Gujarat High Court
Messrs Pradeep Impex vs Union Of India on 19 January, 2022
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
C/SCA/8995/2019 ORDER DATED: 19/01/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 8995 of 2019
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MESSRS PRADEEP IMPEX
Versus
UNION OF INDIA
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Appearance:
MR. SHALIN MEHTA, LD. SR. ADVOCATE FOR GUPTA LAW
ASSOCIATES(9818) for the Petitioner(s) No. 1
MR DHAVAL D VYAS(3225) for the Respondent(s) No. 3
MR NIKUNT K RAVAL(5558) for the Respondent(s) No. 1,2
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CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 19/01/2022
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
1. By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs;
"(A) That Your Lordship may be pleased to issue a Writ Certiorari or any other appropriate writ, direction or order, quashing and setting aside Final Order No.F-3458-3459/CUS/2018 SC (PB) dated 26.12.2018 (Annexure 'K') and letter dated 28.05.2019 (Annexure 'O') passed by the Settlement Commission, Delhi and modifying Final Order No.F-
3458-3459/CUS/2018 SC (PB) dated 26.12.2018 by settling the case at Rs.1,94,48,576/-;
(B) That Your Lordships may be pleased to issue a Writ of Mandamus or any other appropriate writ, order or direction thereby directing the Settlement Commission, Delhi to allow deduction claimed by the Page 1 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 Petitioner, and accordingly, modifying the amount of settlement at Rs.1,94,48,576/- for settling the application of the Petitioner;
(C ) Pending hearing and final disposal of the present petition, Your Lordships may be pleased to restrain the respondents, their servants and agents from recovering any amount from the petitioner in excess of Rs.1,94,48,576/- pursuant to Final Order No.F-3458-3459/CUS/2018 SC (PB) dated 26.12.2018 made by the Settlement Commission, Delhi and also stay the operation of letter dated 09.01.2019 (Annexure-"M");
(D) An ex-parte ad-interim relief in terms of Para 32(c) above may please be granted.
(E) Any other further relief that may be deemed fit in the facts and circumstances of the case may also be granted."
2. The facts, giving rise to this writ application may be summarized as under;
2.1 The writ applicant is a proprietary concern engaged in the business of trading of goods in the nature of PU Leather Fabric and Material. The goods after being imported by the writ applicant from various countries and those are, thereafter, sold in the local market. For the purpose of import, the writ applicant holds a valid and existing Import and Export code.
2.2 It appears from the materials on record that during the period in question, i.e., between January, 2017 and July, 2017 the writ applicant had imported various Page 2 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 consignments of PU Leather cloth declaring the same to be the import of "Stock Lot PU Leather" of varied size. The value of the goods as declared was accepted by the customs department and appropriate amount towards the customs duty including the special additional duty was levied under Section 3(5) of the Customs Tariff Act, 1975 and paid by the writ applicant.
2.3 Upon import, the goods were thereafter sold off in the domestic market under the cover of proper invoices and also on payment of the Sales Tax/Vat or CGST/SGST as applicable. In the transactions of the imported goods sold prior to 01.07.2017, the same were sold on the payment of the sales tax/vat. Whereas, for the domestic sale of the imported goods subsequent to 01.07.2017, the same was made under the cover of the GST invoices and upon payment of the appropriate CGST/SGST.
2.4 The Central Government vide the Notification No.102/2007 dated 14.10.2007 enacted an exemption scheme thereby allowing refund of the Special Additional duty paid at the time of import of goods subject to the condition that such imported goods are resold in the domestic market on payment of the Sales tax or VAT. As the goods imported by the writ applicant were subsequently sold in the domestic market on payment of the Sales Tax/VAT or GST, as the case may be, the writ applicant had from time to time claimed the benefit of refund under the said notification for various such Page 3 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 consignments.
2.5 On 01.07.2017, a new taxation regime came to be introduced in India and the Goods & Service Tax came to be implemented thereby replacing the erstwhile Central Excise and Sales Tax regime. In terms of the provisions of the new GST regime, as a transitional provision, an assessee was made eligible for claiming input tax credit of the CVD and SAD paid on the imported goods, lying in possession of the assessee which were meant to be supplied on payment of the GST under the new regime. On the date of the introduction of the new GST regime, the petitioner had various quantities of such imported goods on which the writ applicant had paid the CVD and SAD and therefore in terms of the transitional provision, the writ applicant filed the required TRANS-1 Form thereby claiming the input tax credit on the quantum of the CVD and SAD paid at the time of the import of goods.
