Delhi High Court
Anuj Rana vs Union Of India & Anr. on 18 September, 2017
$~30 & 31
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 2047/2017
ANUJ RANA ..... Petitioner
Through : Mr. A.K. Prasad and Ms.Priyanka
Goel, Advocates.
versus
UNION OF INDIA & ANR. ..... Respondents
Through : Mr. Sanjeev Narula, Senior Standing
Counsel for Revenue with
Mr.Abhishek Ghai, Advocate.
AND
31
+ W.P.(C) 2053/2017
NEELKANTHAM SYSTEMS PVT. LTD. ..... Petitioner
Through : Mr. A.K. Prasad and Ms.Priyanka
Goel, Advocates.
versus
UNION OF INDIA & ANR. ..... Respondents
Through : Mr. Sanjeev Narula, Senior Standing
Counsel for Revenue with
Mr.Abhishek Ghai, Advocate.
CORAM: JUSTICE S. MURALIDHAR
JUSTICE PRATHIBA M. SINGH
ORDER
% 18.09.2017
Prathiba M. Singh, J.:
1. The short question that arises in these two writ petitions is whether the
Customs, Central Excise and Service Tax Settlement Commission
(hereinafter referred to as the 'Settlement Commission') was right in
rejecting the applications filed by the Petitioners (AA), filed before it on the
ground that there was no `case' pending in terms of Section 31 (c) of the
Central Excise Act, 1944 (hereinafter `CEA').
Facts in brief:
2. Both the writ petitions arise out of identical facts. The Petitioner in
WP(C) 2053/2017 is a company engaged in providing taxable services of
construction, work contract services and is also receiving taxable services of
goods transport agency as defined in the Finance Act 1994 ('FA'). The
Petitioner in WP (C) 2047/17 is one of the directors of the Petitioner in WP
(C) 2053/17. Pursuant to a search conducted on 18th July, 2012, a show-
cause notice ('SCN') dated 18th October 2013 was issued to the Petitioners
to produce their records and also show cause why service tax, which the
Petitioners had failed to deposit, should not be recovered. Interest and
penalty was also sought to be levied. Since there is only one SCN issued to
both the Petitioners i.e., as Noticee No.1 and Noticee No. 2, they are
together referred to as `Petitioner' hereinafter.
3. The Petitioner had deposited the service tax demanded along with interest
and filed an application before the Settlement Commission on 5th December,
2016. On 6th December, 2016, the Petitioner also informed the
Commissioner of Central Excise ('Commissioner') of this fact. While the
application filed before the Settlement Commission was pending scrutiny,
the Petitioner was also served an adjudication order passed by the
Commissioner on the SCN. The said order was dated 2nd December, 2016
but was dispatched on 7th December, 2016 and was received by the
Petitioner on 9th December 2016. Meanwhile, the Settlement Commission
sent a notice under Section 32F (1) of the CEA, to the Petitioner on 9th
December, 2016, seeking a response in writing as to why the application
should be proceeded with. Subsequently, a notice dated 22nd December 2016
was issued to the Petitioner fixing the admission hearing for 4th January,
2017.
4. The Settlement Commission, on 9th January, 2017, rejected the
application filed by the Petitioner on the ground that the matters stood
adjudicated and hence the Petitioner's application was no longer in respect
of a 'case' within the meaning of Section 31 (c) of the CEA. This order is
impugned in the writ petitions.
Submissions of parties:
5. Mr. A.K. Prasad, learned counsel for the Petitioner, relies upon the
decision in Qualimax Electronics Pvt. Ltd. v. Union of India 2010 (257)
E.L.T. 42 (Del) (hereafter 'Qualimax') to submit that the order of the
Commissioner, though dated 2nd December, 2016 was dispatched only on 7th
December, 2016, and the date of the order would thus be deemed to be the
date of dispatch. He further relies on the judgment of the Bombay High
Court in Vishnu Steels v. Union of India (2014) 299 E.L.T. 292 (hereafter
'Vishnu Steels') which has also taken a similar view as this Court in
Qualimax (supra).
6. The submission of Mr. Prasad is that since the application was filed by the
Petitioner on 5th December, 2016, and the date of the adjudication order is
7th December, 2016 - hence, the application was maintainable before the
Settlement Commission as the case was still pending on the date when the
application was filed. He thus submits that the application of the Petitioner
deserves to be considered on merits by the Settlement Commission and the
impugned order is erroneous.
7. Mr. Sanjeev Narula, learned Senior Standing counsel for the Revenue,
does not dispute that the date of the order of the Settlement Commission
should be treated as 7th December, 2016 i.e. the date of dispatch of the order.
However, he also contends that in the scheme of the CEA, there is a period
during which the matter can be pending both before the Settlement
Commission and before the adjudicating authority. During the said period,
the adjudicating authority is well within its powers to pass the adjudication
orders. Mr. Narula relies upon Section 32F (1) of the CEA to submit that
under this provision, the Settlement Commission has to, within a period of 7
days from the date of receipt of the application, issue a notice to the
applicant to explain in writing as to why the application be proceeded with
and thereafter, within a period of 14 days from the date of the notice, pass an
order to either proceed with the application or reject it.
