SDL Auto Pvt. Ltd. v. Commissioner of Central Excise, Faridabad, Delhi-IV

(i) an order of settlement [xxxx] provides for the imposition of a penalty on the person who made the application under section 32E for settlement, on the ground of concealment of particulars of his duty liability; or Explanation - In this clause, the concealment of particulars of duty liability relates to any such concealment made from the Central Excise Officer.

(ii) after the passing of an order of settlement [xxxx] in relation to a case, such person is convicted of any offence under this Act in relation to that case; or

(iii) the case of such person is sent back to the

Central Excise Officer having jurisdiction by the Settlement Commission under section 32L, then, he shall not be entitled to apply for settlement under section 32E in relation to any other matter. (2) Omitted " Sub-Section (1) to Section 32-E of the Act states that an assessee may in respect of a case related to him make an application „before adjudication‟ to the Settlement Commission to have the case „settled‟. Sub-Section (1) uses the expression „adjudication‟ with reference to proceedings pending before the Central Excise Officer on issue of show cause notice for recovery and „settled‟ with reference to the application made by an assessee before the Settlement Commission. The settlement application, the provision postulates, must be filed in the form prescribed and contain a „full and true‟ disclosure of the duty liability not hitherto disclosed before the Central Excise Officer and the manner in which the liability was derived. Additional amount of duty accepted as payable and such other particulars which the applicant admits regarding short levy on account of misclassification, under-valuation, inapplicability of exemption notification, CENVAT credit or otherwise have to be stated. As per proviso to section 32-E(1) of the Act the application would not be maintainable unless returns showing production, clearance and Central excise duty paid in the prescribed manner have been filed; a show cause notice for the recovery of duty has been issued by the Central Excise Officer and the same has been received by the applicant; the additional amount of duty accepted as payable by the applicant exceeds Rs.[3] lacs and the additional amount of excise duty accepted by the applicant along with interest due under Section 11-AA has been paid. We need not refer to sub-Section (3), but sub- Section (4) is important and states that an application once made under sub-Section (1), shall not be allowed to be withdrawn.

9. At this stage itself, we may refer to Section 32-O which prohibits and bars a person from filing a second application for settlement where an order of settlement provides for imposition of penalty on the person who made the settlement application under Section 32-E; the applicant is subsequently convicted of any offence under the Act in relation to that case; or the applicant‟s case has been sent back to the Central Excise Officer on the ground of concealment of particulars of his duty liability. It is, therefore, clear that the provisions of settlement can be invoked by the assessee/applicant by making „full and true‟ disclosure and not with the mala fide intent to defuse and obstruct impending prosecution and penalty proceedings by approaching the Settlement Commissions with incomplete disclosures. When a case has been sent back by the Settlement Commission to the Central Excise Officer, the assessee is barred and cannot apply for settlement in relation to any other matter. Thus, notwithstanding the prescription in Sub-Section (4) to Section 32-E that the applicant cannot withdraw the settlement application once filed, the Settlement Commission has to send the case to the Central Excise Officer where the disclosure of unpaid duty liability in not „full and true‟ and concealed. Thereupon the assessee/applicant is barred and cannot again approach the Settlement Commission in another case.

10. Section 32-F deals with the procedure on filing of the application under Section 32-E and prescribes a strict time line of seven days for issue notice to the applicant from the date of the receipt of the application to explain why the application should be allowed to be proceeded with. The Settlement Commission is thereafter required to pass an order within fourteen days from the date of notice, allowing the application to be proceeded with or rejecting the application. On rejection, the proceedings before the Settlement Commission abate. Rejection order can be passed after notice and taking into consideration the explanation provided by the applicant. Proviso to this sub-section states that where no notice has been issued or no order has been passed within the time stipulated, the application shall be deemed to have been allowed. Every order under Sub-Section (1) of Section 32-F of the Act is required to be communicated to the Principal Commissioner of Central Excise or Commissioner of Central Excise having jurisdiction. Where an application is allowed or deemed to have been allowed to be proceeded with, the Settlement Commission is required to within seven days call for a report and relevant records from the Principal Commissioner/Commissioner of Central Excise having jurisdiction. Report has to be submitted within thirty days of the receipt of the communication from the Settlement Commission. This period of thirty days cannot be extended as the proviso states that where the report is not received within the aforesaid period, the Settlement Commission shall proceed further in the matter without the report from the Principal Commissioner/Commissioner of Central Excise. Where a report is received within the prescribed time, the Settlement Commission may after examination of the report if it is of the opinion that any further enquiry or investigation in the matter is necessary, for reasons to be recorded in writing within fifteen days of the receipt of the report, direct the Commissioner (Investigation) to make or cause to be made such further enquiry/investigation and furnish consequential report within a period of ninety days of receipt of the communication from the Settlement Commission on the matters covered by the application and any other matter relating to the case. As per proviso, when the Commissioner (Investigation) does not furnish their report within the aforesaid period, the Settlement Commission has to proceed to pass an order under sub-Section (5) without such report. These provisions with regard to the Commissioner(Investigation) in the Act are somewhat at variance with the provisions of Section 245D(3) of the Income Tax Act, which permits the Settlement Commission under the Income Tax Act to direct further enquiry or investigation in the matter through the jurisdictional Principal Commissioner or Commissioner, who would then furnish a report on the matters covered by the application or any other matter relating to the case within a period of ninety days of receipt of communication from the Settlement Commission. Sub-Section (5) states that the Settlement Commission, after examining the records and the report of the Principal Commissioner/ Commissioner of Central Excise received under sub- Section (3), and the report, if any, of the Commissioner (Investigation) of the Settlement Commission under sub-Section (4) and after giving an opportunity to the applicant and the Principal Commissioner or Commissioner of Central Excise having jurisdiction of being heard and after examining such further evidence as may be placed before it or obtained by it may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application but referred to in the report of the Principal Commissioner or Commissioner of Central Excise and Commissioner(Investigation). Sub-Section (6) to Section 32-F requires the Settlement Commission to pass an order under Sub- Section (5) in respect of the application within nine months from the last date of the month in which the application was made, failing which the settlement proceedings would abate and the adjudicating authority before whom the proceedings, at the time making of the application were pending, is required to dispose of the case in accordance with the provisions of the Act as if no settlement application under Section 32-E was filed. Proviso states that the period can be extended by the Settlement Commission for a further period not exceeding three months.

