By TIOL News Service

NEW DELHI , SEPT 08, 2017: ALLEGING that the petitioners had not paid CE duty wilfully and knowingly on Flavoured Chewing Tobacco in accordance with the provisions of Section 3A of the CEA and the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010, a show-cause notice demanding duty of Rs.250,11,88,585/- was issued.

In the SCN, the Department stated -

"The contention of the party that they packed pouches with the help of manually operated machines (devices) and sealed separately with the aid of sealers is incorrect in as much as that machines in question are not operated with the human power, instead, those are run with the aid of electric power/pneumatic power generated with the help of a compressor run with the aid of electric power, which is a fact admitted by the concerned directors and employees of the Party in the subsequent Paras of this Show Cause Notice."

The Petitioner then approached the Settlement Commission u/s 32E of the CEA, 1944 with a prayer to admit the application and settle the SCN issued to it.

The Settlement Commission, after considering the report of the jurisdictional authorities and after hearing the parties, by the impugned order dated 3rd September, 2012, by a 2:1 majority sent the matter to the adjudicating authority and did not entertain the application of the Petitioner.

On 16th October, 2012, notice was issued by the High Court and an interim order to the following effect was passed:

"Issue notice. Notice is accepted by Mr. Mukesh Anand, Adv. for respondent No. 1 and Mr. Satish Kumar, sr. standing counsel for respondents No. 2 and 3. List on 10th December, 2012. Request is made for postponement of proceedings before the Commissioner. The same shall be considered reasonably since this Court had issued notice. Dasti under signature of the Court Master."

The matter was heard by the Delhi High Court and an order was passed recently.

After considering the submissions made by both sides and extracting the provisions of sections 32E, 32F, 32I and 32L of the CEA, 1944, the High Court inter alia observed thus -

+ It is clear that the powers of the Settlement Commission are wide and are meant to effectively settle the disputes before it.

+ Court rejects and sets aside the finding of the Settlement Commission that  "these are meant for errant tax evaders who resort to concealment of facts relating to their transactions in statutorily prescribed records. To mend their such misdemeanor, these provisions have been incorporated in the law."

+ The Settlement Commission has given a categorical finding that the question regarding the nature of the two machines remains to be decided. The question as to whether the machines are 'packing machines', according to the Settlement Commission, is a mixed question of fact and law requiring detailed enquiry and adjudication. The Settlement Commission has relied upon the judgment of the Madras High Court in Australian Food Ltd. v. Commissioner of Central Excise  =  2010-TIOL-169-HC-MAD-CX  to hold that disputed questions of fact and law ought not to be entertained by it.

+ If there is a complex question of fact or law or a mixed question requiring adjudication, then the Settlement Commission, may, depending on the facts of each case, refer the matter to the adjudicating authority, more so in a situation where it is of the opinion that a settlement is unlikely. [Union of India v. Dharampal Satyapal & Ors. = 2013-TIOL-827-HC-DEL-CX refers.]

+ The contention of the Petitioner that the Settlement Commission can reject an application and send the matter to the adjudicating authority, if and only if the applicant has not cooperated with the Settlement Commission as per Section 32L of the CEA, is incorrect.

+ The powers of the Settlement Commission to pass 'such orders as it thinks fit' in Section 32F (5) of the CEA, are so broad so as to confer the Settlement Commission with wide powers. Such orders would include the orders to refer the matter back to an adjudicating authority where the Settlement Commission feels that the dispute involves a mixed question of fact and law or that it is unable to decide the factual disputes between the parties owing to the technical nature of the disputes.

+ If in a settlement proceeding, any party refuses to cooperate with the authority, which is dealing with the dispute, it cannot expect it to proceed further. In any Alternate Dispute Resolution ('ADR') mechanism namely mediation, conciliation etc., cooperation of the parties is a pre-requisite and an essential condition.

+ In any process of settlement, it cannot be expected that the Settlement Commission would force any party into a settlement .

+ If the Settlement Commission is of the opinion, for any reason whatsoever, that the dispute is one which cannot be settled, the Settlement Commission has the absolute discretion not to waste any further time on the matter and to immediately, with utmost alacrity, refer the matter to the adjudicating authority.

+ Whenever the Settlement Commission comes to the conclusion that the dispute cannot be resolved by it, it must refer the matter to the adjudicating authority. Any other interpretation to the contrary, defeats the fundamental purpose for constitution of the Settlement Commission namely speedier resolution.

+ The minority view (of Settlement Commission) seeks to suggest that there is no dispute, while a reading of the said view itself supports the conclusion that there is a clear and unequivocal dispute between the parties.The minority view, to the effect that the Settlement Commission itself has to decide all such factual issues, even if they involve a complication, without sending the case back for adjudication, is contrary to the view of this Court in Dharampal Satyapal (Supra).

+ In any event, this Court is not to embark on deciding the correctness of the minority view for the purpose of this writ. It is the majority view which forms the impugned order.

The Writ Petition was dismissed.

(See 2017-TIOL-1790-HC-DEL-CX)