Bombay High Court
M/S. Sharda Synthetics Ltd vs Union Of India And Ors on 14 July, 2022
Bench: K.R. Sriram, Milind N. Jadhav
204. OS WP 1128- 08.doc
R.M. AMBERKAR
(Private Secretary)
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O.O.C.J.
WRIT PETITION NO. 1128 OF 2008
M/s. Sharda Synthetics Ltd
a Company incorporated under the
Companies Act, 1956, having its Registered
Office at 69/71, Dhanji Street, Ground Floor,
Mumbai 400 003 and factory at B-1/2,
MIDC, Phase-II, Dombivili (E) 421204,
Dist. Thane, Maharashtra State. .. Petitioner
Versus
1. Union of India through the Joint Secretary,
Ministry of Law, Justice and Company
Matters, Aaykar Bhawan, M.K. Marg,
Churchgate, Mumbai - 400 020.
2. The Settlement Commission,
Customs and Central Excise Additional
Bench, situated at Utpad Shulk Bhavan,
Bandra-Kurla Complex,
Bandra (E), Mumbai - 400 051
3. Commissioner of Central Excise,
Thane-I Commissionerate
having his office at 5th Floor,
Navprabhat Chambers, Ranade Road,
Dadar (W), Mumbai - 400 028. .. Respondents
....................
Mr. Vipin Jain a/w Mr. Abhishek Deodhar i/by Mr. P.K. Shetty for
Petitioner
Mr. Dhananjay B. Deshmukh for Respondents
...................
CORAM : K. R. SHRIRAM &
MILIND N. JADHAV, JJ.
DATE : JULY 14, 2022
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204. OS WP 1128- 08.doc
ORAL JUDGMENT [PER K.R. SHRIRAM, J.] :
1. Petitioner is, inter alia, engaged in manufacturing of gray
fabric and processes gray fabric falling under Chapters 54 and 55 of
Central Excise Tariff Act, 1985. Based upon certain investigation
carried out by Directorate General of Central Excise Intelligence,
Mumbai Zonal Unit ("DGCEI"), it was alleged that petitioner had
suppressed the production of processed fabric and that accordingly
there was a short payment of Central Excise duty. Petitioner submits
that it deposited sum of Rs. 54,89,101/- in the course of investigation ,
prior to issue of notice to make this short payment of duty. Pursuant
to the investigation carried out, DGCEI issued a show-cause-notice
dated 05.04.2004 demanding Central Excise duty of Rs. 69,63,995/-.
It was alleged that petitioner had failed to discharge appropriate duty
in respect of certain fabrics.
2. On receipt of the said show-cause-notice, petitioner applied
to the Settlement Commission in terms of section 32E of the Central
Excise Act, 1944 ("the Act") admitting the duty liability of Rs.
54,89,101/- as against the duty liability of Rs. 69,63,995/- demanded
in the show-cause-notice. Petitioner submitted to the Settlement
Commission that:-
(a) the notice erred in adopting a higher cost of gray fabric
in respect of Tarcosa fabric, Chiffon fabric, Lizi Bizi
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fabric and accordingly, the duty demand has been
inflated;
(b) processing charges adopted in the notice were
incorrect; and
(c) benefit of cum duty price ought to be extended to it.
3. Petitioner's application was admitted by Settlement
Commission on 01.08.2007. A final order dated 14.12.2007 came to
be passed by which the Settlement Commission held
"a) the petitioner was entitled to benefit of cum duty price and
accordingly the duty liability was being re-computed at Rs.
57,99,970/- as against which an amount of Rs.
54,89,101/- had already been deposited by the petitioner
which was appropriated towards the same and the balance
was to be paid within 30 days. Interest was to be paid at
the rate of 10% per annum from the date when the duty
was due till the same was paid;
b) since the petitioner had fully co-operated and had paid the
admitted duty liability, immunity from penalty in excess of
Rs.10 lakhs was granted;
c) fine of Rs.10,000/- was imposed and immunity from
prosecution was granted under the Central Excise Act,
1944."
4. On 14.01.2008, a corrigendum to the final order was issued
by which certain typographical errors in calculation of the assessable
value and corresponding duty liability were suo motto rectified and
the final duty liability was worked out to Rs. 57,49,970/-. Petitioner
complied with the directions of the State Government by paying the
differential duty and interest.
5. Though various grounds have been raised, Mr. Jain
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submitted that petitioner is restricting its case only to the extent of the
penalty of Rs. Ten Lakhs imposed on petitioner. Mr. Jain submitted
that in the order, the Settlement Commission has accepted that
petitioner had fully co-operated in spirit of settlement and paid the
entire admitted duty liability. Mr. Jain submitted that the Settlement
Commission has also observed that the applicant's case for cum duty
benefit was well founded and applicant had made full and true
disclosure of its duty liability and the amount has also been deposited.
