Bombay High Court
Santogen Textile Mills Ltd. vs Union Of India (Uoi) on 19 March, 2002
Equivalent citations: 2002(84)ECC74, 2002(143)ELT289(BOM)
Bench: H.L. Gokhale, V.C. Daga
ORDER
1. Heard Shri E.P. Bharucha for the petitioners and Shri A.J. Rana appearing for the respondents.
2. The petitioner seeks to challenge the order of the Settlement Commission, Customs and Central Excise Additional Bench, Mumbai, (the Settlement Commission for short) dated 15th January, 2002 (Ex-I), passed in exercise of powers under Section 32F of the Central Excise Act, 1944 (the Act for short). Facts in brief :
3. The 1st petitioner is a 100% Export Oriented Unit (EOU for short) engaged in manufacturing textile fabrics and fabric articles.
4. The 1st petitioner being 100% EOU' was procuring yarn from other EOUs under CT-3 Certificates without payment of duty on the raw material for manufacturing its export products.
5. On the basis of the intelligence report received by the Customs Department, petitioners were proceeded with for diverting duty free raw materials and/or for not using the same in manufacture of the goods meant for export. Certain records pertaining to the petitioners were seized on 11-8-1998 by the officers working under Director Anti Evasion (Now Directorate of Central Excise Intelligence - CEI), Mumbai. The detailed enquiry into the stock verification was also made in the factory under various panchanamas during the period 17-7-1998 to 8-8-1998. The respondents also made further investigation with the suppliers of the raw material, transporters, including employees of the petitioners. Since no charges were framed against the petitioners before the expiry of one hundred and eighty days from the date of seizure, they approached the Settlement Commission under Section 32E of the Act and presented an application on 17-8-2000 for settlement of their cases, contending inter alia that the Revenue did not issue any show cause notice in spite of lapse of more than 180 days. The petitioners while admitting their duty liability to the tune of Rs. 2,07,062/-, have referred to three invoices, the raw material (yarn) of which they did not use in the manufacture of their export product during the period 1-11-1995 to 31-8-1998. The application moved by the petitioners came to be admitted under Section 32E(2) of the Act.
6. At the juncture, it will not be out of place to mention that Section 32E(1) of the Act provides that an assessee may make an application containing a full and true disclosure of his duty which has not been disclosed before the Central Excise Officer having jurisdiction, the manner in which such liability has been derived, the additional amount of duty accepted to be payable by him with such other particulars including the particulars of such excisable goods in respect of which he admits short levy on account of misclassification or otherwise of such excisable goods, to the Settlement Commission to have the case settled.
7. The Settlement Commission following procedure under Section 32F of the Act after having obtained report from the Additional Director of Central Excise, Mumbai, and after having considered the said report vide its order dated 1-11-2000 admitted the said application filed by the petitioners and allowed the said application to be proceeded with.
8. After admission of the application, sealed cover was opened and the contents showing acceptance of duty liability of the three invoices along with the information contained in the Annexure to the application and the statements and other documents accompanying such annexures were sent to the Revenue on 29-11-2001 as required under Rule 3(2) of the Central Excise (Settlement of cases) Rules, 2001 (the rules for short); so as to get the report from the Commissioner Central Excise, Mumbai.
9. The Settlement Commission on 29-12-2000 also directed the Commissioner (Inv.) to remit the case records and to calculate exact duty liability on the petitioners in their application to the Settlement Commission. The Commissioner of Central Excise sent its report in the sealed cover but case records were not sent.
10. The petitioners themselves after admission of their application by the Commission on 10-12-2000, vide their letter dated 8-12-2000 brought to the notice of the Commission that they were served with two more show cause notices both dated 5-12-2000 demanding duty of Rs. 46,73,700/- for the goods procured from M/s. Sarla Polyester Ltd. and Rs. 16,40,978/- for the goods procured from M/s. KUL alleging therein that the subject raw material have not been used in the manufacture of the goods meant for export.
