MUMBAI, APRIL 30, 2013: THE Petitioner was issued a Show Cause Notice demanding central excise duty of 1.73 crores. On 10 January 2011, the Petitioner's Advocate addressed a letter to the Commissioner specifically stating that a decision had been taken to file a settlement application under Section 32E of the Central Excise Act, 1944. Together with the letter, which was received by the Commissioner on the same day, the Petitioner enclosed a copy of the GAR-7 challan reflecting the payment of the fee for filing of the settlement application. The letter indicated that the Petitioner was working out the duty liability together with interest since it was required to be paid before the filing of an application before the Settlement Commission. The letter recorded that the Petitioner would file an application for settlement of the case probably within that week itself and requested the Commissioner to keep the adjudication proceedings in abeyance, until a settlement application was filed. On 11 January 2011, the Superintendent (Adjudication) addressed a letter to the DGCEI for supply of documents relied upon in the notice to show cause to the Petitioner. The Commissioner, notwithstanding the request of the Petitioner and without waiting for the supply of documents to the Petitioner as sought, passed an order dated 13 January 2011 adjudicating upon the notice to show cause. The Petitioner filed a settlement application before the Settlement Commission on 14 January 2011. The order of adjudication was dispatched to the Petitioner on 19 January 2011.

By a majority order, two members of the Settlement Commission held that under Section 32E, an application to the Settlement Commission has to be filed by an assessee to have a case settled before adjudication. The majority held that the settlement application, which was filed on 14 January 2011, was not maintainable since the Commissioner had already adjudicated upon the notice to show cause on 13 January 2011.

The Petitioner is before the High Court against the rejection of application by the Settlement Commission.

After hearing both sides, the High Court held:

++ In the context of Section 32E, an application before the Settlement Commission cannot be filed before the receipt of a notice of the Central Excise Officer for the recovery of duty. An application can be filed before adjudication, to the Settlement Commission. An application before the Settlement Commission is not maintainable after adjudication. A purposive interpretation has to be placed on the expression “before adjudication”. An adjudication cannot be regarded as being complete merely upon the signing of an order by the adjudicating authority. If the adjudicating authority were to keep the order in his own drawer without dispatching it to the assessee the latter would have no means of knowing of the making of the order. An order of adjudication must be placed by the adjudicating authority out of his control by dispatching it to the assessee. For it is once that stage is achieved that the adjudicating authority ceases to have any locus poenitentiae . Once the authority dispatches the order, the adjudicator places it out of his control. There can be no possibility then of the adjudicating authority tearing off the order or making a different order.

++ The Commissioner, without waiting for receipt of the documents of which disclosure was sought and without paying heed to the request of the assessee proceeded to pass an order of adjudication in haste on 13 January 2011. The order was actually dispatched to the assessee on 19 January 2011 when the assessee had already moved a settlement application on 14 January 2011. The adjudicating officer put his order of adjudication out of his control by dispatching it to the assessee only after the filing of the settlement application. In these circumstances, the settlement application could not have been dismissed as being not maintainable. The view which has been taken by the majority of two members of the Settlement Commission is patently erroneous.

(See 2013-TIOL-339-HC-MUM-CX)