11. Sub-section (7) clarifies that the materials brought on record before the Settlement Commission shall be considered by the members of the concerned Bench before passing any order under sub- Section (5) and provisions of Section 32-D would accordingly apply. Sub-Section (8) states that the order passed under Sub-Section (5) to Section 32-F would provide for terms of settlement which may include any demand by way of duty, penalty or interest and the manner in which the said amount would be paid and all other matters to make the settlement effective and in case of rejection contain the reasons thereof and it shall also provide that the settlement should be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts. The proviso states that the amount settled as ordered by the Settlement Commission shall not be less than the duty liability admitted by the appellant in his application under Section 32-E. Sub-section (9) states that where any duty, interest, fine and penalty payable in pursuance of an order under sub-section (5) is not paid by the assessee within thirty days of receipt of a copy of the order by him the amount which remain unpaid shall be recovered along with interest due thereon as per provision of Section 11 of the Act. Sub-section (10) provides that where the proceedings become void on account of sub-section (8), proceedings before the Central Excise Officer shall be deemed to have been revived from the stage at which the application for settlement was allowed to be proceeded with.

12. Aforesaid provisions manifest that the Settlement Commission‟s satisfaction on the assessee‟s „full and true‟ disclosure of the undisclosed duty liability, the manner in which the liability has been derived, and payment of such duty liability with interest are the sine qua non legislative commands that form the jurisdictional preconditions to obtain an order of settlement. Each condition must be satisfied without failure. Settlement Commission has the power while passing an order under Sub-Section (5) to Section 32-F to enhance the duty liability, but it has no power to dispense with and waive the preconditions of „full and true‟ disclosure, the manner in which liability is derived and pre-payment of taxes/duty with interest on the disclosure made. Settlement Commission must record its satisfaction on the jurisdictional pre-conditions for only when the jurisdictional pre-conditions are satisfied that an order „settling‟ the case can be passed. In-eligible cases, where jurisdictional pre-conditions are not satisfied, must be returned to the board of the Central Excise Officer for adjudication of the show cause notice on merits. An order under Sub-Section (5) to section 32-F can enhance the duty liability as declared in the application but only when condition of „full and true‟ disclosure of undisclosed duty liability and the manner in which the liability was derived are satisfied. Satisfaction of the jurisdictional pre-conditions cannot be waived by the Settlement Commission. The Act has not been conferred on the Settlement Commission the power to adjudicate and to pass an order-in -original as a Central Excise Officer in the form of a settlement order. Settlement Commission is not an adjudicating authority or an incognito Central Excise Officer. Settlement Commission does not pass an order on merits deciding duty as demanded in the show cause notice.

13. We are conscious that the provisions for settlement can be misused to delay adjudication proceedings before the Central Excise Officer, and by accepting the legal position as canvassed by the petitioners‟ the Settlement Commission would be denied power to „adjudicate‟ and completely self-deal with such devious and conniving applicants, but this is a matter of jurisdiction. To accept legal authority and jurisdiction of the Settlement Commission to pass settlement order even in cases where there is lack and failure on the part of the applicant to make „full and true‟ disclosure would be contrary to the legislative mandate. In many-a-case the Revenue would be aggrieved and would raise the same legal challenge to the order passed by the Settlement Commission. This would create uncertainty and confusion. In matter of jurisdiction it does not matter whether the aggrieved party is the assessee or the Revenue. The consequences when an applicant does not make „full and true‟ disclosure are provided in the provisions of the Chapter. Strict timelines with stage by stage hearing ensures a timely disposal and effectively checks machinations and delaying tactics. Such applicants have to be dealt with in the expeditiously, albeit in accordance with the statute. Settlement order is not an alternative to an order in original passed by the Central Excise Officer deciding a show cause notice on merits.

