By TIOL News Service

MUMBAI, AUG 05, 2015: THE petitioner is aggrieved by an order passed by the Settlement Commission dated 27th June 2014.

The case of the petitioner is that it is engaged in manufacture of plastic moulded containers and caps and they clear the goods on payment of central excise duty. The petitioners are using moulds as raw materials for the purposes of manufacturing their final product and they are taking cenvat credit. The petitioners' final product is used as packaging material and the duty paid by the petitioners is availed as cenvat credit by the buyers.

One of their customers M/s. HLL supplied moulds to the petitioner on lease basis by charging lease charges per piece of moulded article manufactured using these moulds. These charges were remitted to M/s. Hindustan Unilever Limited but the Revenue raised an objection from December 2007 to March 2012 demanding duty of Rs.49,90,069/- alleging that the actual amortization cost of moulds was not included into the assessable value for payment of excise duty. Another SCN for the period April 2012 to March 2013 also came to be issued.

The petitioners approached the Settlement Commission.

The matter was allowed to be proceeded by the Settlement Commission in terms of s.32F(1) of CEA, 1944after noting that compliances for pre-admission are made.

The matter was fixed for hearing on 26.03.2014. The Revenue filed a report and objected to the computations and calculations, including raising an issue about the correctness of the certificates obtained by the petitioners. The Commission gave time to the department to examine the certificate and submit a report, which was submitted on 28.04.2014.

Consequently, an order was passed by the Commission in terms of section 32F(5) of CEA, 1944 rejecting the application as not admissible.

The petitioner submits that the Settlement Commission could not have concluded the proceedings without complete compliance with section 32F(5) of the CEA, 1944.

On the other hand, the counsel for the Revenue submitted that once the Settlement Commission has found that the applicant-petitioner has not made full and true disclosure of the duty liability and the computation and calculation of the same is not in order, then, there is no obligation on the Commission to go ahead in terms of the statutory provisions. Therefore, the impugned order is legal & proper.

While expressing its disagreement with the submission of the Revenue counsel, the High Court elucidated the contents of section 32E and s.32F of CEA, 1944 and observed that the matter proceeded upto sub-section (4) of section 32-F of the CEA, 1944 inasmuch as the Revenue found faults with the contents of the certificate produced by the petitioner.

The High Court further observed –

+ The Bench felt that a legal settlement is not possible without going into a lot of details of the disputes as far as the methodology is concerned. We do not see how such a conclusion can be reached and so quickly. If that is the conclusion reached, it was not necessary to have commented upon the conduct of the petitioner and allegedly in not coming up with honest disclosures. It should enable a settlement based on cooperation and disclosures.

+ If the Revenue is not accepting the certificate or the lower amount, the Bench is then not handicapped and just cannot fold its hands in cases like the present one. It is not a dismissal based on a conclusion that the disclosure is not full and true. If it was indeed not so, there was no occasion for issuing further directions and to permit parties to examine certificates and equally the Revenue to file the report.

+ All this means that unmindful of the statutory obligation and duty, the Commission wanted to abruptly end the proceedings. There is no short strife or short cut permissible in law. The matters have to be taken to their logical end and out of several reasons assigned at paragraphs 9.5 and 9.6 none appeals to us because they do not meet with the statutory requirements.

+ One can infer the reluctance of the Commission to take up the application and complete the further steps because that involves considerable effort on the part of the Commission and which it was not willing to undertake.

+ If such an approach is adopted, the very purpose of setting up a Commission and enabling settlement of disputes expeditiously and promptly is defeated. That is to encourage settlement of claims which are long overdue and by pendency of which larger public interest cannot be sub-served. Delay in recovery of taxes harms the National economy and one need not over-emphasize this aspect.

The order of the Settlement Commission was quashed and set aside and the Commission was directed to proceed with the application in terms of section 32-F and in accordance with law.

The Writ Petition was allowed.

(See 2015-TIOL-1761-HC-MUM-CX)