2.6 However, in the meantime, on import of one such consignment being the B/E No.2088636 dated 14.06.2017, investigations were initiated by the DRI authorities on the basis of the allegations that the value declared by the writ applicant for the said consignment was not proper and correct. On the basis of such investigations, the department alleged that the goods imported under the said Bill of Entry as also various other Bills of Entry in the past, were not of the Stock Lot but were of the prime quality and therefore, the value declared by the writ Page 4 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 applicant was incorrect and improper and differential duty was required to be paid by the writ applicant on the enhanced value of such imports. Pursuant to the said investigation, a show cause notice dated 11.12.2017 came to be issued to the writ applicant alleging undervaluation on the import of the PU Leather under 19 Bills of Entry filed during the period between January, 2017 and June, 2017. On the basis of the said show cause notice, the department raised a demand of Rs.3,07,03,348/- which was inclusive of the Special Additional Duty payable under Section 3 (5) of the said Act. Along with the proposal to recover duty, the show cause notice also proposed recovery of interest and imposition of penalty/fine under various provisions of the Act and the rules made thereunder. As an amount of Rs.1,68,69,000/- was paid by the writ applicant to show his bonafide during the investigation, the same was also proposed to be appropriated against the said demand made in the show cause notice.
2.7 The writ applicant was called upon to show cause as to why;
(I) The value of import goods, i.e, 'PU Leather' declared in 19 Bills of Entry detailed in Annexure I to the Notice should not be rejected under Rule 12 of the Customs Valuation (Determination of prices of the imported goods) Rules, 2007 read with Section 14 of Customs Act, 1962.
Page 5 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022C/SCA/8995/2019 ORDER DATED: 19/01/2022
(ii) The value of import goods, i.e, 'PU Leather' covered under 17 Bills of Entry as detailed in Annexure IA should not be re-determined at Rs.15,56,43,335/- as per the provisions of Section 14 of Customs Act, 1962 read with Rule 3(1) of the Customs valuation (Determination of value of imported goods) Rules, 2007.
(iii) The value of import goods, i.e, 'PU Leather' covered under the 2 Bills of Entry as detailed in the Annexure IB should not be re-determined at Rs.1,90,98,408/- as per the provisions of the Section 14 of the Customs Act, 1962 read with Rule 5 of the Customs valuation (Determination of value of imported goods) Rules, 2007.
(iv) The import goods "PU Leather' valued at Rs.17,47,41,743/- (details as per Annexure I) should not be held liable for confiscation as per the provisions of Section 111 (m) of Customs Act, 1962.
(v) 1,09,876.5 meters of the import goods, i.e, 'PU Leather' valued at Rs.1,19,32,913/- covered under Bill of Entry No.2088636 dated 14.05.2017 seized under seizure memo dated 29.06.2017, should not be confiscated as per the provisions of Section 111(m) of Customs Act, 1962;
(vi) 10,259 rolls of import goods, i.e, 'PU Leather' valued at Rs.6,20,53,915/- detained as per the Panchnama dated 19.06.2017 handed over to Shri Anil Aggarwal, Stock Manager, M/s. Pradeep Impex, Delhi vide Supratnama Page 6 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 dated 19.06.2017 should not be confiscated as per the provisions of Section 111 (m) of Customs Act, 1962
(vii) Differential duties of customs aggregating to Rs.3,07, 03,348/- (Rupees Three Crore Seven Lakh Three Thousand Three Hundred Forty Eight Only) in respect of the 19 consignments, as detailed in the Annexure-I, evaded by the writ applicant on the said goods, should not be demanded and recovered from the writ applicant under Section 28(4) of the Customs Act, 1962 along with the interest applicable under the provisions of Section 28AA of Customs Act, 1962.
(viii) Rs.1,68,69,000/- paid/cash security deposited by the writ applicant during the course of the investigation should not be adjusted and appropriated against the differential duty & other dues demanded from the writ applicant at sub para (vii) above.
(ix) Penalty should not be imposed on M/s. Pradeep Impex, Delhi under Section 114A of the Customs Act, 1962.
(x) Penalty should not be imposed on Shri Pradeep Jindal under Section 112 (a) of the Customs Act, 1962.