11. The Settlement Commission posted application for hearing on 11-4-2001. In the written submission of the Revenue it was pointed out that the disclosures made by the petitioners were not true and correct as the investigation revealed that the petitioners had procured 40,000 kgs. of yarn involving duty of Rs. 46,73,700/- from M/s. Sarla Polyester Ltd. It was also pointed out that the inquiry made with the various suppliers, transporters and godown keepers revealed that these goods did not reach to the factory of the applicant/petitioners but were unloaded at Bhiwandi and from there the same were diverted to the local market. The petitioners could not produce any proof of transportation of goods from Bhiwandi to their factory at Mumbai. In this view of the matter, the Revenue brought to the notice of the Settlement Commission evasion of actual duty liability to the tune of Rs. 46,73,700/- and Rs. 2,07,730/-.
12. After perusing material on record and after detailed hearing, the Settlement Commission came to the conclusion that there was huge evasion of duty. In the circumstances, the Settlement Commission held that this is not a fit case where immunity from prosecution can be granted to the petitioners under the Customs Act or any other Act. The Settlement Commission, therefore, passed an order directing payment of the balance amount of duty within the period prescribed in the impugned order. This order of the Settlement Commission dated 15th January 2002 (Ex. I) is a subject matter of challenge in the present writ petition filed under Article 226 of the Constitution of India.
13. Shri E.P. Bharucha, learned Senior Counsel appearing for the petitioner raised a solitary contention that the Settlement Commission having directed further enquiry under Clause (6) of Section 32F of the Act ought to have taken into account the disclosures made by the Commissioner of Central Excise (Inv.) with respect to the diversion of goods to the local market (referred to Paras 10 and 11 supra) even though the same were not the subject matter of application and/or petition filed under Section 32E(1) of the Act.
14. Shri Bharucha in support of his submission relied upon the provisions of Sub-sections (6) and (7) of Section 32F of the Act and emphasized that on the true construction of Sub-section (7) the Settlement Commission, can pass such order as it thinks fit not only in respect of the matters covered by the application but also with respect to other matters relating to the case referred to in the report of the Commissioner of Central Excise and Commissioner (Investigation) submitted under Sub-section (1) or Sub-section (6).
15. Shri Bharucha, learned Counsel for the petitioners contents that the allegations made in the report dated 16-7-2000 made by the Additional Director General filed before the Commission after taking inspection of the raw materials procured by the petitioners from other parties are not acceptable to the petitioners but having regard to the report, it was incumbent upon the Settlement Commission having regard to the provisions of Sub-section (7) of the Section 32F of the Act dispose of all the matter, namely, alleged diversion of goods covered under the 3 show cause notices which were issued subsequent to the application filed under Section 32E(1) of the Act.
16. The learned Counsel for the Revenue refuted all the submissions advanced by the learned Counsel for the petitioners and prayed for dismissal of the petition.
Consideration :
17. Having heard the rival contentions advanced by the learned counsel appearing for the parties, in order to decide the controversy involved in the petition, one has to examine the scheme of the machinery created for settlement of the cases under the Act; vis-a-vis; the power of the Settlement Commission. It would be clear from the provisions of Section 32E(1) of the Act, the assessee may, at any stage of the case relating to him make an application in the prescribed form containing full and true disclosure of his duty or liability which has not been disclosed before the Central Excise Officer having jurisdiction, including the manner in which liability has been derived, the additional amount of excise duty accepted to be payable by him and such other particulates as may be necessary including the particulars of such excisable goods in respect of which he admits short levy on account of misclassification or otherwise of such excisable goods, to the Settlement Commission to have the case settled.
