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 ... Entitlement of Settlement of a Case - Introduction of the 'Explanation' to section 32-O(I)(i) of the Central Excise Act, 1944 - Whether with the introduction of the 'Explanation' to section 32-O(I)(i ) there was a change in law with regard to the one time bar under the said section? - Held that:- As the earlier four show cause notices were issued prior to the introduction of the 'Explanation' by Finance Act (N). (No.2) ACT 2014, the bar under section 32-O (1)(i) is not applicable. The argument made on behalf of the respondent that section 32-O(I)(i ) cannot be accepted, if one looks at the plain language of section 32-E(1) of the Act. The 'Explanation' in section 32-O(I) (i ) stating that 'the concealment of particulars of duty liability relates to any such concealment made from the Central Excise Officer' is in aid to and evidently in consonance with the opening part of the provisions contained in section 32-E(1) which provides 'An assessee may, in respect of a case relating to him, make an application, before adjudication, to the Settlement Commission to have the case settled, in such form and in such manner as may be prescribed and containing a full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer having jurisdiction,….' (Emphasis supplied). Therefore, under section 32E(1) an application for settlement can be filed before the Commission where there is a non-disclosure of duty liability before the Central Excise Officer. Under section 32-O(1)(i) a person is barred from filing a subsequent application for settlement where he has suffered an order passed under section 32F(5) and therein the 'Explanation' has been introduced that the concealment of particulars of duty liability 'relates to any such concealment made from the Central Excise Officer'. Thus, 'Explanation' in 32-O(1)(i) is consistent with the statutory intent in section 32-E(1). As seen 'Explanation' introduced is a reiteration of the statutory provisions in section 32E(1). Hence, the 'Explanation' is clarificatory in nature. Therefore, as the bar under section 32-O(1)(i) was always in vogue, the submission in this regard on behalf of the respondent is unacceptable. Pursuant to the notice to show cause dated 25th May, 2010 for the period 3rd July, 2008 to 9th September, 2008, the respondents had filed an application for settlement on 22nd July, 2010 which was disposed of by order dated 26th November, 2010 by imposing penalty and interest. Then again pursuant to the show cause notice dated 9th July, 2010 the petitioner had filed an application for settlement on 12th April, 2011 which was disposed of by the Commission by passing an order imposing penalty. Therefore, as and when the Commission took up the application for settlement for hearing, no 'earlier application' on the 'identical' issue was 'pending' before it. Hence, the section 32-O(2) since deleted, does not come to the aid of the respondents herein, that is the writ petitioners. In this context it is to be noted that a show cause notice was issued on 11th November, 2011 and the respondent had filed an application for settlement on 16th May, 2012 admitting the duty liability which was disposed of by order dated 12th October, 2012 by imposing penalty. As under section 32-O(1)(i) the bar to file subsequent application was always in vogue, in view of the clear finding in detail by the Commission that in the previous proceedings penalty was imposed for concealment of particulars of duty liability, the argument of the respondent on this issue cannot be accepted. In the instant case the learned Single Judge, in the judgement under challenge had overlooked paragraphs 24, 25, 28, 34 and 35 of the order dated 28th March, 2014 passed by the Commission dealing specifically with the earlier proceedings and the orders passed thereon, as noted hereinbefore. The said orders, under section 32M, are conclusive. That apart, as evident from the records, the respondents had accepted each of those orders passed by the Settlement Commission. It is clear from the order dated 28th March, 2014, particularly paragraphs 24 and 35 thereof, that earlier on four occasions the respondent herein was found guilty for concealment of duty particulars and penalty was imposed which the learned Judge had overlooked and thus erred in passing the judgement under challenge. The judgment and order of Single Judge of HC dated 26th August, 2014 cannot be sustained and is thus set aside and quashed - Decided in favor of revenue. 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.