Anil Re-Rolling Mills vs Commissioner of Central Excise

L.N. Reddy, J.�This application is filed with a prayer to review the order, dated 1-9-2014, passed by this Court in W.P. No. 1701 of 2002. The principal ground urged in this behalf is that the Settlement Commission, i.e., respondent No. 2 ordered investigation into the matter, obtained a report and that though a plea that the report was not furnished well in advance for perusal, the same was not taken into account and the writ petition was dismissed.

Heard Sri Vivek Chandra Sekhar, learned Counsel for the petitioner and Sri Jalakam Satyaram, learned Counsel for the respondents.

The writ petition was filed challenging the final order passed by respondent No. 2. On receipt of demand notice/the petitioner wanted the matter to be settled and offered to pay certain amount. Respondent No. 2 ordered investigation into the matter and refused to grant the relief by taking into account the report of investigation and on perusal of the record. The fact that the copy of the report was not furnished well in advance and that it was furnished only on the date of hearing was not canvassed before us. However, in view of the contentions made by the parties in the writ petition and on hearing the parties at this stage, we are convinced that the copy of the investigation report would certainly constitute a ground for seeking review of the order. It is almost a facet of principles of natural justice. Therefore, we allow this application and the order, dated 1-9-2014, is reviewed. We pass the following order in its place:

"This writ petition is filed challenging the order, dated 23-10-2001, passed by the Customs & Central Excise Settlement Commission, Chennai, respondent No. 2 herein."

The petitioner is a manufacturer and is an assessee under the Central Excise Act (for short ''the Act''). It has been filing the returns from time to time. A show cause notice was issued to it on 30-9-1998 pointing out that some of the facts were concealed and thereby, some manufactured goods escaped Excise duty. At that stage, the petitioner approached respondent No. 2 by filing an application under Section 32E of the Act. It admitted that some irregularities have taken place in the past, and prayed for settlement of the matter.

Respondent No. 2 entertained the application and verified the matter. At one stage, it has also directed the Commissioner attached to it, to make further investigation. A report, dated 27-6-2001, was submitted accordingly. On a perusal of the report, respondent No. 2 found that the petitioner did not make full and truthful disclosure before it, and thereby did not extend the required amount of cooperation. Accordingly, it passed the impugned order, directing that the case will go back to the Central Excise Officer, who has jurisdiction to adjudicate the dispute, as though no application under Section 32E of the Act was filed. Hence, this writ petition.

Sri S. Vivek Chandra Sekhar, learned Counsel for the petitioner, submits that respondent No. 2 was not justified in arriving at the conclusion that there is non-cooperation on the part of the petitioner. He contends that a simple observation to that effect would not constitute the basis for denial of settlement and the conclusion must be supported by valid reasons. Learned Counsel submits that apart from disclosing the true and full facts, the petitioner has extended cooperation throughout the proceedings and still the matter was sent back to the assessing authority. He further submits that respondent No. 2 relied upon the investigation report, but the copy of the same was not furnished. It is also urged that the matter was remanded to the Assessing Authority for fresh consideration and on such remand, the investigation report would certainly cause detriment to it.

Sri Jalakam Satyaram, learned Counsel for the respondents, on the other hand, submits that Section 32E of the Act provides for a typical and specific remedy which totally depends upon the honesty and truthfulness of the assessee and a Commission can proceed to settle the dispute only when it is satisfied that the disclosure is genuine and truthful. He contends that this is not a case where respondent No. 2 has simply observed that the assessee is not cooperating, but, on the other hand, it proceeded to point out the aspects on which the true disclosure is not forthcoming. He submits that respondent No. 2 has taken note of the principles that govern the settlement of disputes under Section 32E of the Act and had passed the orders under Section 32L of the Act strictly in accordance with law.

The Central Excise Act, the Customs Act and the Income-tax Act provide for mechanisms for adjudication of disputes, at various levels such as the appeals before the Commissioners and further appeals before the Tribunals. Apart from such adversarial mechanism, those enactments contain provisions for Constitution of Settlement Commissions, which are conferred with the power to settle the disputes. The proceedings before the Settlement Commissions partake the character of inquisitorial adjudication, which would depend upon the nature of disclosure on the part of the assessee. If, after examination of the matter, the Settlement Commission comes to the conclusion that there is still some concealment on the part of the assessee, it can simply decline to proceed further, and leave it open for the assessee, to pursue other remedies in accordance with law.

In the instant case, respondent No. 2 has processed the application submitted by the petitioner, to a substantial stage. Not only the matter was discussed at length with reference to the relevant material, but also the report was called for, through a Commissioner attached to it. On a perusal of the record before it, as well as the report submitted by the Commissioner, respondent No. 2 took the view that there are some more aspects that were not revealed by the writ petitioner.

The expression "Cooperation" occurs at more places than one under the relevant Chapters. In the ordinary parlance, the word "Cooperation", in the context of adjudication, is taken to mean the non-participation of the concerned party, in the proceedings. However, in the context of settlement, it has a different connotation, altogether. The cooperation in such instances connotes the true and full disclosure of the facts pertaining to the assessee; and non-cooperation, the opposite of it.

The relief to be granted by the Settlement Commission is in the form of immunity from prosecution. That, however, is a reward for the assessee being truthful. The relevant procedure mandates that it is only when the disclosure is complete and truthful in all respects, without any reservation, that the Settlement Commission can be expected to grant relief. If it finds that any information or fact that has bearing upon the assessment has been withheld from it, it can simply refrain from proceeding further, and drop the proceedings at that.

Even in the course of ascertaining the truth of the representation made by a manufacturer, respondent No. 2 is required to go by the record before it. Where, however, it proposes to direct investigation or enquiry, it is fundamental that the report of such enquiry or investigation must be furnished to the concerned party well in advance, so that it can present its version. Passing of final order straightaway or furnishing copy of the report on the same day would result in dual disadvantage to the manufacturer. The first is that the party would be denied an opportunity to put forward its contention vis-�-vis the investigation report. The second is that the report would constitute the basis in future proceedings and that would result in detriment to the manufacturer. Since the consequences are so devastating, we are of the view that the petitioner deserves to be given an opportunity to put forward its contention vis-�-vis the investigation report.

Therefore, we allow the writ petition and set aside the order under challenge. We remand the matter to respondent No. 2 for fresh consideration and disposal. The petitioner shall be entitled to submit his remarks on the basis of the investigation report, within two (2) weeks from today. There shall be no order as to costs. Miscellaneous petitions, if any, filed in this appeal shall also stand disposed of.