By TIOL News Service

NEW DELHI, MAY 31, 2016: FACTS

Pursuant to a search,some books and registers were seized from the premises of one Mr. Pawan Goel on 22nd December, 2010 and his statement was recorded. The Petitioners premises were also searched on 19th January, 2011. This resulted in a SC Non 8th July, 2011 raising a demand of Rs.6,24,88,396/- towards Cenvat credit wrongly availed by the Petitioner.

Sometime thereafter, on 21st October, 2011, the Income Tax Department (ITD) also undertook a search in the premises of the Petitioner and seized a diary stated to have been maintained by Mr. Rajeev Rai, an employee of the Petitioner.

On 27th June, 2013, the Petitioner filed an application before the Settlement Commission u/s 32E(1) of the CE Act. In this application, the Petitioner accepted a duty liability of Rs.1,97,69,622/- and interest of Rs.96,01,968/-. It is stated that the documents seized by the ITD were enclosed with this application. It was also contended that the figures contained in the diary maintained by MrRai should form the basis of the settlement.

On 5th August, 2013, the Department filed its report u/s 32F(3) of the CEA raising a preliminary objection that the documents seized by the Income Tax Department were not brought to its notice by the Petitioner during the course of investigation.

Meanwhile, the Petitioner also approached the Income Tax Settlement Commission (ITSC) u/s 245C of the Income Tax Act, 1961 and the materials before the ITSC included the diaries maintained by Mr. Rai, which had been seized.

By an order dated 7th April, 2014, the ITSC allowed the application for settlement to be proceeded with under Section 245D(1) of the IT Act.

Subsequently, the Petitioner brought on record before the CCESC the aforementioned order passed by the ITSC.

On 9th June, 2014, the CCESC passed a final order rejecting the first application of the Petitioner and sending the matter back to the adjudicating authority in terms of Section 32F(5) of the Act.

Noting that the diary maintained by Mr. Rai was not produced before the Department during investigation and the existence of such diary had been brought to the notice of the CCESC only at the stage of hearing, the Bench opined that since there was no meeting ground between the Petitioner and the stand of the Department, the matter should be "better settled through adjudication".

Another application for settlement came to be filed before the CCESC on 27th June, 2014, this time declaring a sum of Rs.2,59,05,014/- towards Cenvat credit wrongly claimed and interest of Rs.1,19,30,190.41/-. The stand of the Petitioner was that the entries in the diary of Mr. Rai represented an accurate and comprehensive enumeration of the transactions undertaken by it.

In its report dated 7th August, 2014, the department reiterated its objections raised to the first application. It again contended that since Mr. Rai's diary had not been brought to the notice of the Department during investigation, it could not be relied upon by the Petitioner.

On 3rd September, 2014, the CCESC passed the final order rejecting the Petitioner's second application observing therein that there was no occasion to revisit the earlier order dated 9th June, 2014 remanding the matter to the adjudicating authority.

A rectification of mistake application was filed on 23rd December, 2014 (as regards the observation that the diary of Mr. Rai was not before the CCESC) with a further application on 1st June, 2015.

By order dated 15th December, 2015, the CCESC dismissed the Petitioner's application but corrected the sentence in its order dated 3rd September, 2014 to remove the words to the effect that Mr. Rai's diary was not on the record of the CCESC.

Writ Proceedings:

In the Writ Petition filed before the Delhi High Court against the order(s) of Settlement Commission, the Petitioner referred to Section 32F of the CE Act as well as Section 32L thereof and submitted that none of the grounds on which the application could be rejected by the CCESC exist in the present case. Relying on the decisions in SSF Plastics India Pvt. Ltd. -2015-TIOL-1761-HC-MUM-CX and Cineyug Worldwide v. Union of India -2016-TIOL-159-HC-MUM-ST , the petitioner submitted that they having made a full and true disclosure of all facts in its application and with none of the grounds in Section 32Lof CE Act being attracted, the CCESC could not have sent back the matter to the adjudicating authority only because there was no consensus between the Petitioner on the one hand and the Department on the other; the order of the ITSC ought to be taken into consideration by the CCESC.

The counsel for the department supported the order of the CCESC.

The High Court observed -

++ None of the provisions in Chapter V of the CE Act dealing with the 'settlement of cases' envisages the CCESC sending the matter for adjudication to the Central Excise Officer because of the differences between the applicant on the one hand and the Department on the other. In other words unless the applicant before it has not stated the true and full particulars or fails to cooperate with it, the CCESC cannot decline to examine the application on the ground that there is difference between the applicant and the Department on an issue arising from the application.

++ There is no finding in the impugned order of the CCESC that the Petitioner before it failed to cooperate with the CCESC. Although Section 32M of the CE Act states that the order the CCESC would be conclusive, judicial review of the said order in a petition under Article 226 of the Constitution of India is permissible.

++ In the present case, the Court finds that both in the order dated 9th June, 2014, rejecting the first application and the subsequent order dated 3rd September, 2014, rejecting the second application, the CCESC has proceeded on two wrong premises. One was that the diary of Mr. Rai was not before it. However, this error was rectified by it by the order dated 16th November, 2015. The second error was in concluding that since the Department and the Assessee were not ad idem on certain factual details, the matter should be sent back for adjudication before the concerned Excise Officer. The CCESC failed to appreciate that the grounds on which the application can be rejected are restricted to those set out in Section 32-F (1) and Section 32-L of the CE Act.

The High Court set aside the impugned orders dated 9th June, 2014 and dated 3rd September, 2014 passed by the CCESC.

The second application for settlement was restored to the file of the CCESC for decision afresh.

The High Court also directed the CCESC to take into consideration the fact that the ITSC had allowed the application filed by the Assessee.

The Writ petition was disposed of.

(See 2016-TIOL-1037-HC-DEL-CX)