Delhi High Court
Commissioner Of Central Excise vs True Woods P. Ltd. And Ors. on 10 November, 2005
Author: T.S. Thakur
Bench: T.S. Thakur, B.N. Chaturvedi
JUDGMENT T.S. Thakur, J.
Page 2273
1. Custom and Central Excise Settlement Commission has, by a majority of 2:1, admitted a Settlement Application filed before it by the respondents in terms of Section 32D of the Central Excise Act, 1944. The present writ petition assails the correctness of the said order.
2. Appearing for the petitioner Mr. Chandrashekharan submitted that the Chairman of the Commission had correctly held that the applicants had not fully and truly disclosed their liability which disclosure was essential for initiating any proceedings under Section 32F of the Central Excise Act, 1944. He contended that the majority order passed by the other two members of the Commission had failed to address itself to the requirement of such a disclosure neglecting in the process the settled legal position that a full and true disclosure alone could constitute a basis for assumption of jurisdiction by the Commission under the Act. He urged that in as much as the Commission had, by majority, decided to proceed with the application filed by the respondent applicants without recording a specific finding to the effect that the applications made a full and true disclosure of their liability, it had fallen in an error that required to be corrected by the issue of an appropriate writ from this Court. Reliance was placed by the learned counsel upon the decision of the Supreme Court in Commissioner of Income Tax, Jalpaiguri v. Om Prakash Mittal and that of a Single bench of the High Court of Calcutta in Commissioner of Customs (Port) v. Settlement Commission, Cus.& C. Ex.
3. On behalf of the respondent, it was per contra argued by Messrs Ganesh and Vellopally, senior advocates that the petition was premature as the Page 2274 admission order did not decide any right or obligation of the parties finally, nor did the order otherwise suffer from any error of law or jurisdiction to warrant interference with the same. It was contended that the majority opinion had specifically left the question regarding full and true disclosure open to be examined at the time of disposal of the applications. There was, therefore, no occasion for the petitioner to make any grievance especially when the Commission was free to take a final view on the said aspect of the matter while passing a final order under Section 32F(7) of the Act or Section 32K thereof. It was urged that a question whether there was a full and true disclosure of liability of the applicants in the applications filed by them could be more appropriately and effectively answered by the Commission after a proper enquiry into the matter was conducted keeping in view the nature of the controversy and the factual aspects that required to be looked into.
4. We have given our anxious consideration to the submissions made at the bar and perused the order under challenge. The Commission has, by the impugned order, simply admitted the applications filed by the respondents. That order, as noticed earlier, is by majority and takes a view different from the one taken by the Chairman of the Commission. The minority judgment authored by the Chairman no doubt rejects the applications on the ground that the applicants had not made a full and true disclosure of their liability as required under Section 32E(1) of the Act. The majority opinion has however left that issue open on the ground that neither side has conclusively proved its version regarding the filing of the declarations or their genuineness. It has reserved liberty for the Revenue to urge the question regarding the genuineness of the returns filed by the applicants or the correctness of the duty liability disclosed by them including the manner in which the same has been determined at the final hearing. This is evident from the following passages appearing in the majority judgment:
"On the issue of filing of declaration and the evidence as well as counter evidence furnished by the rival sides, the Bench finds that neither side have conclusively proved their point barring the report of the Govt. Examiner of questioned documents which too was obtained as per the directions of the Bench. Given the situation where rival sides have tried to proof their point by pointing out shortcomings in each other's arguments in regard to filing of declaration and its genuineness."
"Revenue is at liberty to take up the question of either genuineness of the returns filed or correctness of the duty liability disclosed including the manner in which it has been arrived at the time of final hearing."
5. In the light of the above, we find considerable merit in the contention urged on behalf of the respondents that there is no final opinion expressed by the Commission regarding the making of a full and true disclosure of their liability by the applicants. The question whether the applicants are entitled to any relief in terms of Chapter V of the Central Excise Act, 1944 is therefore open to be examined and answered by the Commission while passing a final order on the applications filed before it. The Revenue shall be free to urge that the applicants are not entitled to any relief as the requirement of a full and true disclosure stipulated under Section 32E remains unsatisfied.