14. The provisions of Section 32-F do not stipulate and over-ride the conditions mentioned in Section 32-E that the assessee who has approached the Settlement Commission should and must make „full and true‟ disclosure of the duty liability which has not been hitherto disclosed. It is only when this condition and other requirements are satisfied that the Settlement Commission can pass an order of settlement. Reference to the report of the Principal Commissioner or Commissioner of Central Excise pursuant to the enquiry and investigation or even to the report of the Commissioner (Investigation) under sub-section (4) and (5) is to ensure that the Settlement Commission ascertains and satisfies itself on full, true and correct disclosure of the duty liability. Legislature conscious that there could be kaleidoscope of cases and situations that cannot be always visualised has recognised that there could be cases where the jurisdictional pre-conditions are satisfied yet the Settlement Commission may have to decide issues and thereby the duty liability as disclosed may get enhanced. The provisions made in this regard do not intend to override and undo the statutory pre-conditions for invoking jurisdiction of the Settlement Commission.

15. On the said legal position, i.e. on scope and ambit of settlement order, we would now refer to the decision of this Court in W.P.(C) No.1495/2007, Picasso Overseas and Ors. versus The Director General of Revenue Intelligence and Anr., decided on 3rd August, 2009, wherein it has been held:-

(ii) Various provisions such as Section 127B (1) uses the expression “accepted to be payable by him”, meaning thereby that on applicant before the Commission is bound basically only to the duty approximately in an around the amount accepted to be payable by the applicant and not the duty amount, which may be considerably or vastly different from the amount which he thought would be one at which he seeks to get the matter settled by making a full and complete disclosure. This very sub section of Section 127 B again uses the expression “to have the case settled”, again indicating that the scope of the Settlement Commission is to have the case settled on a duty which an applicant accepts to be payable by him. In the form it has been prescribed under these Chapter of settlement, in para 12 it is stated “additional amount of duty disclosed and accepted as payable”. In fact, Annexure 11 to such form in para 4 states “full and true disclosure of the facts regarding the issues to be settled, including the terms of settlement sought for by the applicant.

10. All the abovesaid provisions and the paragraphs of the forms make it abundantly clear that what is required is a decision when there are terms of settlement which are agreed to by an applicant and a liability of duty which is accepted by him. Thus, it cannot be said that when an applicant comes for settlement he can be fastened with a liability which he never intended as accepted to be payable by him. We may further hold from subsection (1) of Section 127 C which uses the expression “complexity of the investigation” meaning thereby a Settlement Commission would not in cases of complexity of the investigation have jurisdiction to decided and admit such an application. Therefore, when there are highly complex and contentious questions of fact, a Settlement Commission would not ordinarily even admit the application in as much as the scope and object of scheme of Sections of Chapter XVA is settlement and not adjudication of highly complex questions of facts. Section 127 I also throws further light by entitling Settlement Commission to refer the case back to the proper officer who shall dispose of the case in accordance with the provisions of the Act as if no application for settlement has been made under Section 127B. ” The aforesaid decision interprets parimateria and similar provisions of Section 127F of the Customs Act, 1962. This decision had upheld and accepted the contention of the petitioner therein that the Settlement Commission cannot adjudicate highly contested and disputed questions of facts, for the basic purpose of Settlement Commission is to settle the matter and not to decide and adjudicate the issue on which there is wide variance and difference between the stand of the assessee and the Revenue. Referring to the provisions of settlement, it was observed that these are in contradistinction to adjudication and requirement to make payment of tax and interest and the expression „accepted as payable by the applicant‟ means the applicant before the Settlement Commission is bound basically to declare the duty evaded, which may be approximate or in and around the amount accepted to be payable by him. There should not be any difference between the amount of duty which he accepts as due and payable and the amount on which the matter is finally settled. This is because of the pre-condition that every applicant, in order to invoke the jurisdiction of the Settlement Commission must make „full and true‟ disclosure to have the case settled. It is in this context that in paragraph 10 of the aforesaid quotation in the case of Picasso Overseas & Ors.(supra), it has been observed that when an applicant comes for settlement, he cannot be fastened with a liability which he never intended as accepted to be payable by him. Therefore, when there are highly complex and contentious questions of fact, the Settlement Commission would not ordinarily admit the application inasmuch as the scope and object of the proceedings is settlement and not adjudication of highly complex questions of facts. We do note that the expression “complexity of investigation” used in Section 127C has been deleted from the Customs Act and from sub-section (1) of Section 32-F of the Act, i.e. Central Excise Act, with effect from 1st June, 2007. Legislation has undergone a change. We have referred to the decision as it expounds clear demarcation between „adjudication order‟ and „settlement order‟ and explains the contour and ambit of power to „settle‟, an exclusive and sole jurisdiction exercised by the Settlement Commission, which is different and not a power to adjudicate the show cause notice on merits as a Central Excise Officer. Omission of the expression “ complexity of investigation” though material as the Settlement Commission would examine complex and difficult factual and legal issues, does not mitigate and omit the requirement and condition of „full and true‟ disclosure of the undisclosed tax liability. This requirement remains in the statute as an essential jurisdictional pre-condition to be satisfied for any order under Sub-Section (5) to section 35-F of the Act.

16. We would now reproduce paragraph 12 of the decision in Picasso Overseas & Ors.(supra), which reads as under:-

17. Identical provisions vide Section 32-I of the Act, dealing with powers and procedure of the Settlement Commission state that in addition to powers conferred on the Settlement Commission under Chapter V, the Settlement Commission shall have all powers that are vested in the Central Excise Officer under the Act or the Rules made there under. Sub-section (2) states that when an application has been allowed to be proceeded with under Section 32-F, the Settlement Commission shall have, until an order is passed under sub-section (5) to Section 32-F and subject to the provisions of sub section (4) of that section, exclusive jurisdiction to exercise the powers and perform the functions of a Central Excise Officer in relation to a case. Sub-section (4) states that the Settlement Commission shall, subject to the provisions of the Chapter, have power to regulate its own procedure and the procedure of Benches while dealing with matters.

