Calcutta High Court (Appellete Side)
Gd M/S. C.P. Re-Rollers Ltd. & Anr vs Union Of India & Ors on 4 May, 2015
Author: Sanjib Banerjee
Bench: Sanjib Banerjee
1
7 04.5.2015
W.P. 3043 (W) of 2015
gd M/s. C.P. Re-Rollers Ltd. & Anr.
Vs.
Union of India & Ors.
Mr. N.K. Chowdhury
Mr. Arijit Chakraborti
Mr. Nilotpal Chowdhury
..for the Petitioners
Mr. P. K. Ray
Mr. K. K. Maiti
..for the Respondent nos.3 and 4.
The maxim that the life of law is experience and not logic does not automatically make the law illogical or asinine as the petitioners would have one believe. The argument of the petitioners makes a mockery of the exercise undertaken by the Settlement Commission under the Central Excise Act, 1944 and the provisions relating thereto.
The petitioner company proudly flaunts that it had dodged paying the duty leviable in a previous case whereupon it was slapped with a notice under Section 11 of the Act and it carried the matter before the Settlement Commission under Section 32E of the Act. Such provision permits an assessee, who has, inter alia, been served a show-cause notice for recovery of duty by a central excise officer, to approach the Settlement Commission to have the case settled by indicating the additional amount of excise duty accepted by the assessee to be payable and by furnishing such other particulars as may be relevant.
Upon an assessee carrying a matter before the Settlement Commission, it is not 2 automatic that the application has to be taken up or processed. Leave has to be obtained from the commission for such purpose and the provisions recognise the commission having the authority to inquire of the petitioning assessee why it should be permitted to proceed before the Settlement Commission. It is possible that such notice is not issued; it is than that leave to proceed with the application is deemed to have been given. The procedure before the Settlement Commission requires a report to be furnished by the principal commissioner of central excise or commissioner of central excise having jurisdiction over the matter. If such report is not furnished within the time indicated, the Settlement Commission may proceed with the matter nonetheless.
Section 32F of the Act lays does the procedure to be followed on receipt of an application under Section 32E thereof and sub-section (5) of the later provision gives due authority to the Settlement Commission to pass appropriate orders, including reducing or waiving the penalty that the assessee would otherwise be liable to pay for not disclosing the appropriate quantum of excise duty in the first place.
It is not in dispute that upon the petitioner company receiving a demand for evading excise duty, it approached the Settlement Commission, whereupon 3 the Settlement Commission disposed of the application by its order dated January 4, 2011. The operative part of the order provided for a penalty to the extent of Rs.5 lakh on the petitioner company together with the additional duty in excess of Rs.33 lakh. In imposing the penalty on the assessee, the Settlement Commission accepted or is deemed to have found as a matter of fact that the assessee had not deposited or disclosed the quantum of excise duty payable. There is a discretion available to the Settlement Commission and it is possible in an appropriate case for the entire quantum of penalty to be waived, if the Settlement Commission feels that it was beyond the control of the assessee to ascertain the quantum of duty payable or that there was no attempt at concealment in course of originally depositing the quantum of duty.
The moment the Settlement Commission imposes any penalty on an assessee approaching it under Section 32E of the said Act, it implies that there was an attempt to dodge the amount that was originally due from such assessee. Penalty, by its very nature, is the imposition of a levy or the like for the wrongful conduct of the person suffering the same.
When an assessee approaches a Settlement Commission after receiving a notice of demand indicating that it had paid less duty than what was due on the relevant transaction, it accepts the demand in full or in part by evincing its desire to settle the amount. The assessee is then required to make a clean breast of things and indicate the extent to which it accepts the demand. The Settlement Commission adjudicates on the quantum of the demand made by 4 the central excise officer in the light of the quantum admitted and accepted by the assessee to be due from it in respect of the relevant transaction. Implicit in an assessee approaching the Settlement Commission is the admission of the assessee that it had underpaid and that it was liable to pay an additional amount of duty, though the assessee need not submit to the entire amount contained in the demand and may contend that a lesser amount of additional duty is payable than demanded.
In this petitioner company having previously approached the Settlement Commission after receipt of the show-cause notice or notice of demand, it offered to pay a substantial part of the additional duty demanded and, thereby, admitted that it had paid less than what it ought to have in course of the transaction. In the Settlement Commission discovering that the additional quantum of duty payable by this petitioner company was in excess of Rs.33 lakh, there was a finding that there was underpayment of duty by this petitioner to such extent. In the Settlement Commission imposing a penalty of Rs.5 lakh on this petitioner company, it found as a matter of fact that the petitioner company had concealed the quantum of duty payable in respect of the transaction. An element of mens rea was fastened to this petitioner company upon the order of the Settlement Commission being passed on January 4, 2011.
