2010 (1) TMI 222 - HC - Central Excise

Settlement Commission cannot reduce penalties under Section 11AC; distinction between settlement and adjudication emphasized.

ASHWANI TOBACCO CO. PVT. LTD. Versus UNION OF INDIA

ASHWANI TOBACCO CO. PVT. LTD. Versus UNION OF INDIA - 2010 (251) E.L.T. 162 (Del.) Issues Involved:1. Challenge to the Miscellaneous Order denying the benefit of reduced penalty under Section 11AC of the Excise Act.2. Request for complete immunity from penalty or reduced penalty.3. Examination of the Settlement Commission's powers and jurisdiction.4. Interpretation of provisions under the Excise Act related to settlement and adjudication.Issue-wise Detailed Analysis:1. Challenge to the Miscellaneous Order denying the benefit of reduced penalty under Section 11AC of the Excise Act:The Petitioner challenged the Miscellaneous Order No. 142/CE/09-S.C. (PB) dated 29th April 2009, which denied the benefit of reduced penalty at 25% as provided under Section 11AC of the Excise Act. The Petitioner argued that the Settlement Commission should have applied the provisions of Section 11AC in their entirety, including the benefit of reduced penalty when the duty was deposited within 30 days from the communication of the order.2. Request for complete immunity from penalty or reduced penalty:The Petitioner sought either complete immunity from penalty or, alternatively, the benefit of reduced payment of penalty at 25% under Section 11AC. The Settlement Commission, in its Final Order dated 29th February 2008, had imposed a penalty of Rs. 3,00,00,000/- on the Petitioner under the provisions invoked in the SCN and granted full immunity from penalty to other co-applicants. The Petitioner filed a miscellaneous application seeking rectification of errors and complete immunity from penalty or a reduction in the penalty amount.3. Examination of the Settlement Commission's powers and jurisdiction:The Court examined the relevant provisions of the Excise Act, including Sections 2(b), 11AC, 32A, 32E, 32F, 32H, 32-I, and 32K. It was noted that Section 32A provides for the jurisdiction and powers of the Settlement Commission, while Section 32E allows an assessee to make an application for settlement before adjudication. Section 32F prescribes the procedure for the Settlement Commission to follow upon receiving an application, including making an order on the application after examination of records and reports. Section 32I stipulates that the Settlement Commission shall have the exclusive jurisdiction to exercise the powers and perform the functions of a Central Excise Officer from the time the application is allowed to proceed until an order is passed.4. Interpretation of provisions under the Excise Act related to settlement and adjudication:The Court emphasized that the scheme of settlement under Chapter V of the Excise Act is distinct from adjudication by a Central Excise Officer. The expression 'settlement' is in contradistinction to 'adjudication,' and the Settlement Commission's role is to settle the matter holistically, considering all aspects of the case. The Court observed that the Settlement Commission has the power to grant immunity from prosecution and penalty, which a Central Excise Officer does not possess. Therefore, the benefit of reduced penalty under the proviso to Section 11AC, applicable in cases of adjudication by a Central Excise Officer, does not extend to cases settled under Chapter V of the Excise Act.Conclusion:The Court concluded that there was no infirmity in the impugned order dated 29th April 2009, as the Settlement Commission's decision was in accordance with the provisions of the Excise Act. The petition was dismissed, and no order as to costs was made. The Court reiterated that the scheme of settlement is distinct from adjudication, and the Settlement Commission's powers are to be understood within the context of Chapter V of the Excise Act.