18. We have not quoted Section 32-J of the Act. However, we would record that the provision stipulates that no person shall be entitled to inspect or obtain copies of any report made by a Central Excise Officer to the Settlement Commission, but the Settlement Commission in its discretion may furnish copy thereof on an application made in this behalf and on payment of prescribed fee. Proviso states that certified copy of such report or part thereof, which is relevant, can be furnished to the person whose case is under consideration to rebut evidence brought on record.

19. Under Section 32-K, the Settlement Commission has the power to grant immunity from prosecution and penalty under the Act. Such immunity can be either in whole or in part. However, no immunity can be granted except in cases where prosecution has been instituted before the date of receipt of the application under Section 32-E. Further, as per sub-Section (2) immunity granted under sub-section (1) can be withdrawn if the person fails to pay the sum specified in the order of the settlement passed under sub-section (5) to Section 32-F. Immunity can also be withdrawn if the Settlement Commission is satisfied that such person had in the course of the settlement proceedings concealed any particular material or had given false evidence and thereupon, the person may be tried for the offence in respect of which immunity was granted or for any other offence of which he appears to have been guilty.

20. Section 32-L states that if the Settlement Commission is of the opinion that if the applicant has not cooperated with the Settlement Commission in the proceedings before it, the case may be sent back to the Central Excise Officer having jurisdiction who shall thereupon dispose of the case in accordance with the provisions of the Act as if no application for settlement had been made. Thus, the provision states that the Settlement Commission has the power and authority to remit the case to the Central Excise Officer when the applicant has not cooperated. Sub-section (2) to Section 32-L is equally important for it states that the Central Excise Officer shall be entitled to use all materials and other information produced by the applicant/assessee before the Settlement Commission or the result of the inquiry held or the evidence so recorded in the course of the proceedings before it. Thus, the Central Excise Officer can use the material and information produced by the applicant/assessee before the Settlement Commission or the result of the inquiry held or the evidence recorded in the course of the proceedings before it as there is no bar or prohibition against use of the said material. Admission made by the applicant/assessee in the settlement application and evidence and details collected/ascertained can be used by the Assessing Officer when an order is passed remitting or sending the case back to the Central Excise Officer. The provision is another check on malevolent and devious applications with partial disclosure to deviate and prolong adjudication proceedings and recovery of duty and interest. These provisions of settlement reflect the vast powers given to the Settlement Commission when they verify and ascertain whether or not the applicant/assessee has made „true and full‟ disclosure of undisclosed income and decides the issues and lis that arise on the statements made in the settlement application, but they fall short and do not give jurisdiction to the Settlement Commission to reject the settlement application on the ground of lack of „full and true‟ disclosure of undisclosed income and then proceed to pass an order in original adjudicating the show cause notice on merits as a Central Excise Officer. This is impermissible and beyond jurisdiction of the Settlement Commission.

21. The Delhi High Court in W.P. (C) No.9104/2009, Ashwani Tobacco Co. Pvt. Ltd. versus Union of India, dated 29th January, 2010, has held:-

22. In W.P. (C) No. 6569/2017, Shree Flavours LLP versus Government of India &Ors., decided on 1st September, 2017, a decision relating to the Act, it has been held that the power of settlement requires an element of cooperation by the parties i.e. the assessee, which is a pre-requisite and an essential condition. Therefore, the reference to the term "not cooperated" in Section 32-L of the Act has been made. Thus, the Settlement Commission has the power to examine and arrive at the opinion that the dispute is one which cannot be settled, and which on eventuality it has to refer the matter to the adjudicating authority. This judgment refers to an earlier decision of this court in Komal Jain versus Union of India, 2014 (304) ELT 675 (Del.), which holds as under:- “16.The Court finds this argument unpersuasive. Clause (c) to the first proviso mandates a precondition to approaching the Settlement Commission. The duty “accepted by” the applicant must be paid, before the matter can even be considered by the Settlement Commission. The Settlement Commission is, in essence, a safe haven for applicants who are otherwise at risk of punishment under the penal provisions of the Customs Act. The Settlement Commission can – if it considers it prudent – grant immunity from prosecution, but may not condone the liability amount or interest. Those must be paid nonetheless, as an applicant approaching the Settlement Commission cannot receive better treatment than those who do not. That limited obligation falls on all articles imported into Indian territory. Thus, in order to approach the Settlement Commission, and avail of the beneficial regime of limited immunity, the applicant must – as a reciprocal statutory good faith measure – pay the liability duty (i.e. at least the minimum tax effect possible from the wide range of measures that may be exercised under the Customs Act.) The argument advanced by the petitioner in this case seeks to excuse the applicant to pay this minimum amount, but still avail the beneficial regime of Chapter XIVA. This cannot be the case. Neither does the text support such an argument. Subclause (c) bars an application till “the applicant has paid the additional amount of customs duty accepted by him along with interest due under section 28AB.” The applicant must therefore, first, pay the duty “accepted by him”, along with the “interest due under Section 28AB.” Section 28AB simply says that in case “any duty has not been levied or paid or has been short-levied or short-paid or erroneously refunded”, such a levy must include interest. In other words, a levy under Section 28 – which authorizes a show-cause for duties not levied earlier – includes interest under Section 28AB. Thus, on a textual reading, clause (c) requires that the applicant must deposit the duty he accepts to be the liability, along with interest. This means that it is not necessary for the show cause notice to propose a liability amount for it to be "due" under clause (c). This would include cases where a duty demand exists in the show-cause notice, but is not exhausted by this limited circumstance alone. In cases where the show-cause notice does not contain a figure, the applicant must use a best-judgment standard to determine the amount, and at the very least, deposit that amount. The use of the words “accepted by him” clearly include such a situation, and support the use of a self assessment to require the applicant to deposit what he or she thinks is the duty payable, since that in any case, is due in law, and cannot be waived by the Settlement Commission. Indeed, the Court notices that the self-assessment standard is also prescribed in Section 28(b), as an alternative to the duty ascertained by the Revenue.

