Metalex Pipes Ltd. vs Commissioner Of Central Excise
2006 Latest Caselaw 99 Del

JUDGMENT

T.S. Thakur, J.

Page 387

1. Customs and Central Excise Settlement Commission has, by its order dated 31st May, 2005, dismissed the applications filed by the petitioners under Section 32F of the Central Excise Act, 1944 (for short "the Act"). Aggrieved the petitioners have filed the present petition to assail the said order.

2. The petitioner company is engaged in the manufacture of MS Pipes and is registered with the Central Excise Department. In February, 2002, the Anti Evasion Wing of the Commissionerate searched the factory premises of the company and started an investigation, culminating in the issue of a show cause notice to the company, alleging that the company had manufactured and removed without payment of the excise duty MS Pipes valued at Rs.4,01,68,590/- during the year 1999-2000, Rs.8,03,24,428/- during the year 2000-01 and Rs.6,17,99,704/- during the year 2001-02. The notice on the above basis alleged non-payment of central excise duty amounting to Rs.2,78,16,835/- for the years in question. The notice further alleged that the clearances had not been recorded in 'statutory records', and proposed to raise a demand for payment of the duty amount afore-mentioned with interest payable under Section 11AB of the Act. It also proposed to confiscate the pipes seized in the course of the investigation from the premises of M/s.Star Transport Co.and M/s.ITAC Ltd. and to impose penalties under the provisions of the Act, apart from adjusting the sum of Rs.4 lakhs deposited by the petitioner-company on 18th March, 2002 towards the duty amount.

3. On receipt of the show cause notice, petitioner No.1 company and five others filed applications under Section 32F of the Act for settlement of the dispute before the Customs and Central Excise Settlement Commission, New Delhi. In the said application, petitioner No.1 herein, admitted a duty liability of Rs.10,85,000/-. The application, inter alia, stated that the company was apart from manufacturing MS Pipes also engaged in the trading of the same. It was further stated that the show cause notice was based on data retrieved from the computer of the petitioner company, enquiries made from the buyers, information collected from the banks and the statement of Sh.Suresh Bhardwaj, the Director of petitioner No.1 company. The application alleged Page 388 that the computer entries constituting the basis of the proposed action were fudged by one of the disgruntled employees of the company. It was further canvassed that the sale figures attributed to the company included those made in the course of its trading activity which sales were not dutiable. Theft of certain books of accounts and other records such as the invoice book for the period 1999-2001, purchase bills, stock registers, sales tax forms received from the buyers was also set up by the petitioner company. It was also alleged that a complaint had been lodged by the company with the police in regard to theft of books and bungling of entries of sales and purchases in the petitioner's accounts.

4. On receipt of the above application, the Commission appears to have sought a report from the Commissioner, Central Excise, in which the Commissioner, apart from disputing the assertions made by the petitioners, denied the allegation that the production capacity of the petitioner's unit was no more than 600 MT per annum. It was alleged that the production capacity of the unit was in the neighborhood of 2231.588 MT during the year 1999-2000, 4300.343 MT during 2000-2001 and 3519.309 MT during 2001-2002. The certificate issued by one Dr.Murthy, CEA, Chair Professor of Electrical Engineering Department of IIT, Delhi , relied upon by the petitioner-company was not, according to the Commissioner, conclusive of the matter as the same had been procured one year after the date of search and seizure. The maintainability of the application before the Commission was disputed on the ground that the applicant had not come out with the full and true disclosure of the duty liability before the jurisdictional Central Excise Officer nor even indicated the manner in which such liability had been derived. The Commissioner was also of the view that the conditions relevant for the maintainability of the applications had not been satisfied in as much as the first petitioner company had not filed the returns showing production, clearance and Central Excise duty paid in the prescribed manner.

5. The Commission has upon consideration of the rival contentions urged before it dismissed the applications. It has held that since the first petitioner company had not been paying any duty, there was no question of its filing any return. The company had not even admitted its omission to pay correct duty where the same was due. It has rejected the version given by the petitioner company that the show cause notice was based even on the value of sales made in the course of trading activities of the petitioner company. The Commission disbelieved the story about disappearance of the records relating to the alleged trading activities of the company just about a week before the search by the officers of the Department. It has also referred to the report submitted by Mayapuri Police Station that no complaint regarding the alleged theft had been lodged with it by the petitioner, which report was subsequently contradicted by the very same Police Station. The Commission held that the allegation of fudging of accounts in the computer made in the said complaint was an attempt to cover up the earlier transactions of the company. The Commission also held that the filing of RT-12 returns even where not required and the continuance of trading activity from the very same Page 389 premises whether the manufacturing activity was going on sufficiently showed that the disclosure of duty liability was neither full nor true.

