in the matter is necessary direct, for reasons to be recorded in writing, the Commissioner (Investigation) within fifteen days of the receipt of the report, to make or cause to be made such further enquiry or investigation and furnish a report within a period of ninety days of the receipt of the communication from the Settlement Commission, on the matters covered by the application and any other matter relating to the case: Provided that where the Commissioner (Investigation) does not furnish the report within the aforesaid period, the Settlement Commission shall proceed to pass an order under sub-section (5) without such report. (5) After examination of the records and the report of the Commissioner of Central Excise received under sub-section (3) and the report, if any, of the Commissioner (Investigation) of the Settlement Commissioner under sub-section (4), and after giving an opportunity to the applicant and to the Commissioner of Central Excise having jurisdiction to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount which remains unpaid, shall be recovered along with interest due thereon, as the sums due to the Central Government by the Central Excise Officer having jurisdiction over the assessee in accordance with the provisions of section 11. (10) Where a settlement become void as provided under sub-section (8), the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the Central Excise Officer having jurisdiction may, notwithstanding anything contained in any other provision of this Act, complete such proceedings at any time before the expiry of two years from the date of the receipt of communication that the settlement becomes void. 7.05. As can be seen from the aforesaid provision of law, prior to its substitution by the Finance Act, 2007 (Act No.22 of 2007) and as Section 32F stood, there was no mandatory time limit for the Settlement Commission to dispose of the application. It also did not provide any time limit for the Commission of Central Excise having jurisdiction to submit any report on the further inquiry or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the matter is necessary, direct, the Commissioner (Investigation) within 15 days of the receipt of the report of the Commissioner, to make or cause to be made such further inquiry or investigation and in that case, the Commissioner (Investigation) is required to furnish a report within a period of 90 days of the receipt of the communication from the Settlement Commissioner, on the matters covered by the application and any other matter relating to the cases. It further provides that where the Commissioner (Investigation) does not furnish the report within the aforesaid period, the Settlement Commissioner shall proceed to pass an order under Sub-section (5) without such report. Sub-section (5) of Section 32F provides that after examination of the records and report of the Commissioner of Central Excise received under Subsection (3) and report if any of the Commissioner (Investigation) of the Settlement Commission under Subsection (4) and after giving opportunity to the applicant and to the Commissioner of Central Excise having jurisdiction to be heard and after examining further evidence that may be placed before it, the Settlement Commissioner to pass such order as thinks fit on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oach the Settlement Commissioner and to resolve the dispute is to provide expeditious resolution of dispute outside the judicial mechanism that is already available under the other provisions of the Act. Therefore, if the proceedings for settlement of disputes are allowed to go on indefinitely, the very objective of the Scheme would be defeated and/or frustrated. Therefore, under substituted Section 32F(6) of the Central Excise Act, when the period of nine months further extendable by another three months is provided by the Settlement Commission to pass a final order, the same cannot be said to be arbitrary, unreasonable and/or violative of Article 14 of the Constitution of India. Period of nine months further extendable by another three months, is a reasonable time for settlement of dispute upon full and true disclosure of the duty liability by the taxpayer before the Commission. Therefore, the provisions of Section 32F(6) of the Central Excise Act, 1944 prescribing total one year for disposal of the case in settlement is just and equitous. 7.07. Now, so far as the contention on behalf of the petitioners that if the Settlement Commission would not pass final order within the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement Commission is empowered to extend the period for a further period of three months and within the extended period of three months, the Settlement Commission is required to pass a final order. Considering the aforesaid prescription or time limit at every stage and even safeguards provided, it cannot be said that Section 32F(6) of the Act is unreasonable and/or arbitrary and/or violative of Article 14 of the Constitution of India. 7.08. In the case of R.K. Garg Vs. Union of India, reported in (1981) 4 SCC 675, in paras 7 and 8 the Hon'ble Supreme Court has observed and held as under : 7. Now while considering the constitutionality validity of a statute said to be violative of Article 14, it is necessary to bear in mind certain well-established principles which have been evolved by the courts as rule of guidance in discharge of its constitutional function of judicial review. The first rule is that there is always a presumption in favour of the constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. This rule is based on the assumption, judicially recognised and accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.11. Now, so far as the contention on behalf of the petitioners that the petitioners while submitting the application before the Settlement Commission is required to disclose all material which are within exclusive knowledge of the assessee and is required to make full and true disclosure and therefore, if considering Section 32F(6) of the Act despite the reasons which are not attributable to the applicant, the Settlement Commission did not pass any final order within the stipulated time prescribed under Section 32F(6) of the Act and the proceedings are declared abated and the proceedings before the adjudicating officer shall have to go on and the material which has been disclosed by the applicant can be used against the applicant and therefore, such a provision would be unreasonable, is concerned, it is required to be noted that as such to approach the Settlement Commission as per Section 32E and 32F of the Act is not mandatory. Only those assessee who have avoided payment of duty and want to avoid further litigation and desirous of immunity from prosecution etc. may approach the Settlement Commission with clean hands and on true and complete disclosure of their duty liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and considering the material on record the Bombay High Court arrived at the conclusion that fixing of cut off date as March 31, 2008 was arbitrary and provisions of Section 245HA(1)(iv) to that extent will be also arbitrary and consequently unconstitutional. In the present case, we are concerned with the application for settlement made on or after 1st day of June, 2007. 7.13. Now, so far as the submission of Mr.Dave, learned advocate appearing on behalf of the petitioners to read down Section 32F(6) in the same manner as read down by the Bombay High Court is concerned, it is required to be noted and as per the settled proposition of law, the provision of law is required to be read down either to uphold its constitutionality and so as to achieve the object and purpose and/or when there is some ambiguity in the provision. In the present case, as stated hereinabove, Section 32F(6) of the Act to the extent it provides abatement of the proceedings in case the Settlement Commission does not pass final order within the time prescribed in the said provision is a complete code with all necessary safeguards and to achieve the object and purpose of speedy disposal of cases and speedy rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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