Settlement disclosure for clandestine removals must reflect duty at removal date; dropped undervaluation demand cannot revive later.

For settlement under Section 32E of the Central Excise Act, the disclosure must cover the duty liability that ought to have been paid at the time of clandestine removal, not a later rate applied when duty was eventually paid. The provision requires full and true disclosure of the concealed duty liability, and disclosure of only the clearance value or quantity is insufficient. Where the undervaluation demand was dropped in adjudication and the Department did not appeal or file cross-objections, that limb attained finality and could not be revived in settlement proceedings. The settlement therefore proceeded on the clandestine removal duty liability, with immunity from penalty and prosecution and no interest payable for the relevant period.

---

---

Issues: (i) Whether, for settlement under Section 32E of the Central Excise Act, 1944, the duty liability relating to clandestinely removed goods had to be disclosed at the rate prevailing on the date of removal or at the rate prevailing when duty was subsequently paid; (ii) whether the undervaluation limb of the show cause notice survived when that portion had been dropped in adjudication and was not appealed against by the Department.

Issue (i): Whether, for settlement under Section 32E of the Central Excise Act, 1944, the duty liability relating to clandestinely removed goods had to be disclosed at the rate prevailing on the date of removal or at the rate prevailing when duty was subsequently paid.

Analysis: Section 32E requires a full and true disclosure of duty liability not earlier disclosed before the jurisdictional Central Excise Officer. The relevant liability is the duty that ought to have been paid at the time of removal, because that is the liability which was concealed from the Department. The provision speaks of disclosure of duty liability, not merely of quantities or value of clearances. The analogy drawn from Section 245C of the Income-tax Act, 1961 supports the distinction between disclosure of the taxable base and the resulting tax or duty liability. Accordingly, the plea that duty could be worked out at the later prevailing rate was rejected.

Conclusion: The duty liability on clandestinely removed goods was to be disclosed and settled on the basis of the rate applicable at the time of removal, and the applicant's reduced disclosure was not accepted.

Issue (ii): Whether the undervaluation limb of the show cause notice survived when that portion had been dropped in adjudication and was not appealed against by the Department.

Analysis: The portion of the adjudication order dropping the undervaluation demand had attained finality because the Department neither appealed nor filed cross-objections. The earlier remand by the Tribunal could operate only on the portion that was actually in appeal, and could not reopen the dropped portion. On that basis, the undervaluation demand was no longer alive for settlement proceedings.

Conclusion: The undervaluation limb did not survive and stood excluded from further adjudication.

Final Conclusion: The case was settled by confirming the duty liability on clandestine removals at the higher amount, while granting immunity from penalty and prosecution and holding that no interest was payable for the relevant period.

Ratio Decidendi: For settlement under Section 32E of the Central Excise Act, 1944, the required disclosure is of the duty liability that ought to have been discharged at the time of removal, and a dropped demand not appealed by the Department does not revive merely because the remaining part of the case is remanded or carried forward.

---