By TIOL News Service

NEW DELHI , JULY 5, 2010: THE common question in these writ petitions is whether the “case” of the petitioners had been “adjudicated” prior to the filing of their settlement applications under Section 32E of the said Act. Normally, such a question would appear to require a straightforward determination of the factual position. However, in these writ petitions, it so happens that the order-in-original passed by the adjudicating authority was dated 24.12.2009 though it was received by the petitioners after 08.01.2010, which was the date on which the petitioners had filed their settlement applications under Section 32E of the said Act.

A show cause notice dated 30.09.2008 was issued by the Additional Director General, Directorate General of Central Excise Intelligence, New Delhi , to Qualimax Electronics Private Limited (one of the petitioners).

The order-in-original was passed on 24.12.2009 by the Commissioner of Customs and Central Excise, Ghaziabad .

According to the petitioners, they were unaware of the making / passing of the said order-in-original dated 24.12.2009 when they filed their settlement applications before the Settlement Commission on 08.01.2010. However, according to the respondents, the petitioners were well aware of the making of the said order-in-original and in order to thwart the process of recovery of the demand and penalties along with interest, the petitioners avoided service of copies of the said order-in-original on them and rushed to the Settlement Commission by way of their applications under Section 32E filed on 08.01.2010.

In the course of hearing of these writ petitions, the High Court had directed the counsel for the respondents to verify as to on which date the order-in-original was despatched and on which date the service was effected on the petitioners. The counsel for the respondents placed a copy of the letter dated 15.02.2010 issued by the Superintendent, Central Excise, Ghaziabad to the Superintendent (Adj.), Customs & Central Excise, Commissionerate , Ghaziabad. From the said letter dated 15.02.2010, it is clear that the copies of the order-in-original dated 24.12.2009 had been sent individually to noticee Nos. 2-4 ( Mr Pradeep Gupta, Mrs Manju Gupta and Mr Mohit Gupta) at their address — 83, Anand Lok , New Delhi-49 through speed post on 09.02.2010. The letter also indicates that a copy of the order-in-original dated 24.12.2009 had also been sent to Qualimax Electronics Private Limited at the said address — 83, Anand Lok , New Delhi-49 on 02.02.2010 through speed post.

However, the counsel for the parties stated that on 31.12.2009, the order-in-original was despatched from the office of the adjudicating authority. It is on this date that the order-in-original went out of the control of the adjudicating authority. This date of 31.12.2009 would be of great significance.

It is clear that the petitioners had not received the order-in-original dated 24.12.2009 when they filed their settlement applications under Section 32E(1) of the said Act before the Settlement Commission on 08.01.2010. In fact, even if whatever is stated in the two letters is taken to be true, the copies of the order-in-original had not even been sent by post to the petitioners by 08.01.2010. The service by pasting on the gate of the factory premises was also done only on 13.01.2010. However, it is also true that the order-in-original dated 24.12.2009 was dispatched from the office of the adjudicating authority (i.e., Commissioner of Central Excise and Customs, Ghaziabad) on 31.12.2009. It is on this date that the order-in-original dated 24.12.2009 went out of the control of the adjudicating authority. This fact is of material significance.

The High Court analysed a large number of Court decisions and observed ;

“The thread of reasoning running through all these cases is that when viewed from the perspective of determining the starting point of limitation for an aggrieved party to seek a remedy, be it an appeal, revision or review, communication of the order is a necessary ingredient. Consequently, in such cases, the clock of limitation would not start to tick till the order is communicated to the aggrieved party and, therefore, in construing provisions which use words like 'date of the order', the literal meaning may have to give way to a purposive and constructive meaning. Even in the category of cases where the orders 'bring an end result to a status' such as an order of dismissal from government service, communication of the orders would be necessary to make such orders effective. Thus, in such cases also the date of the order would be construed as the date when it is communicated. But in the case of an order of suspension from service, the date of the order would be construed as the date on which it is made or issued and not the date on which it is received by the government servant .

In these writ petitions, the situation is entirely different to the cases where the starting point of limitation for invoking a statutory remedy is to be construed from the date of an order. Here, the circumstances seem to be quite the reverse. The adjudication order signals the end of the case pending before the adjudicating authority. It is the end point insofar as the petitioners‘ right to seek a settlement under section 32E is concerned. Would it really matter if the petitioners were aware that the case has been adjudicated or not on the date they made the settlement applications under Section 32E' It is not as if the passing of the order triggers the starting point of limitation for them to seek recourse to a remedy such as an appeal or review or revision. In that case, unless otherwise expressly provided by the Statute, it would be the date of receipt of the order that would be material. But, here we need to determine the date on which the petitioners‘ case could be said to have been adjudicated in the context of Section 32E of the said Act. The adjudication of the case by the adjudicating authority closes the window of opportunity, which the petitioners hitherto had, for seeking a settlement of the case. That opportunity was available to the petitioners right from the issuance of the show cause notice on 30.09.2008 upto the adjudication thereof. Hence, the date of receipt of the order-in-original is not of any significance for the purposes of Section 32E.

The real issue is whether on the date the settlement applications were made the 'case' had already been adjudicated or not. It is also a jurisdictional issue for the Settlement Commission. Because, the Settlement Commission can only proceed to settle a case, which is pending, adjudication on the date the settlement application is received by it. The date of receipt of the order by the applicants is inconsequential.

Of course, there is the danger that to prevent an assessee from seeking a settlement of his case, the adjudicating authority may quickly pass the adjudication order the moment he gets an inkling that the assessee is about to approach the Settlement Commission. There is also the danger that the adjudicating authority may backdate an order. Adjudicating authorities are not supposed to behave in this manner and are presumed to function within the boundaries of law but, these things can happen. Would not a literal construction of the provisions then come in aid of such errant officers and run counter to the legitimate hopes of assesses who want to come clean, pay their taxes and have their cases settled by the Settlement Commission' The answer to this would lie in construing the date of adjudication to be the date on which the adjudicating authority loses his locus poenitentia , or opportunity to tear off, destroy or alter the adjudication order. In other words, when the order goes out of his control. And, that happens when the order is signed and the one-way process of sending it to the assessee is put in motion either directly or indirectly through some other agency.

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 dispatched from the office of the adjudicating authority (in this case, the Commissioner of Central Excise & Customs, Ghaziabad).

In this case, 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.

The writ petitions are dismissed leaving the parties to bear their respective costs.

(See 2010-TIOL-461-HC-DEL-CX in 'Excise')