TaxTMI 
TaxTMI 
2005 (6) TMI 546
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....ting to Rs. 16,52,725/-, which the applicant accepted as payable though simultaneously praying for adjustment of the net duty amount granting deduction from the demanded amount, Rs. 2,27,962/- by way of deeming their price as cum-duty price and extending permissible deduction therefrom to re-determine correct assessable value and a further deduction of Rs. 2,18,876/- on account of Modvat credit. As such, the applicant prayed for settlement of the case accepting the duty liability as Rs. 12,05,887/-. The application was heard for admission by the Additional Bench, Mumbai on 25-11-2004. (b) The issue involved in the case was that the noticee M/s. Branson Ultrasonics [Division of M/s. Emerson Electric Company (India) Pvt. Ltd.], were engaged in the activities of trading of 'Ultrasonic Plastic Welding and Cleaning Machines' as well as manufacturing of ''Horns of Fixtures" made out of Aluminium Titanium materials. They affixed the brand name 'BRANSON' on the Horns. They were active since 1996-97 and cleared the branded goods without following Central Excise procedure and without paying the Central Excise duty. They were also not registered with Central Excise ....
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....said exempted final product was not exempt from payment of duty. In the said case, application was filed on 13-2-2002 and after filing the application for settlement, ER-1 return was filed on 19-3-2002 for the period October, 2000 to March, 2001. They cited the following case laws reg. Kullu Valley Transport reported in 77 ITR 518, passed by the Hon'ble Supreme Court : State of Andhra Pradesh v. Donthala Rajaiah reported in (1960) 11 STC 819 (AP). They also quoted the Circular No. 2/93-CX.6, dated 15-1-1993 issued by the Central Board of Excise & Customs permitting submission of belated return in cases of evasion by bulk drug manufacturers in order to substantiate that filing of return belatedly is also to be treated as return filed. It was observed in that case that in the said return, which was not accepted by Revenue for the reason that the applicant was not registered with Central Excise, the applicant had declared certain amount of duty as payable but in the application for settlement did not declare anything more, and hence they did not fulfil one of the conditions enabling an assessee to seek settlement. The application was rejected. 2.2 In the case of M/s. Bharat In....
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....t 'if a person has filed returns for a certain period, there is no inhibition to come to the conclusion that the applicant has fulfilled the proviso to Section 32E(1) of the Act.' (emphasis supplied). 2.4 The case of M/s. FabIndia Overseas, Delhi/Bangalore/Mumbai, manufacturer of garments from handloom fabrics and exporter, was also admitted under Admission Order A-127 to 129/CE/03-SC(PB), dated 14-7-2003. In the case, the applicants pleaded that since C.E. duty was imposed w.e.f. 1-5-2001, the applicant took some time to understand the implications of the levy and before they could develop/install appropriate accounting systems for all its shops located at different places, their premises were raided and show cause notices were issued. 2.5 Another similar case was of M/s. Search Pharma Pvt. Ltd., Gurgaon & Anr., engaged in manufacture of Ayurvedic Medicine, some of which were affixed with brand names belonging to other persons. The main applicant was not registered with the C.E. department. It was pleaded in that case that they were under the bona fide belief that being a SSI unit, they were not required to pay C.E. duty nor were they required to take even the regi....
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....that the applicant has not disclosed the fact of manufacturing and clearing the goods affixing the brand name of other persons and thereby becoming ineligible to avail the benefit of SSI exemption as per para 4 of both the notifications namely 8/2001-C.E., dt. 1-3-2001 and 8/2002-C.E., dt. 1-3-2002." 3.0 The Chairman, Customs and Central Excise Settlement Commission, New Delhi in his reference F. No. C-18/Tech/02-SC(PB), dated 12-1-2005 constituted a Special Bench under sub-section (7) of Section 32A of Central Excise Act, 1944, read with Section 127N of the Customs Act, 1962 (hereinafter referred to as the Act in this order) comprising (1) Shri K.P. Sridhara Raman, Chairman, Customs & Central Excise Settlement Commission, New Delhi - Presiding Officer; (2) Shri M.V.S. Prasad, Vice-Chairman, CCESC, Chennai - Member; (3) Shri R. Mukhopadhyay, Member, CCESC, Kolkata - Member; (4) Shri V.K. Sharma, Vice-Chairman, CCESC, Mumbai; - Member; and (5) Shri B.N. Das, Member, CCESC. Mumbai - Member. 4.0 The following issues were referred to the Special Bench for decision : (a) Whether the yearly 'declaration' filed by a small scale manufacturer can b....
