By TIOL News Service

AHMEDABAD, July 08, 2014: THE genesis of Settlement lies in the Wanchoo Committee report presented on 24th December, 1971 and the essence of which is as under -

This however does not mean that the door for compromise with an errant taxpayer should forever remain closed. In the administration of fiscal laws, whose primary objective is to raise revenue, there has to be some room for compromise and settlement. A rigid attitude would not only inhibit a one time tax-evader or an unintending defaulter from making a clean breast of his affairs, but would also unnecessarily strain the investigation resources of the Department in cases of doubtful benefit to revenue while needlessly proliferating litigation and holding up collections. We would therefore, suggest that there should be a provision in law for a settlement with a taxpayer at any stage of the proceedings.

As per the Ministry website, the basic objective of setting up of the Settlement Commission is to expedite payments of Customs & Excise duties involved in disputes by avoiding costly and time consuming litigation process and to give an opportunity to tax payers to come clean who may have evaded payment of duty.

However, if a taxpayer does not co-operate with the Settlement Commission in the proceedings before it, the Bench in terms of s.32L of the CEA, 1944 can send the case back to the Central Excise officer having jurisdiction who shall thereupon dispose of the case in accordance with the provisions of this Act as if no application under section 32E had been made. It is also mentioned that the CE Officer shall be entitled to use all the materials and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it as if such materials, information, inquiry and evidence had been produced before such Central Excise Officer or held or recorded by him in the course of the proceedings before him.

In the present case, the assessee in their application for Settlement had admitted the charges as per the SCN (of clandestine manufacture & removal) and accepted the duty liability of Rs.1,79,62,981/- after seeking cum-duty benefits.

Finding that the applicant was not co-operating in the proceedings, the Settlement Commission sent the case back to the CE officer.

And the CE officer adjudicated the case by confirming the duty demand.

Aggrieved, the assessee took the matter to the CESTAT and the Bench held that the Revenue has failed to establish clandestine clearance of the goods by the assessee.

Thoroughly disappointed with this order, the Commissioner is before the Gujarat High Court with the following proposed question of law -

++ Whether in the facts and circumstances of the case, the Ld. Tribunal is justified in the eye of law, in holding that the revenue has failed to establish the clandestine clearance of the goods by the assessee - respondent, inspite of it being admitted in its Settlement Application dtd. 10-01-2006 under Section 32E(1) of the Central Excise Act, 1944, before theLd. Settlement Commission?
This question was answered against the Revenue by observing as under -

++ Once the application or proceedings before the Settlement Commission fails, the Central Excise Officer is required to adjudicate the entire proceedings and show cause notice.

++ Whatever is admitted by the assessee while submitting the application before the Settlement Commission submitted under Section 32E(1) of the Act straightway cannot be said to be admission on behalf of the assessee accepting the liability.

++ Whatever material is produced along with the application and/or any material and/or other information produced by the assessee before the Settlement Commission or the result of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it can be used by the adjudicating authority as if such materials, information, inquiry and evidence has been produced before such Central Excise Officer, while adjudicating the show cause notice and the proceedings.

++ If the contention on behalf of the appellant Revenue is accepted, in that case, there is no question of further adjudication by the Central Excise Officer with respect to the amount admitted by the assessee while submitting the application before the Settlement Commission submitted under Section 32E(1) of the Act.

Accordingly, the Tax appeal to the above extent was dismissed.

Nonetheless, the other Tax appeals were admitted to consider the following substantial questions of law -

1. Whether in the facts and circumstances of the case, the Ld. Tribunal is justified in the eye of law, in holding that the statements of ShriBabubhai S. Patel and ShriRajeshbhai A. Patel, were retracted and cannot be relied upon, through their statements dtd. 23-07-2004 and 18-05-2005 respectively, were never retracted, and also corroborated by other independent piece of evidence gathered during the investigation, regarding the clandestine clearance of the goods by the assessee - respondent?

2. Whether in the facts and circumstances of the case, the said assessee - respondent is entitled to the benefit of cum - duty price in case the demand is held to be sustainable in the eye of law?

3. Whether in the facts and circumstances of the case, the penalty may be imposable under Section 11AC of the Central Excise Act, 1944, as well as, the interest under Section 11AB of the said Act, in case the demand is held to be sustainable in the eye of law?”

We will keep you posted.

(See 2014-TIOL-1090-HC-AHM-CE)