20. There is one more reason as to why we think that the petitioner‟s contention is untenable. The opportunity to approach the Settlement Commission is a sort of concession given by the government to errant assessees to enable them to come clean. This opportunity is hedged in by certain conditions, one of which is that the assessee shall pay the additional amount of customs duty accepted by him along with interest due under Section 28AB. What the petitioner contends is that the interest under Section 28AB does not become due once a show-cause notice is served under Section 124 and, therefore, the petitioner should be allowed to approach the settlement commission without satisfying the condition. The legislative intention, however, appears to us to be otherwise. If one of the many conditions prescribed by the first proviso to Section 127B cannot be complied with, albeit because of statutory disability – even assuming the petitioner is right in its contention that there is a statutory disability in calculating the interest due under Section 28AB – the result would be that such a case was not intended to be covered by the section; it is not open to the petitioner to argue that because of the statutory disability (whatever that may be) one of those conditions cannot be complied with but yet the petitioner should be permitted to approach the Settlement Commission. As already pointed out, an assessee is permitted to approach the Settlement Commission subject to inviolable conditions, the proper and complete compliance with which cannot be compromised or condoned in any manner. Even on this score the petitioner as to fail.”

23. Statute states that the Settlement Commission can deal with matters and issues not referred to in the settlement application. Subsection (5) to Section 32-F empowers the Settlement Commission to examine the records and reports of the Principal Commissioner or the Commissioner of Central Excise or the report of Commissioner (Investigation) and thereupon after examining further evidence placed before them and which may be obtained by the Settlement Commission, pass an order on matters covered by the application or any other matters relating to the case not covered by the application but referred to in the report of the Principal Commissioner or the Commissioner of Central Excise or even the Commissioner (Investigation). Powers of the Settlement Commission are indeed wide and by no means narrow or confine the limits only to the settlement application. These details could be necessary to ascertain satisfaction of the jurisdictional pre-conditions and in some cases „settle‟ the matter as the applicant/assessee has satisfied the jurisdictional preconditions, albeit the additional and secondary aspects must be those that are required to be examined and decided to settle the case. Settlement Commission has the power to relegate the applicant to the proceedings before the Central Excise Officer. The provisions would also indicate that the duties of the Settlement Commission are not synonymous and an order passed by the Settlement Commission is not an adjudication order. The applicant, to invoke the jurisdiction of the Settlement Commission and to get favourable order under sub-Section(5) to Section 32-E, must meet the statutory mandate and pre-condition of „full and true‟ disclosure of his duty liability and the manner in which such liability has been derived. The aforesaid pre-conditions must be satisfied before an order under sub-section (5) to Section 32-F of the Act is passed. If the said preconditions are not satisfied, the Settlement Commission should relegate the applicant to the regular and normal proceedings before the Central Excise Officer as delineated under Section 32-L of the Act.

24. Clearly, the Settlement Commission does not perform the adjudicatory functions as a Central Excise Officer when it deals with settlement of cases.

25. In Agson Global Pvt. Ltd. &Ors. versus Income Tax Settlement Commission &Ors., 227(2016) DLT 226(DB), it was held that the Settlement Commission has exclusive jurisdiction from the date the Settlement Commission steps into the shoes of the authority who was hitherto dealing with the case. The aforesaid ratio has to be read in the context in which they were made. The observations were not to hold that the Settlement Commission and Central Excise Officers perform same and identical functions. There could be cases where an assessee has made „full and true‟ disclosure of the undisclosed duty liability and the manner in which such liability was derived, yet issues that arise would require finding and decision in respect of rate of tax, tariff entry applicable, scope of exemption notification, entitlement to CENVAT credit etc. Such issues have to be decided by the Settlement Commission to settle the case. It is in this sense that requisite power under various provisions of Chapter-V has conferred power on the Settlement Commission. However, the Settlement Commission is not a Central Excise Officer. It does not perform functions and duties and is not an alternative to the Central Excise Officer.