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....that the first condition of filing return showing production, clearance and Central Excise duty paid, is that the applicant must not be someone who has totally stayed away from the Revenue with the presumable intent of evading duty on its manufacture. Thus an applicant who has not at all disclosed his existence to the Revenue would no doubt be ineligible to invoke the assistance of this Hon'ble Commission. However, it is submitted that a person who has filed the annual declaration and disclosed his existence to the Revenue as also all the relevant particulars such as location of the factory, nature of goods manufactured, estimated clearance for the current year, and value of past clearances cannot be placed on the same footing as someone who has totally failed to disclose his existence and thereby escaped the liability to pay duty. It is submitted that when the law itself has provided that a person who opts for SSI exemption may file such a declaration annually, it must not be converted into a disability for approaching this Hon'ble Commission for settling the dispute. It is therefore submitted that the yearly declaration filed by SSI who are under total exemption is liable to be t....
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....2 above and in this para is marginal. In a case arising under para 2 above, even at the time of making the application to this Hon'ble Commission, the applicant would not have obtained registration or obtained the ECC. In contradistinction, in a case arising under this para, at the time of filing consolidated return, the applicant has already obtained registration and ECC Code. Hence, it is submitted that the fact that he has obtained registration and ECC and has also disclosed all the past affairs by filing consolidated return, must be treated as bona fide act without any trace of malice. This would be in keeping with the spirit of settlement and making of full and true disclosure. [IV] A case where one Division of a company or firm discloses its affairs and another Division does not do so. It is submitted that under Section 6 of the C.E. Act '44, as well as under erstwhile Rule 174 of the C.E. Rules, 1944 as also Rule 9 of the C.E. Rules, 2002, the assessable entity under the Central Excise Act is either a 'factory' as defined under Section 2(e) of the said Act or a 'warehouse', or the place of 'registered dealer'. The term 'assessee' as defined in Rule 2(c) of the C.....
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....r been considered to be sufficient to confer the legal personality on such units and branches." [V] The reason for introduction of the requirement of filing a return before approaching the Settlement Commission under the Income-tax Act. Prior to 1987, filing of return was not a requirement for approaching Settlement Commission, in terms of proviso to Section 245C of the Income-tax Act, 1961. Therefore, a person who has been previously assessed under the Income-tax Act, 1961 would approach Settlement Commission without filing return for the previous year in dispute. Hon'ble Kerala High Court had held in the case Re : Thoppil Kutty Eroor v. CIT 1958 (34) ITR 850 (Ker.), that penalty for concealment of income cannot be imposed under Section 271(1)(c) of the Income-tax Act, 1961 or corresponding provision thereof in Income-tax Act, 1922 or other similar Acts, when the assessee had not furnished a return of income relevant for the previous year. Therefore, even if the Settlement Commission came to a finding that the assessee had concealed particulars of income and the Settlement Commission is desirous of imposing penalty, the Settlement Commission was not empowered to ....
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....Oxford English Dictionary' is as under - 'Declaration' - A formal or explicit statement or an announcement. 'Return' - An official report or statement submitted in response to formal demand. Plain reading of the above indicates that these two words have different meaning and are different from each other. Besides, the 'declaration' is required to be filed under erstwhile Rule 174 of C.E. Rules, 1944 and 'return' is required to be submitted under erstwhile Rule 53 of the C.E. Rules, 1944/and Rule 12 of the C.E. Rules, 2002. Since the provision of Section 35E(1) of C.E. Act '44 speaks of the word 'return', and not 'declaration', declaration filed under the earlier Rule 174 of the C.E. Rules, 1944 cannot be treated as 'return' for the purpose of Section 35E(1). (2) No. As per the provisions of Rule 12 of the C.E. Rules, 2002 a 'return' is required to be filed by an 'assessee'. The word 'assessee' is defined u....
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.....E. Act '44 reads as 'the applicant has filed returns showing production, clearance and Central Excise duty paid in the prescribed manner' (emphasis supplied). The phrase 'filed returns' was substituted for the phrase 'filed monthly returns' w.e.f. 12-5-2000 by virtue of Section 106 of the Finance Act, 2000. (ii) Before arriving at any conclusion the relevant provisions of Income-tax Act, 1961, Customs Act, 1962 and the Central Excise Act, 1944 have to be examined and compared....................................................... Clause (a) to 1st proviso to Section 127B of the Customs Act, 1962, which reads as 'the applicant has filed a Bill of Entry, or a shipping bill ....' (iii) Though on a plain reading the provisions look similar, a careful analysis of the instances wherein the applicants approach the Hon'ble Settlement Commission, would throw more light on how to interpret the provisions and to give effect while dealing with cases. (iv) Under the Customs Law there are different types of importers/exporters. They may be one time individual importer/e....