6. We have heard learned counsel for the parties and perused the record. Section 32-E of the Central Excise Act, 1944 inter alia provides that an assessed may at any stage of a case relating to him make an application to the Settlement Commission containing a full and true disclosure of his duty or liability which has not been disclosed before the Central Excise officer having jurisdiction and giving particulars of such excisable goods in respect of which he admits short levy on account of misclassification or otherwise. Section 32-F prescribes the procedure that the Commission has to follow, on receipt of an application under Section 32-E. The procedure prescribed inter alia requires the commission to call for a report from the jurisdictional Commissioner of Central Excise and enjoins upon the Commission to decide whether the application can be allowed to proceed having regard to the material contained in the Commissioner's report, the nature and circumstances of the case or the complexity of investigations involved therein. It is evident from a conjoint reading of provisions of Section 32-E and 32F that the Settlement Commission is empowered to reject an application inter alia on the ground that the applicant before it has not made a full and true disclosure of his duty or liability or the manner in which such duty has been derived. It is also manifest that the Settlement Commission has to formulate its opinion on the basis of the material contained in the report submitted by the Commissioner of Central Excise and the nature of the circumstances of the case. Suffice it to say that the finding which the Settlement Commission may record, as regards the full and true disclosure of the duty or liability of the applicant in the application filed before it, would be a finding of fact based on the material contained in the report submitted before it and the facts and circumstances of the case. Interference with any such finding may, therefore, be permissible only if the finding is perverse in that the conclusion of the Commission is such as no prudent person reasonably instructed in law would have arrived at. The finding ought to be in such outrageous defiance of logic that a writ court may find it difficult to countenance the same. 7. The Commission has, while rejecting the application of the petitioner in the present case noticed certain aspects which in its opinion establish non-disclosure of full and true particulars regarding the applicant's liability or the manner in which such liability has been derived. The circumstances which have weighed with the Commission in rejecting the application may be summarised as under :-

i The applicant has not filed returns showing production, clearance and central excise duty paid in the prescribed manner as required under the first proviso to Section 32E of the Act;

ii The applicant has not admitted the omission to pay the correct duty where the same was due and payable.

iii The applicant has raised the plea that the show cause notice takes the value of sales in the course of trading activities into account and treat them as indicative of the applicant's manufacturing activities.

iv The applicant has set up theft of the relevant record and fudging of its accounts by disgruntled employee only with a view to cover up its activities.

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v The applicant has continued its trading activity from the very same premises where the manufacturing activities are being carried on.

vi The allegation that data retrieved from the petitioners' computer is fudged is unacceptable.

8. None of the above circumstances can be said to be irrelevant for purposes of determining whether or not the applicant had made a full and true disclosure of its duty or liability. The Commission has disagreed with the applicant's version that the data available from its computer and used by issuing the show cause notice has been fudged by an employee of the petitioner company. It also has discarded the applicants' version that the records of the company in relation to its alleged trading activities had been stolen just a week before the visit of the officers to its premises. It has, in the totality of the attendant circumstances, concluded that the disclosure made by the applicant in the application was neither full nor true. That conclusion does not appear to us to be irrational or perverse to warrant interference in the present writ proceedings. There is nothing before us to conclusively establish that the data downloaded from the computer of the petitioner company was fudged by any disgruntled employee as alleged by the petitioner. There is nothing even to show that any employee responsible for entering the said data had any grievance against the company or was ever proceeded against. The lodging of the report regarding fudging of the data with the police is also rendered doubtful on account of contradictory reports from police station concerned, one saying that the report was not received and the other stating something contrary. The theft of the documents relating to the alleged trading activities of the petitioner company just a week before the visit of the officers is also only in the realm of an allegation unsubstantiated by any other material. The fact that the documents and accounts allegedly stolen were of no value to the thief in fact improbablises the story of theft. Suffice it to say that the Commission's conclusion that the petitioner company had not fully and truly disclosed its liability or the manner in which the same has been derived, cannot be said to be far-fetched, irrational or perverse. That being the position, the Commission could dismiss the application on that ground. In as much as it has done so, the Commission committed no error of law or jurisdiction to warrant interference.

9. This writ petition accordingly fails and is hereby dismissed but in the circumstances without any orders as to costs.