26. The Settlement Commission is an independent institution and, in a way, is a quasi judicial body, independent and different from the Central Excise Officer. The Central Excise Officer, in the form of the Commissioner or the Principal Commissioner, is a party appearing before the Settlement Commission. Further, the Settlement Commission has the power to grant immunity from prosecution under the Act etc. Proceedings before the Settlement Commission have to be detailed and examination thorough in the sense that hearings have to be held and reports etc. have to be filed. Settlement order has finality attached to it. These proceedings are vastly different from assessment proceeding before the Central Excise Officer. The proceedings are confidential in nature, in the sense that confidentiality is maintained during the period the proceedings are in progress. It is in this context that in Commissioner of Income Tax, Jalpaiguri versus Om Prakash Mittal, (2005) 2 SCC 751, the Supreme Court had observed:-

Similarly, in Brij Lal and Others. versus Commissioner of Income Tax, Jalandhar, (2011) 1 SCC 1, it was held as under:

27. Having examined the legal position, we will now revert to the facts in the writ petitions. WP(C) No. 7277/2015

28. The petitioner, now renamed as M/s.Victora Auto Pvt. Ltd.,was engaged in the business of manufacturing of sheet metal components for automobiles and was registered with the Central Excise Commissionerate, Delhi-IV, Faridabad.

29. Anti-Evasion Branch of the said Commissionerate had initiated investigation and conducted searches on 22.12.2010 at business and residential premises of the petitioner and their suppliers.

30. In the application for settlement filed the petitioner on 16.5.2014, they had accepted duty liability of Rs.60,54,752/- and interest liability of Rs.19,59,645/-.

31. On the other hand, the show cause notice dated 4.4.2012 served on the petitioner, based on the investigation conducted and material/evidence found by the Anti Evasion Team had raised a demand of Rs.2,16,70,002/- as undisclosed duty liability.

32. The contention of the petitioner was that the amount mentioned in the show cause notice was based upon surmises and not supported by cogent and relevant evidence.

33. Revenue had contested the allegation submitting that the petitioner had not made „full and true‟ disclosure of the duty liability evaded by making wrong and fraudulent claim for CENVAT credit. Reliance was placed on the diary found and seized from Pawan Goyal, which as per the Revenue mentions/records a number of transactions which were quantified as Rs.5,23,80,000/-. This amount as per Pawan Goyal, who had filed a separate application for settlement which was also disposed of by the impugned order, was the total of the cheques issued by the petitioner company in respect of the invoices against which the goods were not supplied. Pawan Goyal has not challenged the order passed by the Settlement Commission.

34. The Settlement Commission observed that the question really was of quantification of the duty for the petitioner and the other coapplicants had admitted that the goods were not supplied and the money had flown back to the petitioner, who had made some payment under the table. Reference was made to kaccha documents and the statements of Ashok Rawat and P.L. Gupta, who had affirmed the said flow back of cash and had also admitted that the documents seized relate to a short period, for the earlier document/kaccha paper had been destroyed. Reference was also made to the statement of Radhey Shyam, who had explained that on receipt of any raw material, entry was made in the inward register and when slips were produced, entries were made in raw material register. The said entries included manufacturer‟s name. The goods received were entered in the register as well as the raw material register as per the procedure laid down in the factory of the petitioner. Reference was also made to the statement of Satya Dev Mishra, security guard/advisor of the petitioner who was posted on the entry gate. He had stated that as a security guard/advisor, he was posted on the entry gate and that he would check entry of goods and enter the goods received in the computer and issue inward statement with serial number. He had never seen raw material procured from M/s Allied Strips Pvt. Ltd., M/s JV Strips Pvt. Ltd. and M/s AGR Steel Strips Pvt. Ltd. Similarly, Mr. Sanjay Kaushik, working with the petitioner and incharge of inspection of raw material, after examining the inspection register, had stated that they had not inspected any goods received from M/s Allied Strips Pvt. Ltd., M/s JVS Pvt. Ltd. and M/s Asian Colour Coated Ispat Pvt. Ltd. There were only 9 reports of M/s AGR Steel Strips Pvt. Ltd. and one recorded invoice from M/s MTC. Impugned order of the Settlement Commission refers to the show cause notice on the CR sheets, standard stainless sheets and aluminium sheets and the register maintained by the petitioner company regarding the raw material. Reference stands made to the statement of the drivers who had purportedly transported the material to the petitioner factory. These drivers had denied having transported the goods to the petitioner unit at Faridabad. After referring to the evidence and material, the Settlement Commission has held:-

35. The petitioner, through its Managing Director, had filed an application for settlement in June, 2014, after they were served with a show cause notice dated 24.11.2011 in respect of evasion of central excise duty of Rs.3.51 crores. The petitioner was engaged in the manufacture of pet-preforms. The pet-preforms were supplied by the petitioner to M/s Iceberg Foods Ltd.(„IFL‟ for short), who was engaged in the manufacturing of various variants of packaged drinking water of different brands, aerated water and carbonated drinks of various brands. Pet-preforms were used by IFL to manufacture pet bottles. Both the petitioner and IFL were subjected to search operations by the Director-General of Central Excise Intelligence and incriminating material and documents, including CPU, pen drives, laptops etc. were seized and statement of different persons were recorded.

