2016 (4) TMI 1067 - HC - Central Excise

Court Upholds Bar on Multiple Settlement Applications, Emphasizes Statutory Intent

The court clarified that the introduction of the 'Explanation' to section 32-O(1)(i) did not alter the existing legal landscape regarding the one-time ... Bar on subsequent application for settlement - Concealment of particulars of duty liability - Clarificatory nature of statutory Explanation - One-time approach to settlement - Conclusive effect of Settlement Commission orders under section 32MClarificatory nature of statutory Explanation - Concealment of particulars of duty liability - The effect of the Explanation inserted in section 32-O(1)(i) and whether it changed the law regarding the bar on subsequent applications for settlement. - HELD THAT: - The Court held that the Explanation which specifies that concealment of particulars of duty liability relates to concealment made from the Central Excise Officer is consistent with the statutory intent of section 32E(1), which permits settlement only where there has been non-disclosure to the Central Excise Officer. The Explanation is therefore clarificatory and does not effect a substantive change in law; the bar under section 32-O(1)(i) was always in operation. The respondent's contention that the Explanation introduced a new disqualification is rejected.The Explanation to section 32-O(1)(i) is clarificatory and does not change the pre-existing bar on subsequent applications for settlement.One-time approach to settlement - Bar on subsequent application for settlement - Whether the insertion (1 June 2007) and subsequent omission (8 May 2010) of subsection (2) to section 32-O removed the one-time bar so as to permit subsequent settlement applications in the present facts. - HELD THAT: - The Court found that subsection (2) did not aid the respondents because its proviso permitted another settlement only where an earlier application on an identical issue (apart from period and amount) was pending; in the present case no earlier identical application was pending when subsequent applications were filed. The chronology of prior settlement orders shows each earlier application had been finally disposed of before the next was filed. Consequently the temporary insertion and later omission of subsection (2) does not negate the one-time bar in these facts.The temporary provision in subsection (2) does not apply to these facts and does not remove the one-time bar to subsequent settlement applications.Concealment of particulars of duty liability - Conclusive effect of Settlement Commission orders under section 32M - Bar on subsequent application for settlement - Whether, on the material before the Court, the Settlement Commission had earlier imposed penalties on the respondents for concealment of duty particulars thereby attracting the bar under section 32-O(1)(i). - HELD THAT: - The Court placed reliance on the Settlement Commission's detailed order (notably paragraphs 24, 25, 28, 34 and 35) recording that on four earlier occasions the applicant was penalized for concealment of duty particulars and that those orders were accepted by the respondents. Under section 32M such orders are conclusive. The High Court concluded that the Commission legitimately treated the applicant as debarred from filing a subsequent application and therefore had no jurisdiction to entertain the fifth application; the Single Judge erred in not appreciating those findings of the Commission. [Paras 24, 25, 28, 34, 35]The Commission had earlier imposed penalties for concealment of duty particulars and those conclusive orders attract the bar under section 32-O(1)(i), barring the subsequent application.Final Conclusion: The judgment of the Single Judge is set aside. The Settlement Commission's order rejecting the subsequent applications on the ground that the applicants had earlier been penalized for concealment of duty particulars and were therefore barred under section 32-O(1)(i) is upheld; the appeal is allowed. Issues Involved:1. Introduction of the 'Explanation' to section 32-O(1)(i) and its impact on the one-time bar under the said section.2. Effect of the introduction and subsequent omission of sub-section (2) to Section 32-O on the one-time approach.3. Whether penalties in earlier proceedings before the Settlement Commission were imposed for concealment of particulars of duty liability.Detailed Analysis:Issue 1: Introduction of the 'Explanation' to section 32-O(1)(i)The primary contention was whether the introduction of the 'Explanation' to section 32-O(1)(i) by the Finance Act (No.2) of 2014 altered the legal landscape regarding the one-time bar. The court clarified that the 'Explanation' is consistent with the statutory intent in section 32-E(1), which allows an assessee to apply for settlement before adjudication by making a full and true disclosure of duty liability not previously disclosed to the Central Excise Officer. The 'Explanation' merely reiterates this provision and is thus clarificatory in nature. Therefore, the bar under section 32-O(1)(i) was always in effect, making the respondents' argument on this point unacceptable.Issue 2: Effect of Sub-section (2) to Section 32-OThe respondents argued that the introduction of sub-section (2) to section 32-O from June 1, 2007, and its subsequent omission on May 8, 2010, removed the one-time approach. The court found this argument untenable because no earlier application for settlement on an identical issue was pending when any of the subsequent applications were filed. The court noted that each application for settlement was disposed of before the next one was filed, meaning section 32-O(2) did not aid the respondents. The court emphasized that the respondents had accepted each order passed by the Settlement Commission, which under section 32M, are conclusive.Issue 3: Penalties for Concealment of Duty LiabilityThe court examined whether penalties in earlier proceedings were imposed for concealment of particulars of duty liability. The Settlement Commission's detailed findings in paragraphs 24, 25, 28, 34, and 35 of its order dated March 28, 2014, confirmed that penalties were indeed imposed for such concealment. The learned Single Judge had overlooked these findings, leading to an erroneous judgment. The court reiterated that the bar under section 32-O(1)(i) was always applicable, and since penalties were imposed for concealment of duty particulars, the respondents were barred from filing subsequent applications for settlement.Conclusion:The court concluded that the judgment and order dated August 26, 2014, could not be sustained and thus set it aside. The appeal was allowed, and the Settlement Commission's order dated March 28, 2014, was upheld. The court emphasized that the earlier penalties imposed for concealment of duty particulars barred the respondents from filing subsequent applications under section 32-O(1)(i).Additional Notes:The court also addressed the inapplicability of various judgments cited by the respondents, emphasizing that the facts and legal principles in those cases did not align with the present case. The court underscored that the Settlement Commission's orders were in accordance with the provisions of the Central Excise Act and were conclusive under section 32M.