2016 (6) TMI 14 - HC - Central Excise

Court overturns rejection of settlement applications, orders fresh hearing based on statutory grounds.

The Court set aside the Customs and Central Excise Settlement Commission's orders rejecting the settlement applications, directing a fresh hearing ... Dismissal of settlement application - Demand towards Cenvat credit wrongly availed - CCESC opined that the applicant has not cooperated with the CCESC in the proceedings before it - Difference between the applicant and the Department on an issue arising from the application - Held that:- the Court finds that both in the order dated 9th June, 2014, rejecting the first application and the subsequent order dated 3rd September, 2014, rejecting the second application, the CCESC has proceeded on two wrong premises. One was that the diary of Mr. Rai was not before it. However, this error was rectified by it by the order dated 16th November, 2015. The second error was in concluding that since the Department and the Assessee were not ad idem on certain factual details, the matter should be sent back for adjudication before the concerned Excise Officer. The CCESC failed to appreciate that the grounds on which the application can be rejected are restricted to those set out in Section 32-F (1) and Section 32-L of the CE Act. Therefore, for these reasons, this Court sets aside the impugned order of the CCESC rejecting the first application and the order passed by it rejecting the second application. The order passed by the CCESC, to the extent of correcting the mistake as noted does not call for interference. - Petition disposed of Issues:Challenge to orders of Customs and Central Excise Settlement Commission under Central Excise Act, 1944; Rejection of settlement application by the Petitioner; Discrepancy regarding diary maintained by employee; Consideration of ITSC order in CCESC proceedings; Grounds for rejection of settlement application by CCESC; Judicial review of CCESC order under Article 226 of the Constitution of India.Analysis:The judgment deals with a petition challenging orders of the Customs and Central Excise Settlement Commission (CCESC) under the Central Excise Act, 1944, dismissing the settlement application filed by the Petitioner. The dispute arose from a search conducted at the premises of Mr. Pawan Goel, leading to the issuance of a show cause notice to the Petitioner for wrongful Cenvat credit availed. The Petitioner filed two settlement applications, the first being rejected due to lack of consensus between the Petitioner and the Department, and the second rejected on similar grounds despite a corrected mistake in the order. The Petitioner also sought consideration of an order by the Income Tax Settlement Commission (ITSC) that favored the Petitioner based on the same evidence.The key issue raised was the grounds on which the CCESC could reject a settlement application. The Court highlighted that the CCESC can reject an application if there is a failure to make a full and true disclosure of material facts or lack of cooperation by the applicant. The CCESC cannot decline to examine an application solely due to differences between the applicant and the Department. The judgment emphasized that the CCESC's rejection must be based on the specific grounds outlined in the Central Excise Act, rather than differences of opinion between the parties.The Court noted that the CCESC had erred in rejecting the applications based on incorrect premises, such as the absence of Mr. Rai's diary, which was later rectified. The judgment emphasized the limited grounds for rejection under the Act and the necessity for the CCESC to consider the ITSC's decision favoring the Petitioner. Consequently, the Court set aside the CCESC's orders rejecting the settlement applications and directed a fresh hearing considering the ITSC's decision. The second application was restored for further proceedings before the CCESC, emphasizing the importance of adhering to statutory grounds for rejection and considering relevant decisions in settlement proceedings.