36. Duty of Rs.3.51 crore demanded in the show cause notice for pet-preforms clandestinely removed from the factory of the petitioner during the period January, 2007 to August, 2009, was calculated on the basis of purchase of 2864.800 M.T. of pet resin procured through M/s Prayag Polymers, M/s Guru Kripa International and M/s.Bhaiji International. Petitioner had stated that the IFL and similar bottlers had filed settlement application, accepting their duty demand and interest liability. Some other bottlers were in the process of filing settlement applications. On the question of calculation of duty liability, the petitioner in the application for settlement had stated:-

37. The petitioner had referred to deposit of Rs.50,00,000/- made by them during investigation, a fact admitted in the show cause notice. The petitioner having disclosed duty liability of Rs.3,04,001.39/- as per settlement application were entitled to refund of Rs.46,16,958.25/out of this deposit of Rs.50,00,000/-. Admission of undisclosed duty liability of Rs.3,04,001.39/- is also significant. Clause (c) to the proviso to Section 32-E(1) of the Act states that the application shall not be entertained unless additional amount of duty accepted by the applicant exceeds Rs.3,00,000/-.

38. The Settlement Commission, by the impugned order dated 18.3.2015, has held as under:

39. Recording the above, the Settlement Commission held as under:- “9.[6] In view of the facts and circumstances of the case, the Bench hereby settles the case on the following terms and conditions: Duty:-The Central Excise Duty in this case is settled at Rs.3,51,82,322/- (Rupees three crore fifty one lakh eight two thousand three hundred twenty two only) against the applicant. An amount of Rs50,00,000/- already deposited by the applicant is ordered to be appropriated towards the settled amount of duty. The balance amount of Rs[3],01,82,322/- may be paid within 30 days from the date of receipt of this order. Interest: An amount of Rs 79,040/- paid as interest is ordered to be appropriated towards interest liability. The Revenue is however given liberty to check the correctness of the amount and in case there is any shortfall, they should inform the same within 15 days, to the applicant who shall pay the amount within 15 days from the date of receipt of such communication from Revenue under intimation to Revenue and the Commission. Penalty: The Bench imposes a penalty of Rs. 30,00,000/-(Rupees thirty lakh only) on the applicant firm. The Bench also imposes a penalty of Rs 1,00,000/- ( Rupees one lakh only) on coapplicant no[1] and Rs 2,00,000/- (Rupees two lakh only) on co-applicant no 2, under the provisions invoked in the SCN. The Bench grants the applicant and the co-applicants immunity from penalty in excess of the specified amounts. Prosecution: Subject to payments as above, the Bench grants immunity to the applicant and the coapplicants from prosecution under the Act and Rules framed thereunder as applicable in so far as this case is concerned.” WP(C) No.10013/2016

40. The petitioner company was engaged in manufacture of Copper Ingots and Copper Wire Rods.

41. As per the Revenue, the petitioner had clandestinely removed finished goods, viz. copper ingots by suppressing production, with an intent to evade payment of duty. The petitioner had also wrongfully availed of CENVAT credit on in-admissible capital goods. The petitioner had been subjected to search by the officers of the Preventive Wing of the Central Excise on 22.5.2012. Records and evidence with regard to clandestine removal were seized. Thereafter, show cause notice date 16-18.3.2015 was issued for recovery of excise duty of Rs.57,05,370/-(as not paid on 98212.65 Kg. of Copper Wire Rods/Ingots); wrongful claim of CENVAT credit amounting to Rs.l,53,512/- and wrongful claim of CENVAT credit amounting to Rs.6,10,06,458/- as availed of without receiving the raw materials. Interest payable on the above amounts was demanded. The show cause notice had asked the petitioner to answer why the penalty should not be imposed. Show cause notice was also issued to the Director of the petitioner company to answer why penalty should not be imposed.

42. The petitioner had filed settlement application on 23.9.2015 alleging that the proposed demands in the show cause notice were one-sided and the petitioner as a law abiding citizen did not want to indulge in litigation. The petitioner, it was stated, was liable to pay Rs.48,13,658/- towards duty liability and interest of Rs.56,971/thereon. The petitioner had denied its liability in respect of 3rd limb of the show cause notice for duty liability arising on account of wrongly availing of CENVAT Credit of Rs.6.10 crores.

43. The Settlement Commission, by the impugned order dated 29.09.2016, had recorded that none had appeared for the petitioner in response to the notice of hearing fixed on 12.05.2016. The petitioner had earlier filed letter dated 9.5.2016 with a request to withdraw the application for settlement. This request was rejected in terms of Section 32-E(4) of the Act, which states that an application made before the Settlement Commission cannot be allowed to be withdrawn. Accordingly, the hearing was fixed on 8.6.2016 at 11:30 pm. The case was heard on 8.6.2016 and then again on 29.6.2016. The Settlement Commission while holding that Revenue cannot rely upon and refer to inquiry report of the Commissioner(Investigation) dated 23.8.2016 as it was beyond the time prescribed in the statute and was by the same officer who had issued the show cause notice; on the question of quantum held that there were discrepancies in the assertions of the petitioner as there was no evidence with regard to transport of goods from Gujarat to Bhiwadi, Haryana and retransportation of the goods from Bhiwadi to Gujarat, covering a distance of more than 1000 km. It was held as under:

44. Thereafter, the Settlement Commission had passed the following order under Section 32F(5) of the Act:- “46. In view of the above, and the facts and circumstances of the case, the Bench settles the case under Section 32F (5) of the Act on the following terms:- Central Excise Duty:-The Central Excise Duty in this case is settled at:

(i) Rs 42,49,584/- in respect of clandestine removal of

(ii) Rs14,55,786/- in respect of difference in closing balance of Copper Scrap on 31.3.12, and opening balance as on 1.4.12.

