Madras High Court
M/S.Goodwill Team Paper Limited vs Customs & Central Excise Settlement ... on 28 January, 2011
Author: K.Chandru
Bench: K.Chandru
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 28/01/2011 CORAM THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.(MD)NO.5705 of 2009 W.P.(MD)NO.and 5706 of 2009 and M.P.(MD)Nos.1,1,2 and 2 of 2009 M/s.Goodwill Team Paper Limited, represented by its Managing Director P.Rajendran, Uttapanayakanur - 620 537 Usilampatti Taluk, Madurai District. .. Petitioner in W.P.(MD)No.5705 of 2009 P.Rajendran .. Petitioner in W.P.(MD)No.5706 of 2009 Vs 1.Customs & Central Excise Settlement Commission, Additional Bench, Ministry of Finance Government of India, II Floor, Narmada Block, Custom House, 33, Rajaji Salai, Chennai-600 001. 2.The Commissioner of Central Excise, Bibikulam, Madurai-2. 3.Additional Director General, Directorate General of Central Excise Intelligence, Chennai Zonal Unit, 'C' Wing, Rajaji Bhavan, Besant Nagar, Chennai-600 090. 4.The Deputy Director, Directorate General of Central Excise Intelligence, Regional Unit, Madurai. 5.The Deputy Commissioner of Central Excise, Madurai I Division, Madurai-2. .. Respondents 1 to 5 in both writ petitions 6.The Superintendent of Central Excise, Tirumangalam Range, Tirumangalam, Madurai District. .. Respondent No.6 in W.P.(MD)No.5705 of 2009 Both these writ petitions have been preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorari to call for the records of the first respondent resulting in the impugned proceedings in order No.42/2009 CX dated 9.6.2009 in C.V.15/70-2007/SC insofar as relating to conditional order of levy of penalty of Rs.2,20,000/- and Rs.1 lakhs on petitioners respectively and to quash the same. !For Petitioners ... Mr.S.Renganathan ^For Respondents ... Mr.S.Annamalai - - - - :COMMON ORDER
In the first writ petition, the petitioner challenges an order, dated 9.6.2009 passed by the first respondent Customs and Central Excise Settlement Commission insofar as it relates to the conditional order of levy of penalty of Rs.2,20,000/- and seeks to set aside the same. In that writ petition, the petitioner is M/s.Goodwill Team Paper Limited represented by its Managing Director P.Rajendran. The very same Managing Director in his individual capacity challenged the same order but insofar as it relates to levy of penalty of Rs.1 lakh.
2.Both writ petitions were admitted on 3.7.2009. Pending writ petitions, this court granted an interim stay in the first writ petition on condition that the petitioner shall deposit Rs.1 lakh to the credit of the second respondent Commissioner of Central Excise. In the second writ petition, stay was granted on condition that the petitioner shall deposit Rs.50,000/- to the credit of the second respondent. The interim orders have also been complied with. Aggrieved by the orders passed by this court, the second respondent, Commissioner of Central Excise had filed two vacate stay applications in M.P.(MD)Nos.2 and 2 of 2009 together with supporting affidavit, dated 1.8.2009. They have also filed a typed set of papers containing documents in support of their averments. When the two vacate stay applications came up for hearing, with the consent of parties, both writ petitions were taken up for hearing.
3.It is the stand of the petitioners that they are the Public Limited Company and are having their factory to manufacture Kraft papers. It is registered under the Central Excise Act within the second respondent's jurisdiction. They were also filing monthly Returns before the 6th respondent Superintendent of Central Excise at Tirumangalam. On 28.1.2005, the petitioner's factory premises was searched by the Officers of the Directorate General of Central Excise Intelligence, Chennai and Madurai. They have also drawn officers from the Commissioner of Central Excise, Salem, Trichy, Madurai and Tirunelveli for conducting simultaneous search operations. On verification, it was found that the finished goods, i.e. Kraft papers available at the manufacturing premises were having excess stock of 22.16 MTs valued at Rs.2.66 lakhs. They were seized on the same day. The petitioner Company had paid a pre-deposit of duty for Rs.3 lakhs on 29.01.2005 pending further investigation.
4.Based upon investigation conducted, the Additional Director General had issued a show cause notice, dated 12.7.2005 in respect of seized goods and proposed to confiscate the same as well as to impose penalty under Rule 25 of the Central Excise Rules. The show cause notice, dated 12.7.2005 was issued within six months from the date of seizure i.e. 28.1.2005. An another show cause notice, dated 8.8.2006 was also issued to the petitioner demanding payment of Rs.99,01,979/- for a period from 2001-2002 to 2004-2005 under the proviso to Section 11A(1) of the Central Excise Act. A demand was also made for interest under Section 11 AB and penalty was also proposed under Sectin 11 AC read with Rule 25 of the Central Excise Rules. Section 31 to 32 PA of the Central Excise Act provides for settling the cases by the Settlement Commission. Instead of going before the adjudicating process, the petitioners had approached the Settlement Commission, Chennai Bench, i.e. first respondent and had admitted the liability to an extent of Rs.13,67,944/-. The Central Bank of India had also initiated proceedings before the DRT as well as under the SARFAESI act. The petitioner had pleaded for waiver of penalty and prosecution proceedings as well as redemption fine in respect of seizure while admitting to pay duty on such seized goods.