18. The scheme of the Act further reveals that Section 32F provides that on receipt of an application under Section 32E(1), the Settlement Commission is required to call for report from the Commissioner of Central Excise having jurisdiction and on the basis of the material contained in such report and having regard to the nature and the circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission has to by an order either allow application to be proceeded with or rejected the same. After order under Section 32E, the Settlement Commission is further required to call for further report of the Commissioner of Central Excise under Sub-section (6) and pass an order as he thinks fit in the matters covered by the application. The Settlement Commission is given discretion to pass order in any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner (Investigation) under Sub-section (1) of Section 32F. Thus, conjoint reading of Sub-sections (a), (b) and (7) of the Section 32F of Act would make it clear that the basic purpose of getting reports is to find out as required under Section 32E(1) in the application preferred before Settlement Commission has been made or not. If the Settlement Commission finds that full and true disclosure has not been made in the application as required under Section 32E(1), then it is open for the Settlement Commission to reject the petition while passing the final order.
19. It is no doubt true that if Settlement Commission finds that true and correct disclosure has been made, the Settlement Commission may take into account other matter relating to the case not covered by the application. At any rate, the discretion is given to the Settlement Commission. This discretion has to be exercised judiciously depending on the facts and circumstances of each case.
20. In the present case, it is not disputed that, full and true disclosures were not made by the petitioners. The second report submitted by the Commissioner of Excise (Inv.) and the facts referred to in Para 10 (supra) is sufficient to conclude this issue. The Settlement Commission could have dismissed the entire petition of the petitioner, but considering the fact that subsequent diversion of raw material and evasion of excise duty being the subject matter of the other three show cause notices the Settlement Commission thought it fit not to reject the petition presented by the petitioners and left it open to the petitioners to contest the said show cause notices. In this view of the matter, we are of the opinion that the Settlement Commission has exercised its discretion reasonably arid judiciously and rightly confined its enquiry to the disclosures made in the application filed under Section 32E(1) of the Act. The Apex Court in the case of Fatechand Nursing Das v. Settlement Commission (II and WT) 176 ITR 169 and followed by it in another judgment in the case of Jyotendrasinhji v. S.I. Tripathi (1993) 201 ITR 611, while considering the scope of writ jurisdiction of the High Court cautioned the writ Court and permitted it to examine the legality of the procedure followed, not the validity of the order, it not being a Court of appeal. As laid down by the Apex Court, the writ Court should not be concerned with the decision but with the decision making process.
21. Thus, taking overall view of the matter, we are of the opinion that the Settlement Commission adopted proper decision making process and the same is in accordance with law. No fault can be found with the decision making process. As observed by the Apex Court in S.I. Tripalhi's case (supra) judicial scrutiny cannot go beyond this point. As already pointed out above, the Settlement Commission was well within its jurisdiction to refuse to grant immunity to the petitioners. The Settlement Commission rightly came to the conclusion that the petitioners failed to make true and full disclosure of its duty liability, as such it was well within its jurisdiction to confine itself to the petition filed under Section 32E(1) of the Act. As a matter of fact, we are constrained to observe that the petitioners did not approach the Settlement Commission with clean hands. Petitioners did not make full and true disclosure as required by law. They suppressed material facts from the Settlement Commission. It came before the Settlement Commission through the report of the Commissioner of Central Excise. It was expected of the petitioner to make true, full and correct disclosure at the first instance. Having failed to disclose true and full material particulars, the petitioner cannot be allowed to take advantage of the material brought before the Commission to say that other disputes ought to have been covered and treated as part of the impugned Settlement process. In our view, considering the conduct of the petitioners before the Settlement Commission and attempt to play game of hide and seek, we are not inclined to entertain this petition.
22. We, for the above stated reasons, do not propose to interfere with the impugned order in our writ jurisdiction, However, we make it clear that if the petitioners want to approach the Settlement Commission for Settlement of other cases being subject matter of other show cause notices, they will be free to approach the Settlement of other cases being subject matter of other show cause notices, they will be free to approach the Settlement Commission, the Settlement Commission shall also be free to consider the same on its own merits in accordance with law.
In this view of the matter, writ petition is dismissed in limine with no order as to costs.