Research › Search › Judgment

Gujarat High Court · body

2014 DIGILAW 789 (GUJ)

Mann Pharmaceuticals Ltd. v. Union of India

2014-07-16

K.J.THAKER, M.R.SHAH

body2014
JUDGMENT Mukesh R. Shah, J. 1. JUDGMENT Mukesh R. Shah, J. 1. By way of this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following main reliefs:- "(a) That this Hon'ble Court maybe pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India, calling for the records of the petitioner's case and after going into the validity and legality thereof to quash and set aside the Final Order No. F. No. 113/CEX/JRG/2012/SC(MB), dated 30-4-2013 passed by the respondent No. 3 in Settlement Application No. SA(E)261/2012 and further direct the respondent No. 4 not to proceed with the adjudication of the said SCN bearing No. F. No. DGCI/AZU/36-120/2009, dated 23-12-2009; (b) That this Hon'ble Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ or order or direction under Article 226 of the Constitution of India ordering and directing the respondents themselves, their officers and subordinates to refrain from acting upon or taking any further proceedings in pursuance of and/or in implementation and/or in furtherance of the impugned Final Order No. F. No. 113/CEX/JRG/2012/SC(MB), passed by the Settlement Commission in Settlement Application No. SA(E)261/2012; (c) That this Hon'ble Court be pleased to restore the matter back to the files of the respondent No. 3 and direct it to issue appropriate orders including the demand under Section 11D of the Central Excise Act, 1944 after complying with the principles of natural justice; (d) That alternatively this Hon'ble Court be pleased to hold that the respondent No. 3 is empowered to settle the part of the show cause notice and accordingly restore the matter back to the files of the respondent No. 3 and direct it to issue appropriate orders on all the issues except the demand under Section 11D of the Central Excise Act, 1944 and the issue for the demand under Section 11D of the Central Excise Act, 1944 may please be remitted to the adjudicating authority for decision after complying with the principles of natural justice." Facts leading to the present Special Civil Application, in nutshell, are as under:- 2.1 That the respondent No. 4 issued Show Cause Notice upon the petitioner calling upon the petitioner to show cause as to why the petitioner shall not be held liable to pay a total sum of Rs. 1,38,09,615/- towards the duty demanded which included (1) demand of credit to be reversed on input removed as such (2) differential duty on account of showing lower RSP (3) demand u/s. 11D as per parallel invoices issued for obtaining finance and (4) demand of interest on differential duty against the invoices raised. 2.2 That having served with the aforesaid Show Cause Notice, the petitioner submitted application before the Excise and Central Excise Settlement Commissioner (hereinafter referred to as "the Settlement Commission") under Section 32E of the Central Excise Act (hereinafter referred to as "the Act") accepted the liability to the extent of Rs. 1,02,95,768/- along with the interest on the said admitted duty, however, did not accept the duty liability claimed under Section 11D as per parallel invoices issued for obtaining finance. The said application was submitted on 18-6-2012. 2.3 It appears that along with the said application for settlement, the petitioner paid additional amount of excise duty accepted by him along with interest due under Section 11AB i.e. on Rs. 1,02,95,768/-. It appears that thereafter having satisfied that the petitioner has complied with all requirements as required under Section 32E of the Act, the Settlement Commission passed order on 8-3-2013 under Section 32F of the Act allowing the said application to be proceeded with and granted opportunity to the petitioner as well as Jurisdictional Commissioner of Customs having jurisdiction over the case as provided and/or required to be granted under Section 32F(5) of the Act. It appears that the petitioner insisted that either dispute with respect to demand of duty claimed under Section 11D as per parallel invoices issued for obtaining finance i.e. with respect to demand of Rs. 35,13,847/- be adjudicated upon and decided by the Settlement Commission or the same may be sent to the concerned adjudicating authority to adjudicate the Show Cause Notice with respect to the said demand. It appears that as such the concerned Commissioner having jurisdiction sent its report to the Settlement Commission as per Section 32F(4) of the Act. It appears that, however, the Settlement Commission was of the opinion that the contention of the petitioner with respect to Section 11D is a question of law which may be beyond the purview of the Commission to settle. It appears that, however, the Settlement Commission was of the opinion that the contention of the petitioner with respect to Section 11D is a question of law which may be beyond the purview of the Commission to settle. It appears that in view of the