5.Their application was numbered as S.A.(E)No.70 of 2007. The first respondent Settlement Commission by an interim order, dated 22.5.2007 passed an order directing the petitioner to re-examine the admitted duty liability and to come with true and full disclosure. The first respondent had also directed the Revenue Authorities to assist the petitioner company for arriving at the correct duty liability. As per the direction, dated 31.5.2007 of the Settlement Commission, the petitioner had paid duty of Rs.13,67,944/- before 30.6.2007. The case was posted for hearing on 22.11.2007. The Settlement Commission had admitted the application in respect of the petitioner as well as the co- applicant by an order, dated 17.12.2007. By the said order, the company had also paid the balance re-quantified amount which worked out to Rs.7,59,859/-. It had paid the total duty of Rs.21,27,803/-. A representation, dated 5.2.2008 was also filed along with an order of the BIFR declaring the company as a sick company. The company had also undertaken to discharge the duty amount of Rs.32,878/- in respect of seized goods. Hence the company had paid the entire amount.
6.However, the Settlement Commission by its final order, dated 28.2.2008 settled the case on condition that duty liability for an unaccounted clearance was settled at Rs.21,13,836/- against which the petitioner had already paid Rs.21,27,803/-. The seized goods should also be released by the appropriate authority on payment of appropriate duty of Rs.32,878/-, a part of which had already been paid. The petitioners were also granted immunity in excess of 10% simple interest per annum on the duty liability from the date it became payable till the date of actual payment. The revenue was directed to work out the interest liability and intimate the same to the petitioners within 30 days. Thereafter, the petitioners were given another 30 days time to pay and report compliance to the Commission. The Settlement Commission had also imposed penalty of Rs.2,20,000/- on the company and Rs.1 lakh on the Managing Director. An immunity from payment of excess of the said amount was granted to both the petitioners. The petitioner company and the petitioner in the second writ petition were granted immunity from prosecution under the Central Excise Act. The final order in No.15/2008, dated 28.2.2008 also imposed levy of interest at the rate of 10%.
7.It is now claimed that levy of penalty of Rs,2,20,000/- while granting immunity in respect of prosecution is contrary to the legal procedure and against the very power granted under Section 32K of the Central Excise Act read with Section 32F. The levy of interest at the rate of 10% was challenged in W.P.(MD)No.2310 of 2008. This Court by an order, dated 7.11.2008 partly allowed the writ petition. It held that imposing penalty on both petitioners was set aside and the matter was remitted to the first respondent for re-consideration. The first respondent was directed to consider the request of the petitioner strictly in accordance with law after affording sufficient opportunity. Insofar as the interest ordered to be paid, no interference was called for. A writ appeal was filed against the said order in W.A.(MD)No.764 of 2008 only against the order of confirmation of interest in the writ petition. The writ appeal was also dismissed on 18.6.2009. Subsequent on remand by this court, the Settlement Commission reheard the case on 27.5.2009 in respect of levy of penalty and confirmed the levy penalty of Rs.2,20,000/-.
8.The contention raised was levy of penalty was contrary to Section 32F(7) read with Section 32K(1) of the Central Excise Act. Since the entire duty amount has been paid before passing of the impugned order, the first respondent should have considered the same. The first respondent also did not consider the sickness of the petitioner company. The condition imposing penalty was also arbitrary. Once immunity against prosecution was granted, an immunity from penalty must also be granted.
9.In the counter affidavit filed by the respondents, it was claimed that the Settlement Commission had taken note of the entirety of facts and also found at the first instance that the petitioner did not make true and full disclosure. It is also noted by the division bench regarding the waiver of interest. The full disclosure of admitted liability was made only during the course of the proceedings. Therefore, the Commission recorded that it is the case of violation of law and evasion of duty by suppression of production and clandestine removal of unaccounted goods by using parallel set of invoices and realization of sale proceeds by cash which were willfully and systematically organized by the petitioner. Therefore, there was no scope for full immunity from imposition of penalty. It was claimed that the petitioners had admitted the unaccounted production and clandestine removal of goods and had admitted the duty liability. Even the Settlement Commission has got discretionary power relating to waiver of penalty or fine either wholly or partly. Therefore, having approached the Settlement Commission, the petitioner cannot come to this court for a further relief. It was also pointed out that when the petitioner had produced the order of the BIFR declaring the company as sick industry, they did not reveal that the AIFR vide its order, dated 20.10.2008 had set aside the order of the BIFR. Even this fact was also suppressed by the petitioners.