(xi) Penalty should not be imposed on Shri Pradeep Jindal under Section 114AA of the Customs Act, 1962.
2.8 As the writ applicant was inclined to dispute the Page 7 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 allegations levelled by the Department, he thought fit to file an application dated 23.03.2018 before the Settlement Commission, Mumbai thereby accepting the duty liability to the tune of Rs.1,94,48,576/-. As regards the differential value, the writ applicant took the stance that the same was attributable to the SAD and CVD which would have been available to the writ applicant by way of refund/credit and, therefore, should be deducted from the total payment made in the show-cause notice.
2.9 On scrutiny of the application filed by the writ applicant and in terms of the procedure prescribed under the Act, a notice dated 23.03.2018 came to be issued to the writ applicant seeking explanation from the writ applicant as to why the application should be allowed to be proceeded with as the entire amount had not been paid by the writ applicant.
2.10 In reply to the above notice, the writ applicant submitted his response on 02.04.2018, thereby explaining the reason for the non-payment of the differential amount. As there was some short payment with regard to the interest calculated by the the writ applicant, the same was also duly communicated in the said response. Moreover, the said shortfall in the payment of interest was also duly made on 27.03.2018.
2.11 Therefore, a further notice dated 04.04.2018 was received by the writ applicant from the Commission, Page 8 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 directing the writ applicant to pay the differential amount along with interest. In response to the same, the writ applicant filed a detailed reply dated 06.04.2018 explaining that the said amount attributable to the SAD and CVD would have to be refunded and/or given back as credit to the writ applicant and thus, the entire situation qua the said amount was completely revenue neutral. Hence, it was prayed that the deposit of the said amount may not be insisted.
2.12 In the meantime, as the period of 14 days elapsed from the date of issuance of the notice, the application filed by the writ applicant was deemed to be admitted on 12.04.2018. On the basis of the subsequent Misc. Application filed by the writ applicant, the case of the writ applicant was transferred from the Additional Bench, Mumbai to the Principal Bench of the Settlement Commission, Delhi vide order dated 16.05.2018.
2.13 In response to the application for settlement filed by the petitioner, the DRI submitted its comments vide communication dated 23.05.2018 contesting the deduction claimed by the writ applicant.
2.14 The Settlement Commission, thereafter, passed an order on 26.12.2018 thereby holding that the writ applicant had made true and full disclosure of its liabilities and had co-operated in the proceedings before the Commission. However, the Commission rejected the Page 9 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 argument of deduction raised by the writ applicant and concluded that the entire amount of duty demanded in the show cause notice was payable by the writ applicant along with interest, as calculated and communicated by the respondent commissioner. The Commission held that the duty component is required to be paid within a period of 15 days from the date of receipt of the said order and the amount of interest is required to be paid within 15 days from the date of communication of the calculation of interest by the respondent commissioner. In addition to the said payment, the Commission gave an option to the writ applicant to pay fine of Rs.1,00,000/- and Rs.6,00,000/- in lieu of confiscation of the goods. As regards the issue of penalty, the Commission imposed a penalty of Rs.15,00,000/- on the writ applicant and granted immunity from penalty in excess of the said amount. Further, immunity from prosecution was also extended subject to the payment of duty, interest, fine and penalty within 30 days from receipt of the order.
2.15 In the impugned order, the Commission declined to grant the benefit of the deduction claimed by the writ applicant on the ground that the writ applicant had, at the time of import, not paid the SAD on the enhanced value and the goods in turn were also not sold on the enhanced value. It was thus, held that no VAT was paid on such value and therefore, the question of granting refund of SAD did not arise. As regards, the goods imported prior to Page 10 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 01.07.2017 but sold after 01.07.2017, i.e, after the introduction of the GST regime, the Commission held that as tax was not paid at the enhanced value at the time of local sales, the benefit of the refund of SAD was not available to the writ applicant. As regards the submission of availability of the input tax credit, the Commission on similar line held that as the GST had not been paid on the enhanced value of the goods at the time when the goods were cleared in the local market, the IGST payable against the import of the goods is not eligible to the writ applicant as input tax credit.
2.16 After receiving the impugned order, the writ applicant noticed that the order of the Settlement Commission also suffered from various calculation mistakes. The writ applicant, therefore, preferred Misc. Application on 14.01.2019 for rectification of such mistake.
2.17 However, the Settlement Commission disposed of the said application vide letter dated 28.03.2019 holding that there was no mistake while passing the aforesaid final order.