above, the learned advocate representing the petitioner suggested that the application may be settled only in respect of the first two issues, where duty demand has been accepted by the petitioner and the third issue relating to Section 11D may be referred to the adjudicating authority for deciding as per law. However, the learned Settlement Commission did not agree with the same, neither decided the issue relating to Section 11D though required to be decided and passed order under Section 32F(5) of the Act nor accepted the suggestion made by the learned advocate appearing on behalf of the petitioner that the case may be settled only in respect of first two issues where duty demand has been accepted by the petitioner and the third issue relating to Section 11D may be referred to the adjudicating authority for deciding as per law. However, the learned Settlement Commission was of the opinion/view that the petitioner has failed to cooperate in the proceedings before the Commission and the demand of duty amounting to Rs. 35,13,847/- under Section 11D of the Central Excise Act has not been accepted and rather legal issue i.e. applicability of Section 11D where there is no removal/sale of goods under an invoice has been raised and the request to split the application and settle it partially is also not correct and therefore rejected the said application in exercise of power under Section 32L of the Act and passed an order that the application filed by the petitioner - Mann Pharmaceuticals Ltd. on 30-7-2012 be sent back to the concerned Central Excise Department having jurisdiction i.e. Commissioner of Central Excise, Ahmedabad-III, as if application under Section 32E of the said Act has not been made. 2.4 Feeling aggrieved and dissatisfied with the impugned order passed by the Settlement Commission, the petitioner has preferred the present Special Civil Application under Article 226 of the Constitution of India. 2. Mr. 2.4 Feeling aggrieved and dissatisfied with the impugned order passed by the Settlement Commission, the petitioner has preferred the present Special Civil Application under Article 226 of the Constitution of India. 2. Mr. S.N. Thakkar, learned advocate appearing on behalf of the petitioner has, at the outset stated at the bar that the petitioner is not insisting to accept their request as suggested by his advocate before the Settlement Commission that the application may be settled only in respect of the two issues where duty demand has been accepted by the petitioner and the third issue relating to Section 11D may be referred to the adjudicating authority for deciding as per law. However, has submitted that the once application submitted by the petitioner before the Settlement Commission on compliance of all requirement under Section 32E and thereafter i.e. on payment of additional amount of excise duty accepted by the petitioner along with interest due under Section 11AB and thereafter application before the Settlement Commission was permitted to be allowed to be proceeded by passing an order under Section 32F(1) of the Act. That thereafter the Settlement Commission was required to pass a final order under Section 32F(5) of the Act. It is submitted that as such the Commissioner was required to pass a final order under Section 32F(5) of the Act after following due procedure as required under Section 32F of the Act more particularly Sections 32F(3), 32F(4) and 32F(5). It is submitted that in the present case, as such, by order/notice dated 8-3-2013, an opportunity of being heard was granted to the petitioner as well as the Jurisdictional Commissioner of Customs having jurisdiction over the case as required to be provided under Section 32F(5) of the Act. It is submitted that as such even the Commissioner also submitted report. It is submitted that therefore, the Settlement Commission was required to pass an order and determine the amount of duty, interest, fine and penalty, after following due procedure as required under Section 32F(5) of the Act. It is submitted that in the present case, the learned Settlement Commission has failed to exercise powers under Section 32F(5) of the Act and has materially erred in holding and/or observing that the Commission is not required decide the issue with respect to duty claimed under Section 11D of the Act. It is submitted that in the present case, the learned Settlement Commission has failed to exercise powers under Section 32F(5) of the Act and has materially erred in holding and/or observing that the Commission is not required decide the issue with respect to duty claimed under Section 11D of the Act. It is submitted that the learned Settlement Commission has materially erred in rejecting the application submitted by the petitioner and passing order under Section 32L of the Act by observing that duty of demand amounting to Rs. 35,13,847/- under Section 11D of the Central Excise Act has not been accepted and rather legal issue i.e. applicability of Section 11D where there is no removal/sale of goods under an