10.The question whether the petitioners made full disclosure of facts at the earliest opportunity is essentially a question of fact. The division bench itself had noted that the petitioners did not make full disclosure at the earliest opportunity thereby disqualifying itself from receiving any benefit. Secondly, after approaching the Settlement Commission, they cannot come before this court for improving their concession.
11.Mr.S.Renganathan, learned counsel for the petitioners placed reliance upon a judgment of a division bench of Bombay High Court in Union of India Vs. Hoganas India Ltd. Reported in 2006 (199) E.L.T. 8 (Bom) for contending that the Settlement Commission has wide power to settle the matters including confiscation and immunity from criminal prosecution. Its powers cannot be restricted.
12.He also relied upon a judgment of the Delhi High Court in Commissioner of Central Excise, Visakhapatnam Vs. True Woods Pvt. Ltd. reported in 2006 (199) E.L.T. 388 (Del.) for contending that full and true disclosure is a continuing requirement and it has to be satisfied from the beginning of the proceedings till its conclusion. The requirement of full and true disclosure need not be examined and authoritatively determined at the threshold.
13.Further reference was also made to the judgment of the Supreme Court wherein the decision of the Delhi High Court referred to above came to be considered. The Supreme Court held as follows:
"The Delhi High Court in its impugned order had held that the requirement of a full and true disclosure of liability need not be examined and authoritatively determined at threshold of any proceedings initiated before Settlement Commission under Section 32E of Central Excise Act, 1944. It further held that Commission is free to examine issue regarding full and true disclosure of liability before passing any final order as also Commission may be justified in throwing out application at any stage if it comes to conclusion that disclosure made by assessee is either incomplete or untrue."
14.The learned counsel also placed reliance upon a judgment of the Bombay Division bench in Arora Fibres Ltd. Vs. Union of India reported in 2009 (243) E.L.T. 327 (Bom.) to contend that the Settlement Commission was not empowered to impose penalty without complying with the statutory requirement.
15.Per contra, Mr.S.Annamalai, learned counsel for the respondents Department referred to a judgment of the Supreme Court in Sanghvi Reconditioners Private Limited Vs. Union of India and others reported in 2010 (2) SCC 733, wherein the Supreme Court considered the similar provisions under the Customs Act and held in paragraphs 36 and 37 as follows:
"36.We also find substance in the contention of the learned counsel for the Revenue that having observed that the appellant had not made a full and true disclosure, their application should have been rejected by the Settlement Commission on that count itself and no relief should have been granted to the appellant. However, in view of the fact that order dated 8.2.2001 passed by the Settlement Commission allowing the application of the appellant to be proceeded was not challenged by the Commissioner nor such a plea was urged by the Revenue before the High Court or in their reply to the present appeal, we find it difficult to reject the application at this stage, though, having perused some of the documents available on record, we are convinced that the appellant had not made a full and true disclosure of its affairs before the Settlement Commission. Be that as it may, we are of the opinion that having opted to get their customs duty liability settled by the Settlement Commission, under Chapter XIV-A of the Act, the appellant cannot be permitted to dissect the Settlement Commission's order with a view to accept what is favourable to them and reject what is not.
37.As observed by Krishna Iyer, J. in CIT Vs. B.N.Bhattacharjee (1979) 4 SCC 121, the recommendation of the Wanchoo Committee was : (SCC p.128, para 20) "20....a compromise measure of a statutory settlement machinery where [a] big evader could make a disclosure, disgorge what the Commission fixes and thus buy quittance for himself and accelerate recovery of taxes in arrears by the State, although less than what may be fixed after long protracted litigation and recovery proceedings."
16.The view expressed in Sanghvi Reconditioners Private Limited's case (cited supra) completely supports the stand of the respondent department. This court is not inclined to interfere with the penalty imposed by the Settlement Commission. The petitioners have not made out a case. As correctly contended, the very maintainability of the writ petitions is doubtful since the petitioners had already availed the remedy before the Settlement Commission. Thereafter they cannot come to this court for further improvement.
17.Hence both writ petitions will stand dismissed. However, there will be no order as to costs. Consequently, connected stay petitions will stand dismissed and the vacate stay petitions stand closed as unnecessary.
vvk To
1.Customs & Central Excise Settlement Commission, Additional Bench, Ministry of Finance Government of India, II Floor, Narmada Block, Custom House, 33, Rajaji Salai, Chennai-600 001.
2.The Commissioner of Central Excise, Bibikulam, Madurai-2.
3.Additional Director General, Directorate General of Central Excise Intelligence, Chennai Zonal Unit, 'C' Wing, Rajaji Bhavan, Besant Nagar, Chennai-600 090.
4.The Deputy Director, Directorate General of Central Excise Intelligence, Regional Unit, Madurai.
5.The Deputy Commissioner of Central Excise, Madurai I Division, Madurai-2.
6.The Superintendent of Central Excise, Tirumangalam Range, Tirumangalam, Madurai District.