AI Drafter 
TaxTMI 
TaxTMI 
2014 (5) TMI 604
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....ses like argon gas, hydrogen gas, nitrogen gas and also various mixtures of gases, which were excisable goods falling under Chapter 20 of the 1st Schedule of the Central Excise Tariff Act, 1985. VGL had been selling and supplying in tankers gases manufactured by them, after payment of excise duty, to the Petitioner No. 2. Vadilal Chemicals Limited. The Vadilal Chemicals Limited filled these gases in cylinders and affixed labels on the cylinders which mentioned the details like grade of gas, composition, purity of gas, etc. 3. The Director General of Central Excise (Intelligence) (for short 'DGCEI') conducted inquiries with regard to the transactions of VGL and Vadilal Chemicals Limited, and thereafter, the Joint Director, DGCEI issued a show cause notice F. No. DGCEI/AZU/36-52/2011-12, dated 8-6-2011 demanding Central Excise Duty of Rs. 23,76,942/- from VGL, on the ground that the processes of purification, grading and labelling carried out by VGL on gases like commercial hydrogen gas constituted manufacture attracting levy of excise duty. Proposals for recovering interest from VGL and also for imposing penalties on all three petitioners were made in the show cause notice. ....
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.... of receipt of notice, the Settlement Commission did not consider the replies of the petitioners. 7. The Settlement Commission passed an ex parte order on 2-3-2012 and rejected the applications filed under Section 32E(1) of the Act on the ground that the petitioners have not deposited the additional excise duty liability and interest as required by clause (d) of proviso to Section 32E(1). The Settlement Commission further held that there was no legal provision under which adjustment of the amount deposited by Vadilal Chemicals Limited could be adjusted against the pre-deposit of duty liability and interest required to be deposited by VGL. The Settlement Commission was of the opinion that since Vadilal Chemicals Limited has already filed refund claim for the amount of Rs. 15.00 lakhs, which was in deposit with the Excise Department, and the claim of refund had been rejected, against which an appeal had been filed by Vadilal Chemicals Limited, which is pending, the amount of Rs. 15 lakhs cannot be adjusted. Since the applications did not fulfil the criteria laid down under clause (d) of proviso to Section 32E(1) of the Act, therefore, all the applications were rejected under ....
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....use (d) of proviso to Section 32E(1) of the Act and had deposited the additional duty and interest, their second applications filed soon after the rejection of first applications would be maintainable. The learned counsel for the petitioner has further urged that the amount of excise duty and interest was liable to be deposited by VGL only because so far as Petitioners Nos. 2 and 3 are concerned, there was no demand of excise duty raised by the Department against them in the show cause notice dated 8-6-2011, therefore, so far as the applications of Petitioners Nos. 2 and 3 are concerned, their applications were maintainable, and the Settlement Commission committed an error in rejecting applications of Petitioners Nos. 2 and 3. He lastly urged that since fresh second applications have been filed by all the three petitioners, after complying with clause (d) of proviso to Section 32E(1) of the Act the Settlement Commission ought to have decided the same afresh and the applications were illegally returned. 11. On the other hand, Mr. Gaurang H. Bhatt appearing for respondent No. 3 and Mr. P.S. Champaneri appearing for Respondent No. 1 have urged that since clause (d) of proviso ....
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....wing production, clearance and Central Excise duty paid in the prescribed manner; (b) a show cause notice for recovery of duty issued by the Central Excise Officer has been received by the applicant; (c) the additional amount of duty accepted by the applicant in his application exceeds three lakh rupees; and (d) the applicant has paid the additional amount of excise duty accepted by him along with interest due under Section 11AB : Provided further that no application shall be entertained by the Settlement Commission under this sub-section in cases which are pending with the Appellate Tribunal or any court : Provided also that no application under this sub-section shall be made for the interpretation of the classification of excisable goods under the Central Excise Tariff Act, 1985 (5 of 1986)." 13. Clause (d) of the first proviso to sub-section (1) of Section 32E of the Act clearly lays down that no application under Section 32E(1) shall be made unless the applicant has paid the additional amount of excise duty accepted by him along with interest due under Section 11AB. Therefore, the man....
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.... application to be proceeded with, or reject the application as the case may be, and the proceedings before the Settlement Commission shall abate on the date of rejection : Provided that where no notice has been issued or no order has been passed within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded with." 15. It is not disputed by the learned counsel for the parties that the first applications of the petitioners were not maintainable in view of clause (d) of proviso to Section 32E(1) as the petitioner has not deposited the additional amount of excise duty accepted by the Petitioner No. 1 along with interest due under Section 11AB. Clause (d) of the proviso to the section, makes it clear that the application would not be maintainable or entertainable in absence of deposit of additional amount of excise duty and interest. Learned counsel for the respondents have vehemently urged that under the Act, there is no provision under which the second applications could be maintained. The applications of the petitioners have been rejected on 2-3-2012 at the threshold due to non-deposit of additional excise du....
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....at it had passed a final order is erroneous. Since the application of the petitioner was defective and was neither maintainable nor entertainable, final orders could not be passed on it as no report was called from the Commissioner. The first applications of the petitioners can only be rejected on technical ground of non-payment of the amount as provided by clause (d) of proviso to Section 32E(1) as not maintainable. The first applications filed by the petitioners could be rejected under the discretionary powers by the Settlement Commission. Sub-section (1) of Section 32F would come into play only when an application filed by the applicant before the Settlement Commission is maintainable. 16. For the sake of argument even if we assume that the Settlement Commission could decide the first applications under Section 32F(1) wherein the defect under the first proviso to sub-section (1) of Section 32E had not been removed and the one of the applicant was claiming to adjust the amount deposited by other applicant before the excise department so that he may comply with the clause (d) of the proviso to sub-section (1) of Section 32E so that he may cure the defect in his application....
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....undant and otiose. We are of the considered opinion that under Section 32F(1) only valid applications could be considered and decided according to the procedure provided in the section. But the application which are mandated by the first proviso to sub-section (1) of Section 32E that it should not to be entertained by the Settlement Commission could not be decided or rejected or declared to have abated under Section 32F(1). The notice dated 27-1-2012 though mentions that it was a notice under Section 32F(1) for proceeding with the application of the petitioners but such notice could only be issued in a valid and eligible application. And such notice cannot be issued in a defective application which was not entertainable under Section 32E(1) of the Act. 17. The second applications filed by the petitioners would not be barred by the principles of res judicata as the first applications were dismissed on technical ground of non-deposit of admitted excise duty and interest. For the applicability of bar of res judicata to the maintainability of the second applications, there must be determination of the matter in dispute in the first applications with regard to the questions rais....
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....e applicable. The second application filed by the petitioners would be barred if the first applications have been decided on merits. In absence of any decision on merits, and the first applications having been dismissed on technical ground of non-compliance of clause (d) of Section 32E(1) of the Act, the second applications after depositing of admitted additional excise duty and interest would be maintainable. 18. There is yet another reason to arrive at a conclusion that second applications before the Settlement Commission would not be barred. Section 32-O bars subsequent applications for settlement in certain cases. It lays down that in three types of cases subsequent applications are not maintainable. It is beneficial to reproduce 32-O of the Act as under : "32-O. Bar on subsequent application for settlement in certain cases. - (1) Where, (i) an order of settlement passed under sub-section (7) of Section 32F as it stood immediately before the commencement of Section 122 of the Finance Act, 2007 (22 of 2007) or sub-section (5) of Section 32F, provides for the imposition of a penalty on the person who made the application under....