2.18 In such circumstances, referred to above, the writ applicant is here before this Court with the present writ application.
3. On 07.05.2019, a Coordinate Bench of this Court passed the following order;
Page 11 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022C/SCA/8995/2019 ORDER DATED: 19/01/2022 "The counsel for the petitioner has invited Court's attention to the submission made to the Settlement Commission for indicating the futility of demanding and insisting for revenue neutral demands. The settlement commissioner instead of addressing to it has gone on altogether an alien issue which would not in fact amounting to examining the proposal for settlement and that has rendered final order of the settlement commission dated 20.12.2018 vulnerable. The counsel invited Court's attention to the reasoning part of the settlement commission to support his case.
We are of the prima facie view that the settlement commissioner ought to have adverted to the emphasis laid upon the revenue neutrality in the submission and it was expected of giving its reason thereon, lack thereof would prima facie amounts to non application of mind qua the prayer for settlement on the permissible ground.
Hence, we are of the view that by ad-interim-relief, the respondents shall be restrained from taking any precipitative action pursuant to the order impugned in this petition.
Direct service qua respondent no.3 is permitted. "
Submissions on behalf of the writ applicant:-
4. Mr. Shalin Mehta, the learned senior counsel assisted by Mr. Paritosh Gupta, the learned advocate appearing for the writ applicant raised a solitary contention that the settlement commission could be said to have committed a serious error in deciding the disputed questions arising in the settlement proceedings. Mr. Mehta would submit that Page 12 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 if the amount offered by the writ applicant was not found to be accurate and was disputed by the DRI authorities, the Commission, in such circumstances, could not have taken upon itself to adjudicate on the said issues. It is submitted that the Commission ought to have remitted the matter to the Adjudicating Authority for deciding the proposals raised in the show-cause notice in accordance with law as if no application had been filed by the writ applicant before the Settlement Commission.
5. In support of the aforesaid contention, Mr. Mehta seeks to rely upon the following two decisions;
I) SDL Auto Pvt. Ltd. vs. Commissioner of Central Excise, Faridabad & ors., (2019) 366 ELT 496;
ii) Fairy Footwear vs. Union of India, (2015) 323 ELT 469
6. In such circumstances referred to above, Mr. Mehta prays that the impugned order be quashed and set aside and the matter be remitted to the Adjudicating Authority for adjudication of the show-cause notice on its own merits.
Submissions on behalf of the Revenue:-
7. Mr. Dhaval D. Vyas, the learned standing counsel appearing for the respondent No.3 submitted that the writ applicant had approached the Settlement Commissioner, Page 13 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 West Zonal Bench, Mumbai on 09.03.2018 with an application to settle the issue covered in the show-cause notice in the manner explained by the writ applicant in Para-6 of the application. Para 6 of the said application runs from Para-6.1 to 6.7. At Para-6.1, the writ applicant has stated that the applicant accepts the charges levied in the Show-cause notice with regard to the valuation of the P.U. Leather cloth (with some reservations). Mr. Vyas submitted that the actual value of the imported goods arrived at in the said show-cause notice is Rs.17,47,41,743/- and on the basis of the said value, the additional duty liability of the writ applicant comes to Rs.3,07,03,348/-. At Para-6.6 of the application made before the Settlement Commission, the writ applicant requested for considering waiver of the partial duty amount (Rs.1,12,54,772/-) demanded under the show cause notice. Para-6.2 to 6.5 are submissions in favour of considering waiver as requested under para-6.6. It is submitted that the writ applicant, before the Settlement Commission, accepted the whole amount of duty liability, i.e, 3,07,03,348/- demanded in the notice.
8. Mr. Vyas would submit that the provisions of Section 32P of the Central Excise Act, 1944 read with the provisions of Chapter XIVA would indicate that the proceedings before the Settlement Commission are "judicial proceedings" within the meaning of Sections 193 and 228, and for the purpose of Section 196 of the Indian Penal Code (45 of 1960). Therefore, after passing of the Page 14 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 final order by the Settlement Commission, the Settlement Commission becomes functus officio. Hence, in such circumstances, it is not permissible in law for the Settlement Commission to review or revisit its own order.
9. In such circumstances, referred to above, Mr. Vyas prays that there being no merit in the present writ application, the same be rejected.