8. Mr. Narula points out that Section 32F of the CEA also creates a deeming
fiction that if the order is not passed within 14 days from the date of notice,
the application would be deemed to have been proceeded with. Thus, as per
Mr. Narula, during these two periods - first, 7 days and then 14 days, the
jurisdiction of the Settlement Commission is not exclusive. He further
submits that the question is whether the proceedings which are pending
adjudication ought to be considered at the time when the order to `proceed
with' the application is to be passed. Mr. Narula thus submits that the order
having been passed on 2nd December, 2016 and having been dispatched on
7th December, 2016, the Settlement Commission has rightly rejected the
Petitioner's applications.
9. Mr. Narula also took this Court through the chronology of events to show
that the Petitioners have been deliberately delaying the adjudication
proceedings since 2014 and they only chose to approach the Settlement
Commission on the eve of the passing of the order by the adjudicating
authority. His submission in short was that the Petitioners do not deserve
any indulgence from this Court in view of their conduct.
Relevant Provisions of the Central Excise Act, 1944
10. The provisions of the CEA which fall for consideration in the present
case are:
Section 32E. Application for settlement of cases. -
(1) 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, the manner in which such
liability has been derived, the additional amount of
excise duty accepted to be payable by him and such
other particulars as may be prescribed including the
particulars of such excisable goods in respect of which
he admits short levy on account of misclassification,
under-valuation, inapplicability of exemption
notification or CENVAT credit or otherwise and any
such application shall be disposed of in the manner
hereinafter provided:
Provided that no such application shall be made unless,-
(a) the applicant has filed returns showing
production, clearance and central excise duty paid in the
prescribed manner;
(b) a show cause notice for recovery of duty issued by
the Central Excise Officer has been received by the
applicant;
(c) the additional amount of duty accepted by the
applicant in his application exceeds three lakh rupees;
and
(d) the applicant has paid the additional amount of
excise duty accepted by him along with interest due
under section 11AA :
Provided further that the Settlement Commission, if it is
satisfied that the circumstances exist for not filing the
returns referred to in clause (a) of the first proviso to
sub-section (1), may after recording the reasons
therefore, allow the applicant to make such application:
Provided also that no application shall be entertained by
the Settlement Commission under this sub-section in
cases which are pending with the Appellate Tribunal or
any court:
Provided also that no application under this sub-section
shall be made for the interpretation of the classification
of excisable goods under the Central Excise Tariff Act,
1985 (5 of 1986).
(3) Every application made under sub-section (1) shall
be accompanied by such fees as may be prescribed.
(4) An application made under sub-section (1) shall not
be allowed to be withdrawn by the applicant.
Section 32F - Procedure on receipt of application
under Section 32E -
(1) On receipt of an application under sub-section (1) of
section 32E, the Settlement Commission shall, within
seven days from the date of receipt of the application,
issue a notice to the applicant to explain in writing as to
why the application made by him should be allowed to
be proceeded with, and after taking into consideration
the explanation provided by the applicant, the Settlement
Commission, shall, within a period of fourteen days from
the date of the notice, by an order, allow the application
to be proceeded with, or reject the application as the
case may be, and the proceedings before the Settlement
Commission shall abate on the date of rejection:
Provided that where no notice has been issued or no
order has been passed within the aforesaid period by the
Settlement Commission, the application shall be deemed
to have been allowed to be proceeded with.
(2) A copy of every order under sub-section (1), shall be
sent to the applicant and to the Principal Commissioner
of Central Excise or Commissioner of Central Excise
having jurisdiction.
Analysis and Findings
11. A perusal of the above provisions reveals that an application under
Section 32E has to be made 'before adjudication'. So, what needs to be
checked by the Settlement Commission is whether on the date of making of
the application, there was a case relating to the Petitioner. Section 31 (c) of
the CEA defines 'case' as under:
31(c) "case" means any proceeding under this Act or
any other Act for the levy, assessment and collection of
excise duty, pending before the adjudicating authority
on the date on which an application under sub-section
(1) of section 32E is made:
Provided that when any proceeding referred back by
any court, Appellate Tribunal or any other authority, to
the adjudicating authority for a fresh adjudication or
decision, as the case may be, then such proceeding shall
not be deemed to be a proceeding pending within the
meaning of this clause.
12. It is clear from a conjoint reading of Sections 31 (c) and 32E of the
CEA, that if any proceeding is pending before the adjudicating authority on
the date on which the application under Section 32E is filed, the said
application would be maintainable, subject to the fulfilment of the other
requirements under Section 32E of the CEA.
13. The consideration of the Settlement Commission whether to proceed
with or reject an application filed before it, as contemplated under Section
32F (1) involves not merely an examination into the pendency of the
proceedings but various other conditions/requirements which are to be
fulfilled as per Section 32E of the Act. Such conditions/requirements include
making a full and true disclosure of the duty liability, the manner in which
such liability is derived, the additional amount of excise duty accepted to be
payable by the applicant, other particulars, if any, including particulars of
such excisable goods in respect of which the applicant admits short levy on
account of misclassification, under-valuation, inapplicability of exemption
notifications, CENVAT credit availed of and such other requirements as
stipulated in the said provision.