Section 32-O of the said Act permits subsequent applications for settlement being made, provided the assessee has not been penalised 5 previously "on the ground of concealment of particulars of his duty liability ..." It is necessary to see the relevant provision without its explanation, which is not necessary for the present purpose:
"Section 32-O - Bar on subsequent application for settlement in certain cases - Where
(i) An order of settlement passed under sub-section (7) of section 32F, as it stood immediately before the commencement of section 122 of the Finance Act, 2007 (22 of 2007) or sub- section (5) of section 32F, provides for the imposition of a penalty on the person who made the application under section 32E for settlement, on the ground of concealment of particulars of his duty liability; ..."
It is absurd to suggest that the expression, "concealment of particulars of his duty liability", pertains to the application made before the Settlement Commission. If that were to be so, every knave and his accomplice would conceal the duty payable in course of every transaction and approach the Settlement Commission only in the cases where he would be caught and would be slapped a show-cause notice for additional duty.
The scheme of the provisions
6
introduced for settlement of a demand
indicates that a person may approach the Settlement Commission once for having concealed the particulars of the duty payable, but having exercised such option, the doors of the Settlement Commission are forever closed to the concerned assessee if the Settlement Commission imposes any fine on such assessee.
It cannot be lost sight of that this petitioner company had previously approached the Settlement Commission after receiving a notice of demand. In this petitioner company accepting a quantum of the amount of additional duty as demanded to be payable, it accepted and acknowledged that it had failed to pay the duty that it was originally obliged to. It is possible in a particular case that there may be a bonafide reason for not paying the appropriate quantum of duty, but the adjudication on the reasons for not tendering the appropriate duty is conducted by the Settlement Commission. If the Settlement Commission is of the opinion that, despite the exercise of due diligence and for reasons beyond the control of the assessee, the appropriate duty 7 could not be tendered, the commission would waive the penalty on the assessee. But the moment any amount of penalty is imposed on an assessee, the commission is deemed to have rendered a finding that the assessee had concealed the particulars as to the duty payable. It is such assessed conduct that amounts to the concealment of particulars of the duty and prevents the same assessee from approaching the Settlement Commission a second time after it has once been found to have concealed the particulars of the duty liability. In the petitioner company having exhausted its right to approach the Settlement Commission upon the order of January 4, 2011 being pronounced, the petitioners could not have carried the demand now made by way of a subsequent application under Section 32E of the said Act before the Settlement Commission.
The order impugned dated August 27, 2014 is appropriate and perfectly justified and it read the relevant provision as it ought to be.
The petitioners have relied on an order dated August 26, 2014 passed by single Bench of this court in WP No. 392 of 2014 8 (Ankit Metal & Power Ltd v. Settlement Commission). In that case, upon the Settlement Commission refusing to entertain a subsequent application under Section 32E of the said Act by a person who had suffered a penalty on a previous occasion, this court held that the previous order of the Settlement Commission did not specify why or for what purpose the penalty had been imposed on the writ petitioner. It was in such circumstances, that the order required the Settlement Commission to reconsider the matter.
The earlier order passed by the Settlement Commission in that case is not quoted in the relevant order. It is, thus, not possible to appreciate the circumstances in which the order dated August 24, 2014 in WP 392 of 2014 came to be made.
In the present case, the order of the Settlement Commission on the previous occasion is lucid and leaves no room for doubt. The order of January 4, 2011 found that the petitioner company was liable to the extent of Rs.33,44,227/- on account of additional duty. Such amount was required to be appropriated from the sum of Rs.35 lakh that had been kept in deposit by the 9 petitioner company. The Settlement Commission found that the petitioner company was liable to pay interest of Rs.62,876/-, which was also required to be deducted from the deposit already made. On penalty, the settlement commission took into account "the facts and circumstances of the case and repetitive nature of offence" before granting "immunity from penalty as is in excess of Rs.5,00,000/- ..."
Thus, it is clear from the previous order in this case as to why the penalty was imposed. The petitioners were found by the central excise commissioner to have evaded duty. The petitioners approached the Settlement Commission by offering to pay a substantial part of the additional duty and the Settlement Commission found that the petitioner company ought to be penalised to a certain extent for having evaded the duty that it was originally liable to pay.
In the light of the penalty imposed on the petitioner company herein and such penalty covering the expression "concealment of particulars of his duty liability" in Section 32-O of the said Act, the Settlement Commission cannot be faulted for having 10 rejected the subsequent attempt at settlement.
The respondent authorities have not been called upon.
W.P. 3043 (W) of 2015 is dismissed with costs assessed at Rs.1 lakh to be paid by the petitioner company to the excise authorities before taking any further steps against the notice of demand served on it.
Urgent certified website copies of this order, if applied for, be made available to the parties upon compliance with the requisite formalities.
(Sanjib Banerjee, J.) 11