Settlement - Explanation inserted by FA, 2014 in s. 32O(1)(i) is consistent with statutory intent & a reiteration of statutory provisions in sec 32E(1), hence clarificatory - bar from filing subsequent application consequent upon penalty in earlier case was always in vogue: HC
By TIOL News Service
KOLKATA, FEB 26, 2016: THIS is a Revenue appeal against the judgment dated 26.08.2014 passed by the Single Judge.
The facts:
+ M/s. Rohit Ferro-Tech Ltd. had filed the first application for settlement on 22.08.2005. In this case, the duty evasion admitted by them was Rs.5,06,452/-. While settling this case, the applicants were granted immunity from penalty and prosecution.
+ Again in July 2010, they approached the Settlement Commission in respect of a case involving removal of 841 M.T. Ferro Chrome and Slllcon Maganese cleared without payment of Central Excise Duty. The duty in this case was settled at Rs.1,27,32,650/- along with interest payable. A penalty of Rs. 5 lakhs was also imposed on the applicant but they were granted immunity from prosecution.
+ Almost a year later, the applicant filed another application for settling another case involving removal of 85.4 MT of goods without payment of Central Excise Duty of Rs.4,16,663/-. The duty in this case was settled at Rs. 3,16,663/- along with interest and a penalty of Rs.50,000/- was imposed and immunity was granted from prosecution.
+ On 16.02.2012 M/s. Rohit Ferro-Tech Ltd. again approached the Settlement Commission for settlement of their case involving incorrect availment of Cenvat Credit amounting to Rs.30,83,857/-. This case was also settled at the admitted amount along with applicable interest. A penalty of Rs.1,50,000/- was also imposed immunity was granted from prosecution.
+ In the year 2013, they again sought settlement of their case which involvedCE duty evasion of Rs.19,80,703/-.
+ However, this time, the Settlement Commission rejected the application for settlement.
+ It was inter alia observed -
"25. In all the earlier orders passed by this bench in respect of the applicant, nowhere the applicability of the provisions of section 32-O(I)(i) has been even remotely examined, even though the fact that the applicant has been penalized by Settlement Commission, earlier is clearly noted.
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28. Four such orders have been issued by this Bench in the case of the applicant earlier. In three of these cases, penalty has been imposed on the applicant. First time, penalty was imposed on them, vide order dated 26.11.2010 and after that two more applications from them were admitted and also settled by the bench. This is in contravention of the provisions of section 32-O(1)(i) of the Central Excise Act, 1944. M/s. Rohit Ferro-Tech Ltd. stood debarred from applying to the Settlement Commission in any matter after 26.11.2010, when a penalty was imposed on them. All subsequent orders of settlement have been issued ignoring the provision of section 32-O(1)(i), which by no stretch of imagination can be treated as a precedent.
"To perpetuate an error is no heroism. To rectify it, is the compulsion of the judicial conscience"(Supreme Court in Appeal (crl.) 978 of 2004 in the matter of Nirmal Jeet Kaur - vs. - The State of Madhya Pradesh And Anr.)"
+ Against this order of rejection, the applicant had filed a Writ Petition and which was disposed of by the Single Judge by observing thus -
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"The order of the Settlement Commission does not specify whether this ( concealment of particulars of duty liability )kind of a penalty was imposed on the writ petitioner. Just because a penalty is imposed on a show-cause notice the writ petitioner's application before the Commission was not entertained.
In that view of the matter, I direct the Settlement Commission to reconsider its order dated 28th March 2014 in the light of the above observations and if it is found that the penalty has not been imposed on the writ petitioner in an application for settlement under Section 32E, on the ground of concealment of particulars of their duty liability in that application, then the Commission will proceeded to consider their case on merits."
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As mentioned, Revenue is in appeal against this order.