invoice has been raised. It is submitted that as such while approaching the Settlement Commission under Section 32E of the Act, it was not incumbent upon the petitioner to accept the whole demand of duty as per the Show Cause Notice. It is submitted that as such while submitting the application for settlement of case under Section 32E of the Act, the petitioner was required to make an application in such form and in such manner as may be prescribed and containing full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer having jurisdiction, manner in which such liability has been derived, additional amount of excise duty accepted to be payable by him and such other particulars may be prescribed including the particulars of such excisable goods in respect of which he admits short levy on account of misclassification, undervaluation, inapplicability of exemption notification or Cenvat credit or otherwise. It is submitted that along with the said application the petitioner was required to pay additional duty of excise duty accepted by him along with interest due and under Section 11AB. It is submitted that therefore, as such it was not incumbent upon the petitioner to accept the entire demand raised in the Show Cause Notice. It is submitted that along with the said application the petitioner was required to pay additional duty of excise duty accepted by him along with interest due and under Section 11AB. It is submitted that therefore, as such it was not incumbent upon the petitioner to accept the entire demand raised in the Show Cause Notice. It is submitted that the petitioner may accept the duty liability claimed by Show Cause notice partially and approach the Settlement Commission accepting the liability to the extent the petitioner accept the liability and with respect to the rest of the dispute, after calling the report from the Commissioner, the Settlement Commission is required to pass an appropriate order under Section 32F(5) of the Act after giving opportunity to the petitioner as mentioned in Section 32F(5) of the Act. It is submitted that therefore, the observations made by the Settlement Commission that as the petitioner has not accepted the demand duty amounting to Rs. 35,13,847/- under Section 11D of the Central Excise Act and rest of the legal issue with respect to applicability of Section 11D of the Act and rejection of application on the aforesaid and treating the same as non-cooperation and thereby passing order under Section 32L of the Act cannot be sustained and the same deserves to be quashed and set aside and the Settlement Commission ought to have passed an appropriate order on the issue relating to demand raised under Section 11D of the Act by exercising power under Section 32F(5) of the Act. Making above submissions it is requested to allow the present Special Civil Application by quashing and setting aside the impugned order passed by the Settlement Commission and remand the matter to the learned Settlement Commission to decide the issue with respect to the demand of duty raised under Section 11D of the Act after following due procedure as required under Section 32F of the Act. 3. Ms. Manisha Lavkumar, learned advocate has appeared on behalf of the Department. 3. Ms. Manisha Lavkumar, learned advocate has appeared on behalf of the Department. It is submitted that as such the learned advocate appearing on behalf of the petitioner suggested that the Settlement Commission may pass order with respect to two demands which were admitted by the petitioner and with respect to third issue relating to Section 11D of the Act to the adjudicating authority and the same is rightly rejected by the Commission, as the same is not permissible under the law more particularly under Section 32F of the Act. However, Ms. Manisha Lavkumar, learned advocate appearing on behalf of the Department is not in a position to seriously dispute that even with respect to third issue relating to Section 11D and demand of duty amounting to Rs. 35,13,847/- under Section 11D of the Act, Settlement Commission was required to pass appropriate order under Section 32(F) of the Act. It is submitted that as such on facts and considering the report submitted by the Commissioner which was submitted under Section 32F of the Act, the Department is justified in raising demand of Duty under Section 11D of the Act. However, she is not in a position to dispute that if that be so and after giving an opportunity to the petitioner to meet with the same, the Settlement Commission was required to pass appropriate order under Section 32F(5) of the Act. Heard the learned advocates appearing on behalf of the respective parties at length. 