Retrospective tax amendments and settlement rights: later Explanation to central excise bar provision held prospective, with remand ordered.

The Andhra Pradesh HC held that an Explanation inserted to Section 32-O(1)(i) of the Central Excise Act could not be applied retrospectively because it was not shown to be declaratory or curative, and the settlement remedy was a substantive right governed by the law in force when proceedings could have been initiated. It further held that ambiguity in the pre-amendment text had to be resolved in favour of the assessee, so the Settlement Commission could not reject the third settlement application solely on the later Explanation. Delay in filing the writ petition was not fatal because no intervening prejudice or third-party rights were shown, and the matter was remanded for fresh consideration.

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Issues: (i) whether the Explanation inserted to Section 32-O(1)(i) of the Central Excise Act, 1944 by the Finance Act, 2014 operates retrospectively; (ii) whether the delay in filing the writ petition challenging the Settlement Commission's order was fatal.

Issue (i): whether the Explanation inserted to Section 32-O(1)(i) of the Central Excise Act, 1944 by the Finance Act, 2014 operates retrospectively.

Analysis: The right to seek settlement under Chapter V is a substantive statutory right that accrues when the show-cause notice is received, and the governing law is ordinarily the law in force when settlement proceedings could have been instituted. The Explanation inserted on 06.08.2014 was not expressed as a declaratory or curative clarification and therefore could not be treated as retrospective merely because it was described as an Explanation. The Court further held that, even on the pre-amendment text, the ambiguity in Section 32-O(1)(i) had to be resolved in favour of the assessee, and the provision could not be expanded by judicial interpolation to cover concealment before the Central Excise Officer when the text then in force was reasonably capable of a narrower construction.

Conclusion: The Explanation to Section 32-O(1)(i) was held to be prospective, and the Settlement Commission's rejection of the third settlement application solely on the basis of that Explanation was unsustainable; the matter had to be reconsidered afresh.

Issue (ii): whether the delay in filing the writ petition challenging the Settlement Commission's order was fatal.

Analysis: Delay and laches are matters of judicial discretion, and the decisive consideration is whether the delay has caused prejudice by creating intervening rights or otherwise making relief inequitable. The writ petition was filed a little over one year after the impugned order, and no intervening third-party rights or comparable prejudice was shown.

Conclusion: The delay was not held to be fatal.

Final Conclusion: The impugned order rejecting the third settlement application was set aside and the matter was remanded to the Settlement Commission for fresh consideration after hearing the petitioner; the companion writ petitions were dismissed as not pressed.

Ratio Decidendi: An Explanation added to a settlement-bar provision will not be applied retrospectively to curtail a substantive settlement remedy unless the legislature clearly indicates such intent, and where the statutory language is ambiguous in a fiscal context, the construction favourable to the assessee prevails.

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