(iii) Cenvat credit amounting to Rs[1],53,512/- availed incorrectly on ineligible capital goods is ordered to be recovered from the applicant.

(iv) The wrongly availed Cenvat credit amounting to

Rs[6],10,06,458/- is ordered to be recovered from the Out of the said, the applicant has claimed to have discharge duty liability of Rs. 48,13,6581 towards tax liability admitted by him. The said amount is ordered to be appropriated towards the settled amount of duty. The remaining amount should be paid by the applicant within 30 days of the receipt of this order. Interest: The applicant has admitted and claimed to have deposited an amount of Rs[1],24,224/- towards their interest liability and appropriate the same. The Jurisdictional Commissionerates should calculate the interest liability and inform to the applicant within 15 days of the receipt of this order. The applicant shall pay the remaining amount, if any, within 10 days from the date of receipt of such communication from the Jurisdictional Commissionerate under intimation to the Commissionerate and the Commission. Penalty: The Bench imposes a penalty of Rs. 200,00,000/- (Rupees two crores only) on the applicant and grants immunity to the applicant from penalty in excess of the above amount. The Bench also imposes a penalty of Rs50,00,000/- ( fifty lakh only) on the co- The settled amount of duty, penalty and interest should be paid by the applicant within 30 days of receipt of this order. Prosecution: In view of extensive manipulation of records, evasion of substantial Central Excise duties, concealment and mis-representation of facts which the applicant continued to do even during the Settlement Proceedings, we reject the applicants' request for immunity from prosecution.”

45. A reading of the impugned orders would show that the Settlement Commission did not accept the claim of the three petitioners that they had made „full and true‟ disclosure of the duty liability. It had also opined on the petitioners‟ failure to disclose the manner in which the said duty liability was derived. Two essential pre-conditions for invoking jurisdiction of the Settlement Commission were therefore not satisfied. In the given facts, the Settlement Commission should have rejected the settlement applications and referred the case to the Central Excise Officer to decide the show cause notices issued to the parties on merits. However, notwithstanding the failure and non-satisfaction of the jurisdictional pre-conditions, the Settlement Commission proceeded to act as an adjudicating authority and has decided the show cause notice. This would be beyond the scope and power of the Settlement Commission, for the Settlement Commission is not an adjudicatory authority substituting the Central Excise Officer. The Settlement Commission must function under the four corners of the powers conferred under Chapter-V of the Act. The Settlement Commission, after expressing and recording the finding on the failure of the petitioners to make „full and true‟ disclosure of the duty liability and the manner in which it was derived, should have rejected the settlement application. The petitioners should have been relegated to suffer and undergo adjudication mechanism and procedure as per the provisions of the Act.

46. Learned counsel for the petitioners, Iceberg Aqua Pvt Ltd & Ors in WP(C) No.8939/2015 and K M G Rolling Pvt. Ltd. & Anr. in WP(C) No.10013/2016 had stated that the petitioners would have to face the adjudication proceedings pursuant to the show cause notice. Orders in this regard remitting the case to the Central Excise Officer may be passed. However, learned counsel for the petitioner SDL Auto Pvt. Ltd. in WP(C) No.7277/2015 had submitted that the matter should be remanded to the Settlement Commission. We would observe that once the Settlement Commission had concluded that the petitioner had not made „full and true‟ disclosure of the evaded duty and the manner in which the duty was derived, we should relegate the petitioner to the normal procedure. Learned counsel for the petitioner in WP(C)No.7277/2015 had submitted that in case of associate enterprise and other cases, the Settlement Commission has accepted their duty liability at much lower and lesser figure. These cases were arising from the investigation conducted pursuant to the group search and seizure of diaries. We would only observe facts of each case and the adjudication would depend upon the evidence and material collected in the investigation in each case. We are primarily concerned with the evidence and reasoning recorded by the Settlement Commission in the case of the petitioner in WP(C) No7277/2015. The findings recorded by the Settlement Commission are elaborate and detailed. Case for remand to the Settlement Commission is not made out. We therefore do not find any merit in the prayer for remand made by the learned counsel for the petitioner in WP(C) No.7277/2015.

47. Recording the aforesaid, the writ petitions are partly allowed, quashing the impugned orders passed by the Settlement Commission to the extent they „adjudicate‟ and confirm the demand raised in the show cause notice. We do not disturb the impugned orders to the extent they hold that the petitioners had not made full and true disclosure of their duty liability and the manner in which it was derived. Legal consequences as postulate in law would follow.

48. Proceedings pursuant to the show cause notice before the Central Excise Officer would commence. Period from the date of filing of the applications for settlement till the present pronouncement would be excluded for the purpose of limitation. The adjudicating authority/Central Excise Officer would consider the defence and the contentions of the petitioners before passing the final order. Lest there be any confusion or ambiguity, we would observe that statements made in the settlement application, reports, settlement order etc. would be read and taken into consideration as per law. Show cause notices would be decided by the Central Excise Officer on merits after hearing the parties. Observations and findings recorded by us in the present judgment are for deciding the writ petitions. We have not decided the show cause notice on merits. In the facts and circumstances of the case, there would be no order as to costs. -sd- (SANJIV KHANNA) JUDGE -sd- (CHANDER SHEKHAR)

JUDGE DECEMBER 20th, 2018/ssn