3.1 At the outset, it is required to be noted that a show cause notice came to be issued upon the petitioner raising demand of Rs. 1,38,09,615/- with respect to (1) demand of credit to be reversed on input removed as such (2) differential duty on account of showing lower RSP (3) demand u/s. 11D as per parallel invoices issued for obtaining finance and (4) demand of interest on differential duty against the invoices raised. However, the petitioner submitted application before the Settlement Commission under Section 32E of the Act accepting duty liability to the extent of Rs. 1,02,95,768/- and interest on the said admitted duty. The petitioner did deposit the entire additional duty on the aforesaid accepted duty amount i.e. Rs. 1,02,95,768/- and the interest thereon. However, the petitioner submitted application before the Settlement Commission under Section 32E of the Act accepting duty liability to the extent of Rs. 1,02,95,768/- and interest on the said admitted duty. The petitioner did deposit the entire additional duty on the aforesaid accepted duty amount i.e. Rs. 1,02,95,768/- and the interest thereon. It appears that thereafter having satisfied that all requirements under Section 32E of the Act has been complied with and/or satisfied, the Commissioner passed an order under Section 32F of the Act allowing the petitioner to proceed with the Settlement Application. However, it also transpires that thereafter the Settlement Commissioner gave an opportunity to the petitioner as well as Jurisdictional Commissioner as required under Section 32F(5) of the Act and the concerned Commissioner did send the report. However, thereafter without passing any final order under Section 32F(5) of the Act, the learned Commission passed order under Section 32L of the Act by observing in paragraph Nos. 6.6 and 6.7 as under: "6.6. During the course of hearing on 22-3-2013, it was pointed out by Bench that the applicant contention with regard to Section 11D had raised question of law which may be beyond the purview of the commission to settle. The ld. Advocate representing the applicant thereupon suggested that the application in this case may be settled only in respect of first two issues where duty demand has been accepted by the applicant and the third issue relating to Section 11D may be referred to the adjudicating authority for deciding as per law. 6.7 Looking to the facts circumstance of this case the Bench finds that the applicants have failed to cooperate in the proceeding before this Commission. The demand of duty amounting to Rs. 35,13,847/- under Section 11D of the Central Excise Act has not been accepted and rather a legal issue i.e. applicability of Section 11D where there is no removal/sale of goods under an invoice has been raised. The demand of duty amounting to Rs. 35,13,847/- under Section 11D of the Central Excise Act has not been accepted and rather a legal issue i.e. applicability of Section 11D where there is no removal/sale of goods under an invoice has been raised. Their request to split the present application and settle it partially is also not correct and therefore rejected." 3.2 Considering the provisions of law, more particularly Section 32E and 32F of the Act, the Settlement Commission is justified in not accepting the suggestion made by the learned advocate appearing on behalf of the petitioner that the case may be settled only in respect of first two issues where duty demand has been accepted by the petitioner and the third issue relating to Section11D may be referred to the adjudicating for deciding as per law. However, the learned Settlement Commission has erred in rejecting the application by observing that the demand of duty amounting to Rs. 35,13,847/- under Section 11D of the Act has not been accepted by the petitioner. It is required to be noted that while approaching the Settlement Commission and while making the application before the Settlement Commission, the only requirement is as per Section 32F of the Act, which reads as under :- Section 32F. Procedure on receipt of an 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 an application, issue a notice to the applicant to explain in writing as to why the application made by him shall 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 Commissioner of Central Excise having jurisdiction. (2) A copy of every order under sub-section (1), shall be sent to the applicant and to the Commissioner of Central Excise having jurisdiction. (3) Where an application is allowed or deemed to have been allowed to be proceeded with under sub-section (1), the Settlement Commission shall, within seven days from the date of order under sub-section (1) call for a report along with the relevant records from the Commissioner of Central Excise having jurisdiction and the Commissioner shall furnish the report within a period of thirty days of the receipt of the communication from the Settlement Commission: Provided that where the Commissioner does not furnish the report within the aforesaid period of thirty days, the Settlement Commission shall proceed further in the matter without the report of the Commissioner. (4) Where a report of the Commissioner called for under sub-section (3) has been furnished within the period specified in that sub-section, the Settlement Commission may, after examination of such report, if it is of the opinion that any further inquiry