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Judgment
S.C. Dharmadhikari, J.—We have heard both sides and with their assistance perused the Writ Petition and all annexures thereto. With the consent of both sides, we dispose of this Writ Petition finally.
Rule. Rule made returnable forthwith. Respondents waive service.
The petitioner is aggrieved by an order passed by the Settlement Commission dated 27th June, 2014, certified true copy of which is at Annexure-A. The case of the petitioner and simply stated is that it is engaged in manufacture of plastic moulded containers and caps falling under Chapter 39 of the Central Excise Tariff Act, 1985 at their factory at Daman (Union Territory). They hold a central excise registration and they clear the goods on payment of central excise duty. The petitioners are using moulds as raw materials for the purposes of manufacturing their final product and they are taking cenvat credit. The petitioners final product is used as packaging material and the duty paid by the petitioners is availed as cenvat credit by the buyers. However, what the claim of the petitioners is that one of their customers M/s. Hindustan Unilever Limited supplied moulds to the petitioner on lease basis by charging lease charges per piece of moulded article manufactured using these moulds. These charges were remitted to M/s. Hindustan Unilever Limited but the Revenue raised an objection from December 2007 to March 2012 and demanded Rs. 39,89,012/- as duty short-paid. Thereafter there was a reference made by the petitioners to certain circulars and to establish that what they are manufacturing as a final product and what goes into it has to be properly evaluated. The petitioners produced a certificate from a Cost Accountant. This, according to the petitioners, complies with the Central Board of Excise & Customs Circular dated 23rd January, 1996, They also approached a Chartered Engineer and obtained a certificate. The petitioners received a notice to show cause dated 27th December, 2012, demanding duty in the sum of Rs. 49,90,069/- alleging that the actual amortization cost of moulds was not included into the assessable value for payment of excise duty and there is short payment.
There was one more show cause notice and for further period i.e. April, 2012 to March, 2013. The petitioners worked out certain sum of differential duty and their liability accordingly, but having found that there is a difference of opinion, the petitioners approached the Settlement Commission and desired closure of the matter by a proper settlement mechanism.
Pertinently, on this application the Settlement Commission found that compliances pre-admission are made and that is how the matter proceeded in terms of section 32-F(1). The Revenue filed a report and objecting to the computations and calculations, including raising an issue about the correctness of the certificates obtained by the petitioners. The matter was fixed by the Settlement Commission before it and on 26th March, 2014. Submissions were canvassed with regard to the Chartered Engineer''s certificate. From the record it appears that the Settlement Commission gave time to the Department to examine the Chartered Engineer''s certificate and submit a report. The Department submitted its report on 28th April, 2014. Then, the Department was also informed that it has an option to go to another Chartered Engineer and obtain appropriate certificates so as to place them before the Commission.
After all this, the Settlement Application was placed before the Commission, but the complaint of the petitioners'' counsel is that without any further scrutiny and hearing, abruptly the proceedings have been closed and with the observation at pages 51 and 52 paragraphs 9.5 and 9.6. The precise submission is that an order has been passed in terms of section 32-F(5) but what the Settlement Commission essentially has done is to reject the application as not admissible in terms of section 32-E of the Central Excise Act, 1944. The fundamental difference between the two sections and the sub-sections thereof has not been noticed at all. The Settlement Commission could not have concluded the proceedings without complete compliance with section 32-F(5) of the Central Excise Act, 1944.
On the other hand, Mr. Jetly supported the impugned order and submitted that once the Settlement Commission has found that the applicant-petitioner has not made full and true disclosure of the duty liability and the computation and calculation of the same is not in order, then, there is no obligation on the Commission to go ahead and in terms of the very statutory provisions. Therefore, the impugned order need not be set aside.
After hearing both sides we are unable to agree with Mr. Jetly. The Settlement Commission ought to have understood that section 32-E of the Central Excise Act, 1944, deals with application for settlement of cases and by sub-section (1) what the law postulates is a proper application to the Commission to have a case settled. The application must be in such form and must be made in such manner as is prescribed by the Rules. It should contain full and true disclosure of the duty liability which has not been disclosed before the Central Excise Officer having jurisdiction; the manner in which the liability has been derived, the additional amount of excise duty accepted to be payable and such other particulars as may be prescribed and set out in sub-section (1) of section 32-E. We have found that this stage had already reached and the matter went much beyond the same. In fact, what we have adverted about and the uncontroverted factual position would denote that the Settlement Commission reached the stage and as contemplated by section 32-F. After the application is taken as not deficient but worth admitting what has to be done thereafter is to forward to the applicant, a notice to explain why the application should be allowed to be proceeded and after taking the explanation into consideration the Settlement Commission may allow the application to be proceeded with or reject the application and the proceedings before the Settlement Commission then shall abate on the date of rejection. Thereafter, a copy of that order has to be forwarded in terms of sub-section (2) of section 32-F to the Principal Commissioner of Central Excise or Commissioner of Central Excise having jurisdiction but when an application is allowed or deemed to have been allowed to be proceeded with under sub-section (1) of section 32-F, then, the Settlement Commission can call for a report along with relevant records from the Commissionerate and the Commissionerate then, through its Commissioner is obliged to forward this report. After such a report is received, then, how the matter or application should be dealt with is provided by sub-sections (4) and (5) of the said provision viz. Section 32-F.
From the record it is very clear that the matter proceeded upto sub-section (4) of section 32-F of the Central Excise Act, 1944. There are certificates which have been obtained and placed on record by both the appellant-petitioner and the Revenue. The Revenue faults the contents of that certificate and by raising several pleas. However, the Bench viz. the Settlement Commission found that the petitioner is contesting the methodology of the Department in arriving at the demand in the show-cause notice. A reference is made to the certificate of the Chartered Engineer and the recalculation of the duty payable on that basis by the petitioner. Thereafter, Revenue''s objection to the certificate is noted and particularly that there is no documentary evidence to support the claim. The Bench felt that a legal settlement is not possible without going into a lot of details of the disputes as far as the methodology is concerned. We do not see how such a conclusion can be reached and so quickly. If that is the conclusion reached, it was not necessary to have commented upon the conduct of the petitioner and allegedly in not coming up with honest disclosures. It should enable a settlement based on cooperation and disclosures. If the Revenue is not accepting the certificate or the lower amount, the Bench is then not handicapped and just cannot fold its hands in cases like the present one. It is not a dismissal based on a conclusion that the disclosure is not full and true. If it was indeed not so, there was no occasion for issuing further directions and to permit parties to examine certificates and equally the Revenue to file the report. All this means that unmindful of the statutory obligation and duty, the Commission wanted to abruptly end the proceedings. There is no short strife or short cut permissible in law. The matters have to be taken to their logical end and out of several reasons assigned at paragraphs 9.5 and 9.6 none appeals to us because they do not meet with the statutory requirements. One can infer the reluctance of the Commission to take up the application and complete the further steps because that involves considerable effort on the part of the Commission and which it was not willing to undertake.
If such an approach is adopted, the very purpose of setting up a Commission and enabling settlement of disputes expeditiously and promptly is defeated. That is to encourage settlement of claims which are long overdue and by pendency of which larger public interest cannot be sub-served. Delay in recovery of taxes harms the National economy and one need not over-emphasize this aspect.
As a result of the above discussion, we cannot sustain the impugned order. It is, accordingly, quashed and set aside. The Settlement Commission shall now proceed with the application in terms of section 32-F and in accordance with law. We keep all contentions of both sides open on the merits of the Settlement Application.
The Writ Petition is, accordingly, allowed. There will be no order as to costs.