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....that in certain circumstances an assessee shall file a quarter return. Rule 2(a) of C.E. Rules, 2002 defines 'assessee' as any person who is liable for payment of duty assessed or a producer or manufacturer of excisable goods or a registered person of a private warehouse in which excisable goods are stored and includes an authorised agent of such person" (emphasis supplied). However units producing goods which are not excisable goods which are wholly exempt from excise duty, neither get themselves registered with the department nor there be any need to file a declaration. Such units who do not manufacture excisable goods do not fall within the ambit of the definition of 'assessee'. It has also been held in number of cases by CESTAT and High Courts that if a declaration is filed with the department suppression of fact/extended time limit u/s 11A could not be invoked. (viii) From the above it is evident that filing of bill of Entry/Shipping Bill is mandatory under the Customs Act. Similarly filing of a return, which has to be filed as per the provisions of the Income-tax Act is mandatory under the said Act. The provis....
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.... returns for the purpose of considering and admitting an application before the Commission. 4. Notfn. No. 35/2001 C.E. (N.T.), dated 26-6-2001 issued under Rule 9 of CER, 2002 stipulates that if a person has more than one premises requiring registration, separate registration certificate shall be obtained for each of such premises (except for relaxation in as far as textile units are concerned). Further the Central Excise law recognises each unit in a jurisdiction as a separate 'assessee' for the purpose of the Act and is under the control of the concerned jurisdictional Central Excise officers. Hence, if the provisions are interpreted strictly the other division which neither files returns nor pays duty, shall not be deemed to have complied with Sec. 32E as in such case, the law does not exempt such division either from taking out Registration or filing of returns as in other cases stated earlier. However there will be an anomaly, if for the same company the case is settled in a different jurisdiction and for the other jurisdiction the company has to go through the process of normal adjudication. There is every possibility that the grounds....
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....e that when the words of the statute are precise and unambiguous no more is necessary than to expound those words in their natural and ordinary sense, the words themselves in such case best declaring the intention of the legislature. Kindly see 1983 (13) E.L.T. 1337 (S.C.) = AIR 1961 SC 1549 at 1551 (Para- 4) Collector of Customs v. Digvijay Sinhji. The language of the first proviso to Section 32E(1) of the Act is precise and unambiguous. That plain language must therefore be given effect to. (iv) It is a settled law that where the words of a statute are clear and there is no room for applying any principles of interpretation which are merely presumptuous in cases of ambiguity in statute, the Court must interpret statute as it stands. The object and purpose of the statute must be gathered from the words themselves. Kindly see 1993 (66) E.L.T. 379 (S.C.) = AIR 1993 SC 2288 - M/s. Oswal Agro Mills Limited v. Collector of C. E. As the language of Section 32E is clear, there is no room to impor....
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....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)". 10.1 As per the above provision, one of the entry conditions, subject to which alone an application can be made before the Settlement Commission, is that the applicant had filed 'returns' showing production clearance and Central Excise Duty paid in the prescribed manner. The questions posed for consideration and decision by the Special Bench revoke around the maintainability of settlement applications from applicants who, as small scale manufacturers, had not filed such 'returns', either bona fidely or otherwise. 10.2 Section 32E itself does not define the 'returns' envisaged to have been filed by the applicant, though the aforesaid Clause (a) of the first proviso to Sec. 32E(1) describes what the said 'returns' should have contained/reflected. During the hearing before the Special Bench, a reference has been drawn to the ph....
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.........goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (V of 1986) has been subject to a duty of excise and includes salt." Further, though under Rule 9 of the Central Excise Rules, 2002 every person who manufactured excisable goods shall be registered with the Central Excise Department and under sub-rule (2) of the said Rules, Government has issued Notification 36/200l-C.E. (N.T.), dated 26-6-2001 as amended, providing that those persons manufacturing goods which are chargeable to nil rate of duty or remain fully exempt from the whole of the duty leviable thereon are exempt from the requirement of registration under the aforesaid Rule 9, subject to the conditions mentioned in the said Notification, one of which is that the manufacturer has to file a 'declaration' while claiming exemption from registration under the said Notification. But in case the goods manufactured by him are exempted based on the value of clearances in a financial year, such a declaration shall not be required if the aggregate value of such clearances is less than the full exemption limit minus Rs. 10 lakhs. Therefore, a small scale manufacturer, who avails va....
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....ally within the 'specified value of clearances' (i.e. totally exempted value of clearances minus Rs. 10 lakhs), and, therefore, from filing 'return' also even on quarterly basis (quarterly return is intended for SSI units availing partial exemption). The question before the Special Bench relates to the maintainability of applications from such bona fide or self-proclaimed small manufacturers who had availed total exemption based on value of clearances, but Revenue made out a case that their clearances had exceeded the said value, requiring them to pay duty. 10.6 One of the frequent refrains on the maintainability of an application is that a court should stretch its jurisdiction to enable as many applicants as possible to enter its portal. Plea is made for interpreting the settlement provisions as liberally as possible, ostensibly, in tune with the spirit of settlement, by going behind the intention for such conditions. This plea itself is born out of the contention that, the main object of the Settlement Commission is to resolve disputes and expedite collection of duty. To advance this contention, reliance is also placed of the judicial pronouncement that Section 245C of th....
