Settlement Commission limits prevent merits adjudication; disputed demand must go back to normal adjudication when disclosure is not full and true.

The Settlement Commission's jurisdiction is confined to settlement under the statute and it cannot assume the role of an adjudicating authority on the disputed merits of a show cause notice. Where the statutory precondition of full and true disclosure is not satisfied, the proper course is to reject the settlement application and remit the matter to normal adjudication. The impugned order was therefore beyond jurisdiction to the extent it examined valuation, confirmed the demand, and imposed consequential reliefs and penalties, and was liable to be quashed to that extent.

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Issues: Whether the Settlement Commission could determine the merits of the show cause notice and confirm the demand instead of rejecting the settlement application and relegating the matter to adjudication.

Analysis: The writ applicant had approached the Settlement Commission for settlement, but the Commission proceeded to examine the disputed valuation and duty liability and, after declining the claimed deduction, confirmed the demand and imposed consequential reliefs and penalties. The Court relied on the settled principle that the Settlement Commission functions within the limited settlement jurisdiction conferred by the statute and is not meant to act as an adjudicating authority on the disputed merits of the show cause notice. If the Commission found that the statutory precondition of full and true disclosure was not satisfied, the proper course was to reject the settlement application and leave the parties to the normal adjudication mechanism. The impugned order, to the extent it adjudicated and confirmed the demand, was therefore beyond jurisdiction.

Conclusion: The Settlement Commission could not decide the disputed demand on merits, and the impugned order was liable to be quashed to that extent, with the matter to proceed before the competent adjudicating authority.

Ratio Decidendi: Where the Settlement Commission finds that settlement is not maintainable or that statutory preconditions are not met, it must decline settlement and cannot assume the role of an adjudicating authority on the show cause notice.

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