The Division Bench observed that the following issues require consideration -
i) Whether with the introduction of the "Explanation" to section 32-O(I)(i) there was a change in law with regard to the one time bar under the said section;
++ Respondents in this appeal had submitted that as the earlier four show cause notices were issued prior to the introduction of the "Explanation" by Finance Act (No.2) Act 2014, the bar under section 32-O(1)(i) is not applicable. The argument made on behalf of the respondent that section 32-O(1)(i) (is not applicable) cannot be accepted, if one looks at the plain language of section 32-E(1) of the Act.
++ The "Explanation" in section 32-O(1)(i) stating that "the concealment of particulars of duty liability relates to any such concealment made from the Central Excise Officer" is in aid to and evidently in consonance with the opening part of the provisions contained in section 32-E(1) which provides "An assessee may, in respect of a case relating to him, make an application, before adjudication, to the Settlement Commission to have the case settled, in such form and in such manner as may be prescribed and containing a full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer having jurisdiction,…." (Emphasis supplied). Therefore, under section 32E(1) an application for settlement can be filed before the Commission where there is a non-disclosure of duty liability before the Central Excise Officer.
++ Under section 32-O(1)(i) a person is barred from filing a subsequent application for settlement where he has suffered an order passed under section 32F(5) and therein the "Explanation" has been introduced that the concealment of particulars of duty liability "relates to any such concealment made from the Central Excise Officer". Thus, "Explanation" in 32-O(1)(i) is consistent with the statutory intent in section 32-E(1). As seen "Explanation" introduced is a reiteration of the statutory provisions in section 32E(1). Hence, the "Explanation" is clarificatory in nature . Therefore, as the bar under section 32-O(1)(i) was always in vogue, the submission in this regard on behalf of the respondent is unacceptable.
ii) Whether with the introduction of sub-section (2) to Section 32-O with effect from 1st June 2007, subsequently omitted on 8th May 2010, the concept of one time approach under section 32-O was removed?
++ The argument of the respondent, that with the introduction of sub-section 2 to section 32-O from 1st June, 2007, which was omitted on 8th May, 2010, the one time approach was removed, cannot be accepted as no earlier application for settlement "identical to the issue" was "pending" before the Commission when any of the subsequent applications were filed.
++ As and when the Commission took up the application for settlement for hearing, no "earlier application" on the "identical" issue was "pending" before it. Hence, the section 32-O(2) since deleted, does not come to the aid of the respondents herein, that is the writ petitioners.
iii) Whether in the earlier proceedings before the Settlement Commission penalty was imposed on the respondents, that is the writ petitioners, for concealment of particulars of their duty liability.
++ Under section 32-O(1)(i) the bar to file subsequent application was always in vogue, in view of the clear finding in detail by the Commission that in the previous proceedings penalty was imposed for concealment of particulars of duty liability, the argument of the respondent on this issue cannot be accepted.
The case laws cited by the respondent were held to be inapplicable to the facts of the case.
Holding that the judgment and order dated 26th August 2014 of the Single Judge cannot be sustained, the same was quashed and set aside.
The Revenue appeal was allowed.
Quick reference:
"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 section 32E for settlement, on the ground of concealment of particulars of his duty liability; or
[Explanation.- In this clause, the concealment of particulars of duty liability relates to any such concealment made from the Central Excise Officer.]
(ii) x x x ; or
(iii) x x x
then, he shall not be entitled to apply for settlement under section 32E in relation to any other matter.
[(2) * * *]
Sub-section 2 to section 32-O, inserted with effect from 1st June, 2007 and omitted with effect 8th May, 2010 read as under :-
"(2) Where an assessee has made an application under sub-section(1) of section 32E, on or after the 1st day of June, 2007 and if such application has been allowed to be proceeded with under sub-section (1) of section 32F, such assessee shall not be entitled to apply for settlement under section 32E in relation to any other matter:
Provided that such assessee shall not be prevented from filing an application for settlement if the issue in the subsequent application is, but for the period of dispute and amount, identical to the issue in respect of which the earlier application is pending before the Settlement Commission."
(See 2016-TIOL-378-HC-KOL-CX)