10. We have also heard Mr. Nikunt Raval, the learned standing counsel appearing for the respondent Nos.1 and 2 respectively. Mr. Raval also submitted that the writ application deserves to be rejected.
ANALYSIS
11. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the Settlement Commission committed any error in passing the impugned order.
12. A Division Bench of this High Court speaking through Hon'ble Justice M. R. Shah (as His Lordship then was) in the case of Eagle Corporation Pvt. Ltd. & Anr. vs. Union of India & Ors., reported in (2015) 85 VST 523 has observed in Para-28 of the judgment as under;
"The proceedings before the Settlement Commission can be said to be in the form of conciliation and it gives an opportunity to the assessee to approach the Page 15 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 Settlement Commission by submitting application and accepting the liability by disclosing true and correct facts which are necessary for the purpose of determination of amount of tax/demand of tax. As per example show cause notice is issued with respect to evasion of "A" amount and the assessee/notice approaches the Settlement Commission accepting the liability to the extent of "B" amount by declaring true and correct facts, on payment of the amount of "B" with interest, in that case, the Settlement Commission is required to adjudicate the dispute with respect to the balance amount, i.e., amount A-B (A minus B) and for which the Settlement Commission is required to follow the procedure as required under Section 32F of the Act, i.e., to call for the report from the Commissioner and/or Commissioner Vigilance and thereafter after giving an opportunity to the assessee, the entire amount of tax liability is required to be determined by the Settlement Commission. However, the Settlement Commission has no power, authority or jurisdiction to adjudicate the disputed questions.
By the nomenclature of the Commission namely "Settlement Commission" itself is suggestive of the fact that the Settlement Commission is established for settlement of the disputes between the parties and to have settlement without following the normal procedure of adjudication of leading evidence, etc., and assessee approaches the Settlement Commission with a view to get immunity and to save their skin from prosecution provided in the Act for non-payment of the tax which is due and payable by the assessee as per the Department. Under the circumstances, we are afraid to accept the submission of the petitioner that the Settlement Commission has jurisdiction to decide the dispute with respect to either applicability of the Service Tax and/or entering into the questions like the questions raised in the present petition.
Therefore, we are of the opinion that with respect to Page 16 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 such questions, appropriate remedy would be to proceed with the show cause notice, as the power of adjudication is vested with the appropriate authority. Therefore, technically speaking, proceedings before the Settlement Commission cannot be in strict-senso said to be an alternate to the adjudication proceedings, as sought to be contended on behalf of the petitioner. We have dealt with the aforesaid aspect as the learned advocate appearing on behalf of the petitioner has made submissions on the same and has vehemently submitted that the proceedings before the Settlement Commission is an alternate proceedings to normal adjudication by the appropriate authority."
13. The Bombay High Court in the case of Fairy Footwear vs. Union of India, reported in (2015) 323 ELT 469, has observed as under;
"5. After hearing both sides and perusing the writ petition, we find that the Revenue as also the Commission was keen on maintaining the show cause notice and with some variations. However, the Commission observed that though the bill books contained details of locally procured material, most of the prices related to the imported footwear having Aerosoft brand and that too from foreign supplier. The Commission relied upon the statement recorded under Section 108 of the Customs Act, 1962 wherein the petitioner had agreed to submit original invoices, but the original invoices were not submitted. The differential duty was, thus, worked out without any documents. The petitioner's worksheet was rejected for want of supporting documents and the Commission relied upon paragraph 14 of the show cause notice.
6. We are of the opinion that the Revenue was keen on supporting the allegation and based on which the show cause notice came to be issued.Page 17 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022
C/SCA/8995/2019 ORDER DATED: 19/01/2022 Whereas the applicant-petitioner before us was not ready and willing to accept the same. If there was no settlement possible, then, the Commission should have relegated the petitioner to adjudication. The petitioner made the choice and if it does not want any settlement by application of mind by an independent Commission to all the facets of the matter, then, there is no obligation on the Commission to assist him. We are of the opinion that there is some substance in the contention of Mr. Jetly. However, if the matter cannot be resolved eventually with the assistance of the record available with the petitioner and the Department and based on which the show cause notice was issued, then, the best course was to relegate the matter to the Adjudicating Authority so as to adjudicate the show cause notice in accordance with law.