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....t been without its share of detractors. It was observed by Justice Krishna Ayer in the case of Commissioner of Income Tax v. B.N. Bhattacharyjee that "It is based on the debatable policy, fraught with dubious potentialities in the context of the third world conditions of political peculium and bureaucratic abatement that composition and collection of public revenue from tycoons is better than prosecution of the tax related crimes on litigation for total revenue recovery. However, as a creature under the law the Commission is not to go into the merits of, or the needs for, Settlement Commission but as only to implement the laws as in existence." The above contents of the judgment in the case of Income Tax v. B.N. Bhattacharyjee is recalled and referred only to disassociate any notion that the Settlement Commission which is a body to resolve disputes and encourage compliance should go any far to admit all and sundry applications to promote revenue collection. 10.9 It is also worth noticing that the Hon'ble Madras High Court had observed in the case of SPAM Krishnan Chetia and Sons v. Income Tax Settlement Commission [1993 (202) ITR 81-MAD] that "The remedy under Section 245C ....
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.... can be entertained by the Commission for settlement. The Madras High Court in the aforesaid case of SPAM Krishnan Chetia and Sons v. Income Tax Settlement Commission has very specifically observed that ".......if an assessee want to avail of that remedy he has to necessarily fulfil the conditions prescribed as on the date on which the applications is made and as the section is the machinery section indicating the procedure to be followed, the appellant has to fulfil the requirements of Section 245C." This ratio has been upheld by the Apex Court also in the case of Express Newspaper. 10.12 As for the claim that the Settlement law would not have intended to keep out permanently small scale manufacturers who do not have to file returns, the Bench observes that even when the settlement provisions were introduced into the Central Excise Act in the year 1998, the exemption from registration subject to filing of declaration and consequent exemption from filing of return of production by small scale manufacturers availing total exemption based on value of clearances was already available in the statute. Therefore, one cannot ignore the fact that in spite of these provisions applic....
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.... of Entry filed in the case of imported goods. Under the self-removal procedure scheme, in terms of Rule 6 of the Central Excise Rules, 2002, the assessee himself assesses the duty payable on the excisable goods cleared, on the ER1 return to be filed under Rule 12 of the said Rules. Column 7 of the said ER1 return provides for "Self assessment memorandum". Therefore, the said return contains disclosure of duty liability by an excise assessee, and hence the basis of assessment. If he is to approach the Commission for settlement, he has to make additional disclosure in the settlement application, over and above the disclosure referred to supra. In addition, just as the Bill of Entry is a mandatory document under the settlement provisions of Customs Act the 'returns' are also mandatory on excise front under otherwise exempt and cannot be ignored. 10.14 The Bench observes that in the case of small scale manufacturer availing total exemption based on the value of clearances, the format of the declaration to be filed is also prescribed by Notification No. 36 of 2001-C.E. (N.T.), 26-6-200l. The said format provides, inter alia, for value/quantity of goods cleared during the previo....
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....to be a compliance with settlement application requirement. It has only disposed off the petition on the basis of the submissions without any specific direction or finding. 11. Order In the light of the above discussions and general views, and the statutory provisions, as a whole relating to the scheme of settlement, the Bench would answer the questions posed before it as under: (a) Whether the yearly 'declaration' filed, by a small scale manufacturer can be treated as a 'return' under Sec. 32E(1) of the Central Excise Act. Answer : Yes. As discussed supra. A return of production, clearance and duty paid in the prescribed manner, is a statutory requirement. In the absence of a specific reference in Section 32E to ER1/ER3 i.e. monthly/quarterly returns prescribed under Rule 12 of the Central Excise Rules, since the 'declaration' filed by a small scale manufacturer also contains the basic particulars of estimated production and clearances though not the duty paid, as the product is totally exempt, and keeps the Department aware of the bona fide existence of the applicant, the yearly dec....
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....disclosure in the application form, as the said ad hoc disclosure would not be truthful at that stage. As a result, a consolidated return filed just before filing the application or along with the application by a person, not registered with Central Excise and not having ECC Code Number, cannot be considered as satisfying the requirement of having filed returns as laid down in Clause (a) of the first proviso to Section 32E(1) of the Central Excise Act, 1944. (c) Can returns filed after obtaining ECC Code, but for the period prior to obtaining such Code Number, be treated as valid returns as per Sec. 32E(1) of the Central Excise Act, 1944. Answer : No. The reply furnished to question (b) applies in toto to this also. The only difference in the instant question is that in the earlier point, reference was to the consolidated returns filed without obtaining ECC Code, whereas the present question is on the returns (without reference to consolidated or otherwise) filed after getting ECC Number. In this case also, the applicant would not be able to indicate 'duty paid' in the prescribed manner (or even....