Mr. Jain submitted that there is only one sentence in the penalty
portion of the impugned order where the Settlement Commission
simply says "Bench grants immunity from penalty to the applicant in
excess of Rs. 10,00,000/- (Ten lakhs only)". Mr. Jain states there is no
reason given as to why even this penalty of Rs. Ten Lakhs should have
been imposed or that it could not have been zero or One Lakh or Five
Lakhs or even Twenty Lakhs. Mr. Jain submitted that under section
32K of the Act, the Settlement Commission, if it is satisfied that any
person who made the application for settlement has co-operated with
the Settlement Commission in the proceedings before it and has made
a full and true disclosure of its duty liability, has powers to grant such
person immunity from prosecution for any offence under the Act and
also either wholly or in part from the imposition of any penalty and
fine under the Act with respect to the case covered by settlement. If
the Settlement Commission decides not to grant immunity wholly
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from the imposition of any penalty, at least some, if not elaborate,
reason should have been given in the order, when admittedly the party
has fully co-operated and which has also been appreciated by the
Settlement Commission. The Settlement Commission should not have
been imposed any penalty. Mr. Jain also submitted that in the
impugned order, Settlement Commission states that petitioner had
given a detailed justification for reduction in duty liability and the
revenue had not rebutted. It was further submitted that petitioner
had in fact admitted duty liability of Rs. 54,89,101/- which has been
paid against the demand of Rs. 69,69,995/- and the Settlement
Commission finally arrived at a figure of Rs. 57,49,970/- as the duty
liability, a difference of less than Rs. Three Lakhs. Mr. Jain submitted
that, therefore, the order of Settlement Commission, to the extent of
penalty, should be interfered with by this Court under Article 226 of
the Constitution of India. Mr. Jain also tendered a compilation of
about seven orders passed by the Settlement Commission, where
penalty has not been imposed at all and party was granted immunity
from penalty in cases where party has co-operated with the
Commission in the proceedings and has made a full and firm
disclosure of the duty liability. Mr. Jain also tendered an order passed
by the Settlement Commission where penalty has been imposed but
the Commission has given elaborate reasons for that.
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6. Mr. Deshmukh submitted :-
(a) that the High Court is not a court of appeal against the
order of Settlement Commission and hence, it is
permitted only to examine the legality of the procedure
and not validity of the order of Settlement Commission;
(b) that petitioner cannot be permitted to accept what is
favourable and reject what is not;
(c) that since it was more in the nature of administrative
order, detailed reasons are not required to be assigned
by the Settlement Commission in all cases, in all
circumstances.
7. Having heard the learned counsel, even though we may
agree with submission that this court is not court of appeal but this
court in its jurisdiction under Article 226 is entitled to consider
whether the Authority has exercised its discretion correctly. Whether
to impose penalty and to what extent is purely discretionary order and
we would not in normal circumstances, interfere with such
discretionary order. It is true that a party will approach a Settlement
Commission and has to either accept the opinion of the Settlement
Commission in its entirety or not accept but when the Settlement
Commission has exercised its discretion to impose penalty of Rs.
10,00,000/-, we would have expected the Settlement Commission to
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at least give some reasons, if not, very elaborate detailed reasons to
indicate why it had imposed penalty of Rs. 10,00,000/-. This is
particularly in view of the fact that the Settlement Commission has,
in the impugned order, appreciated the conduct of petitioner and held
that petitioner's claim for duty benefit was well founded and petitioner
had made full and true disclosure of its duty liability, that petitioner
has already deposited the admitted amount and co-operated with the
Settlement Commission in the proceedings before it. The Settlement
Commission has also concluded that petitioner was entitled to cum
duty benefit and settled the case at Rs. 57,49,970/- as against the
demand made by the department of Rs. 69,63,995/- and it was
petitioner's case that only Rs. 54,89,101/- was payable and the
petitioner had already deposited that amount. With such a
background simply saying "Bench grants immunity from penalty to
the applicant in excess of Rs. 10,00,000/- (Ten lakhs only)", in our
opinion, will not suffice. We also note that the Apex Court in the case
of State of Punjab Vs. Bhag Singh1 has held that where the decisions
are taken by Settlement Commission and in some cases complete
waiver from the payment of penalty has been granted and in some
cases even the waiver of interest has also been granted, some specific
reason should be assigned for not waiving the entire penalty. Right to
reason, in our view, is an indispensable part of sound judicial system.
1 2004 (164) ELT 137 (S.C.)
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Reasons, at least sufficient to indicate an application of mind or the
rationale in imposing penalty, should be given in the order. It is also
not the case of respondents that petitioner was a habitual offender.
8. In the circumstances, we would interfere with the impugned
order passed by the Settlement Commission to the extent of imposing
the penalty of Rs. 10,00,000/-.
9. Rule, therefore, made absolute and the petition disposed
accordingly.
10. Admittedly, rule was issued on 17.07.2008 and petitioner
was granted ad-interim relief subject to the condition of furnishing
bank guarantee in the amount of Rs. 10,00,000/- to the satisfaction of
respondent No. 3. Mr. Jain states that the bank guarantee has been
given which is alive even today. The bank guarantee should be
cancelled and returned within four weeks on receiving request to that
effect from petitioner.
11. In the order dated 17.07.2008, there is a reference to
another Central Excise Appeal No. 168 of 2005 which counsel states is
an erroneous reference. The counsel as well as court master state
that the High Court website does not indicate pendency of any such
Central Excise Appeal.
[ MILIND N. JADHAV, J. ] [ K. R. SHRIRAM, J.]
Digitally signed
by RAVINDRA
RAVINDRA MOHAN
AMBERKAR
MOHAN Date:
AMBERKAR 2022.07.16
13:08:04
+0530
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