Page 2275
6. In Om Prakash Mittal's case (supra) upon which the petitioner places reliance, the Supreme Court was examining the validity of an order of settlement passed by the Income Tax Settlement Commission, Calcutta under Section 245D(4) of the Income Tax Act, 1961. After noticing the provisions of Section 245C of the said Act which provisions are in pari materia with the provisions of Section 32C of the Central Excise Act, 1944, their lordships observed as under:
"The foundation for settlement is an application which assessed can file at any stage of a case relating to him in such form and in such manner as is prescribed. The statutory mandate is that the application shall contain "full and true disclosure" of the income which has not been disclosed before the assessing officer, the manner in which such income has been derived. The fundamental requirement of the application under Section 245C is that full and true disclosure of the income has to be made, along with the manner in which such income was derived. On receipt of the application, the Commission calls for report from the Commissioner and on the basis of the material contained in the report and having regard to the nature and circumstances of the case or complexity of the investigation involved therein, it can either reject the application or allow the application to be proceeded with as provided in Section 245D(1)".
7. The above passage, argued the learned counsel for the petitioner, makes it incumbent upon the Settlement Commission to record a specific finding to the effect that the applicant has made a full and true disclosure before it can admit the application or take any further steps on the basis thereof. It was contended that the foundation for settlement before the Commission is an application made by the assessed which must contain a full and true disclosure of the relevant particulars required under the provisions concerned. In the absence of any such finding, argued the learned counsel, the assumption of jurisdiction by the Commission would be wholly uncalled for.
8. We regret our inability to accept that line of reasoning. It is true that the foundation for settlement is an application from the assessed in which the assessed must make a full and true disclosure as required under the provision of Section 245C of the Income Tax Act or Section 32E of the Central Excise Act, but it is equally true that the requirement of a full and true disclosure need not be examined and authoritatively determined at the threshold of any proceedings initiated before the Commission under Chapter V. There may be cases where it is possible for the Commission to record a finding that the disclosure made in the application is "full and true". There may, however, be situations in which the Commission may not be able to, at the stage of admission of the application, record a finding with any amount of certainty. In any such situation, it will not be legally impermissible for the Commission to keep the question open as it has done in the instant case to be examined at a later stage or at the stage of final disposal of the application. What is important is that there must be full and true disclosure to the satisfaction of the Commission before any relief Page 2276 can be granted to the applicants which implies that the requirement of such a full and true disclosure is a continuing requirement that needs to be satisfied from the beginning of the proceedings till the conclusion thereof. The Commission may consequently be justified in throwing out the application at any stage if it comes to the conclusion that the disclosure made by the assessed is either incomplete or untrue. The passage relied upon by the learned counsel for the petitioner simply emphasises the significance of a full and true disclosure but stops short of making such a disclosure or a finding on the satisfaction of that requirement as a condition precedent for the assumption of jurisdiction.
9. Reliance upon the decision of the single bench of the Calcutta High Court in Commissioner of Customs (Port) v. Settlement Commission, Cus.& C. Ex. is also of no avail to the petitioner. That was a case where the Court was examining whether the maintainability of an application could be re-opened once an order lawfully deciding that aspect had been passed by the Commission and accepted by the parties. The argument urged before the Court was that a party belatedly challenging the said order was estopped from doing so. The Court accepted that submission on the principle of Waiver and Estoppel in the following words:
"Mr. Pal has rightly said in this context that as question of entertainability and maintainability of the application has been lawfully decided and accepted by the parties without any demur, this Court will not accept the contention of the Revenue now. In my opinion this question of jurisdiction could have been raised immediately after the decision at the admission stage was rendered and without accepting the direction and order. Therefore, the principle of waiver and estoppel will be applicable though the question relates to jurisdiction. Therefore, I overrule the contention raised by the learned Additional Solicitor General that the Commission had no jurisdiction to entertain this application."
10. The above does not, in our view, lend any assistance to the petitioner. If the majority decision had examined the question of full and true disclosure of the liability, the petitioner could on the basis of the above observations, argue that the challenge to the finding cannot be deferred till the final order is passed by the Commission without the principle of estoppel intervening to prevent such a challenge. That however is not the position here. The Commission has, in the present case, left the issue regarding disclosure of the true and complete facts open which implies that the Revenue shall be free to urge all through the proceedings and even at the final stage that no case for settlement was made out as the applicants had not made a full and true disclosure of their liability. It is only after the Commission takes a final view on that aspect and passes a final order that the petitioner may have the cause of action to assail the said finding or the direction issued by the Commission. Suffice it to say that the order passed by the Commission does not suffer from an error of law or jurisdiction to warrant interference at this stage. The Commission shall be free to examine the issue regarding full and true disclosure of the Page 2277 liability before passing any final order on the subject bearing in mind the law declared by the Supreme Court in Om Prakash Mittal's case (supra) that a settlement is envisaged under the scheme of the Act only if the disclosure made by the applicants is a 'full and true disclosure'.
11. With the above observations, this writ petition fails and is hereby dismissed.