7. We have clarified to Mr. Kantawala that the petitioner cannot derive any advantage or benefit from the Commission's Order. Mr. Kantawala, on instructions, states that the petitioner is agreeable to such a course. Further, the petitioner is also agreeable to the Revenue retaining a sum of Rs. 17,61,172/- towards duty but without prejudice to the rights and contentions of both sides.
8. In the circumstances, we set aside not only the order passed by the Settlement Commission, but we also declare that the Settlement proceedings initiated by the Commission are of no legal effect from inception. Let the show cause notice be adjudicated in accordance with law by the Revenue. However, the adjudication will proceed on the clear understanding between the parties and noted above. All contentions of the petitioner insofar as the allegations in show cause notice, however, are kept open. We clarify that we have not endorsed any of the findings in the Settlement Commission's order either."
14. The Delhi High Court in the case of SDL Auto Pvt.
Page 18 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022C/SCA/8995/2019 ORDER DATED: 19/01/2022 Ltd. vs. Commissioner of Central Excise, Faridabad, reported in (2019) 366 ELT 496 speaking through Hon'ble Justice Sanjiv Khanna (as His Lordship then was) has observed as under;
"49. A reading of the impugned orders would show that the Settlement Commission did not accept the claim of the three petitioners that they had made „full and true‟ disclosure of the duty liability. It had also opined on the petitioners‟ failure to disclose the manner in which the said duty liability was derived. Two essential preconditions for invoking jurisdiction of the Settlement Commission were therefore not satisfied. In the given facts, the Settlement Commission should have rejected the settlement applications and referred the case to the Central Excise Officer to decide the show cause notices issued to the parties on merits. However, notwithstanding the failure and non-satisfaction of the jurisdictional preconditions, the Settlement Commission proceeded to act as an adjudicating authority and has decided the show cause notice. This would be beyond the scope and power of the Settlement Commission, for the Settlement Commission is not an adjudicatory authority substituting the Central Excise Officer. The Settlement Commission must function under the four corners of the powers conferred under Chapter-V of the Act. The Settlement Commission, after expressing and recording the finding on the failure of the petitioners to make „full and true‟ disclosure of the duty liability and the manner in which it was derived, should have rejected the settlement application. The petitioners should have been relegated to suffer and undergo adjudication mechanism and procedure as per the provisions of the Act.
51. Recording the aforesaid, the writ petitions are partly allowed, quashing the impugned orders Page 19 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 passed by the Settlement Commission to the extent they „adjudicate‟ and confirm the demand raised in the show cause notice. We do not disturb the impugned orders to the extent they hold that the petitioners had not made full and true disclosure of their duty liability and the manner in which it was derived. Legal consequences as postulate in law would follow.
52. Proceedings pursuant to the show cause notice before the Central Excise Officer would commence. Period from the date of filing of the applications for settlement till the present pronouncement would be excluded for the purpose of limitation. The adjudicating authority/Central Excise Officer would consider the defence and the contentions of the petitioners before passing the final order. Lest there be any confusion or ambiguity, we would observe that statements made in the settlement application, reports, settlement order etc. would be read and taken into consideration as per law. Show cause notices would be decided by the Central Excise Officer on merits after hearing the parties. Observations and findings recorded by us in the present judgment are for deciding the writ petitions. We have not decided the show cause notice on merits. In the facts and circumstances of the case, there would be no order as to costs."
15. In view of the settled position of law as noted above, we accept the principal contention canvassed on behalf of the writ applicant that the Settlement Commission ought not to have gone into the merits of the show-cause notice. If the Settlement Commission was of the view that the writ applicant failed to make "full and true' disclosure of the duty liability, it should have rejected the settlement application. The writ applicant should have been relegated to suffer and undergo the adjudication Page 20 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022 C/SCA/8995/2019 ORDER DATED: 19/01/2022 mechanism and procedure as per the provisions of the Act.
16. In the result, this writ application is partly allowed.. The impugned order passed by the Settlement Commission to the extent the same 'adjudicate" and confirm the demand raised in the show-cause notice is hereby quashed. The legal consequences as postulate in law would follow. The proceedings pursuant to the show- cause notice before the concerned authority shall commence. The show-cause notice shall be decided by the authority concerned on its own merits after hearing the parties. We clarify that we have not decided the show- cause notice on merits. In the facts and circumstances of the case, there shall be no order as to costs.
(J. B. PARDIWALA, J) (NISHA M. THAKORE,J) Vahid Page 21 of 21 Downloaded on : Sun Apr 24 10:08:42 IST 2022