14. The discretion of the Settlement Commission at the point when it
considers as to whether the application should be proceeded with, is of a
much larger conspectus i.e. to determine whether the application is in
accordance with law. The Settlement Commission at this stage does not
have the discretion to simply reject the application on the basis that an order
by the adjudicating authority has come to be passed post the filing of the
application for settlement before the Settlement Commission. Any other
interpretation would defeat the purpose of the terms 'proceeding under this
Act...pending before the adjudicating authority on the date on which the
application under sub-Section (i) of Section 32E is made' and 'before
adjudication' as contained in Section 31 (c) and 32E of the Act,
respectively.
15. So long as the application has been filed prior to the order of the
adjudicating authority, it will not be open to the Settlement Commission to
reject it merely on the ground that an order has been passed subsequently by
the adjudicating authority i.e. during the intervening period - from the date
of filing till the date of passing of the order on the application to be
proceeded with or rejection thereof as per Section 32F.
16. In the present case, there is no dispute as to the date of the order passed
by the adjudicating authority. The date of the order is 7th December, 2016,
though, the date appearing on the order itself is 2nd December, 2016. This is
as per the dictum of this Court in Qualimax (supra) wherein it was held:
"...33. Thus, the date of receipt of the order-in-original
is not a relevant circumstance. What is of prime
importance is the date on which the order-in-original
was despatched from the office of the adjudicating
authority (in this case, the Commissioner of Central
Excise & Customs, Ghaziabad). As we have seen, the
order-in-original dated 24.12.2009 had left the office of
the said Commissioner on 31.12.2009 and was beyond
his reach and control. Consequently, the adjudication
becomes effective and complete on that date, i.e.,
31.12.2009. That being so, the necessary pre-condition
of a case pending adjudication on the date of the
settlement application is not satisfied. As such, the
Settlement Commission had no jurisdiction to entertain
the plea of settlement. Because, it is only a "case" as
defined in Section 31(c) which could be the subject
matter of settlement. Section 31(c) defines "case" to
mean any proceeding for the levy, assessment and
collection of excise duty, "pending before an
adjudicating authority on the date on which an
application under Sub-section (1) of Section 32E is
made". Once, the order leaves the hands of the
adjudicating authority in the sense explained above, the
'case' can no longer be said to be pending before him.
Conversely, the proceeding would be regarded as
pending before an adjudicating authority till the order
does not go out of his control. In the present case, this
happened on 31.12.2009. Thus, on 08.01.2010, when the
settlement applications were filed by the petitioners, the
matter before the adjudicating authority had already
been adjudicated..."
17. The decision of the Bombay High Court in Vishnu Steels (supra) is on
the same lines as in Qualimax (supra) and reads as under:
"...16. In consequence we also set aside the order of the
Commissioner of Central Excise dated 13 January 2011
since we have held that the application which was filed
before the Settlement Commission on 14 January 2011,
prior to the dispatch of the order of adjudication, was
maintainable. We clarify that we have done so without
expressing any opinion on the merits of the allegations
contained in the show cause notice issued to the
assessee. Unless this consequential relief were to be
granted as prayed, two parallel proceedings would
result, namely (i) arising out of the order of the
Commissioner of Central Excise and, (ii) before the
Settlement Commission which the statute does not
contemplate. Hence, for these reasons the order of the
Commissioner of Central Excise dated 13 January 2011
is also set aside...."
18. That the adjudicating authority can deal with the proceedings pending
before it prior to the order being passed by the Settlement Commission on
whether to proceed with the settlement proceedings, is not an issue that
arises in this case.
19. There is no doubt that under the scheme of the CEA, the adjudicating
authority has to, under Section 32F (3), call for a report from the Principal
Commissioner of Central Excise or the Commissioner of Central Excise in
respect of the adjudicating proceedings pending before them. However,
under Sections 32F (1) and 32F (2), the Settlement Commission gets
exclusive jurisdiction only after the order is passed by the Settlement
Commission to proceed with the application. This Court, in these
proceedings, is not called upon to decide upon the validity or otherwise of
the order passed by the adjudicating authority.
20. There is no cavil to the conclusion that the date of the order in the
present case is 7th December, 2016 and the date of the filing of the
application before the Settlement Commission is 5th December, 2016. Thus,
on the date when the application came to be filed before the Settlement
Commission, the proceeding was pending before the adjudicating authority.
In the circumstances, the Settlement Commission was in error in holding
that the application before it was not maintainable.
21. For the aforementioned reasons, the impugned order dated 9th January,
2017 of the Settlement Commission is hereby set aside; the applications of
the Petitioners are held to be maintainable. The said applications are restored
to the file of the Settlement Commission for being proceeded with from the
stage at which they were, when the impugned order was passed, in
accordance with law.
22. The writ petitions are allowed in the above terms. The Petitioners'
application be listed before the Settlement Commission on 6th November,
2017 for further proceedings.
PRATHIBA M. SINGH, J
S.MURALIDHAR, J
SEPTEMBER 18, 2017
j