or investigation in the matter is necessary direct, for reasons to be recorded in writing, the Commissioner (investigation) within fifteen days of the receipt of the report, to make or cause to be made such further inquiry or investigation and furnish the report within a period of ninety days of the receipt of the communication from the Settlement Commission on the matter covered by the application and any other matter relating to the case: Provided that where a Commissioner (investigation) does not furnish the report within the aforesaid period, the Settlement Commission shall proceed to pass an order under sub-section (5) without such report. (5) After examination of records and the report of the Commissioner of Central Excise received under sub-section (3), and the report, if any, of the Commissioner (investigation) of the Settlement Commission under subsection (4), and after giving an opportunity to the applicant and to the Commissioner of Central Excise having jurisdiction to be heard, either in person or through a representative duly authorized in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as 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 Commissioner of Central Excise and Commissioner (investigation) under sub-section (3) or sub-section (4). (6) An order under sub-section (5) shall not be passed in respect of any application filed on or before the 31st day of May, 2007, later than the 29th day of February, 2008 and in respect of an application made on or after the 1st day of June, 2007, after nine months from the last day of the month in which the application was made, failing which the settlement proceedings shall abate, and the adjudicating authority before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application under Section 32E has been made: Provided that the period specified under this sub-section may, for reasons to be recorded in writing, to be extended by the Settlement Commission for a further period not exceeding three months. (7) Subject to the provision of Section 32A, 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, in relation to the passing of such order, the provisions of Section 32B shall apply. (7) Subject to the provision of Section 32A, 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, in relation to the passing of such order, the provisions of Section 32B shall apply. (8) The order passed under sub-section (5) shall provide for the terms of settlement including any demand by way of duty, penalty or interest, the matter in which any sums due under the settlement shall be paid and all other matters to make the settlement effective and in case of rejection contained the reasons therefore and it shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentations of facts: Provided that the amount of settlement ordered by the Settlement Commission shall not be less than the duty liability admitted by the applicant under Section 32E. (9) 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 remains unpaid, shall be recovered along with interest due thereon, as the sums due to the Central Government by the Central Excise Officer having jurisdiction over the assessee in accordance with the provisions of Section 11. (10) Where a settlement becomes void as provided under sub-section 8, the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the Central Excise Officer having jurisdiction may, notwithstanding anything contained in any other provision of this Act, complete such proceeding at any time before the expiry of two years from the date of the receipt of communication that the Settlement became void." 3.3 At that stage, the petitioner is not supposed to accept the entire duty liability and/or liability as per the show cause notice. As per the requirement of Section 32E, the petitioner is required to make an application in such form and in such manner as may be prescribed and containing full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer having jurisdiction, manner in which such liability has been derived, additional amount of excise duty accepted to be payable by him and such other particulars may be prescribed including the particulars of such excisable goods in respect of which he admits short levy on account of misclassification, undervaluation, inapplicability of exemption notification or Cenvat credit or otherwise and is supposed to and is required to pay additional amount of excise duty accepted by him along with interest due under Section 11AB. Considering the Scheme of the Act under Section 32F, as per Chapter 5, more particularly Section 32E onwards, thereafter the Settlement Commission is required to pass appropriate order under Section 32F(5) of the Act and determine the amount of duty, interest, fine and penalty on the issue which is not accepted by the petitioner and for which dispute has been raised, after following due procedure as required under Section 32F(3) to 32F(5) of the Act. In the present case, the learned Settlement Commission has materially erred in not exercising the jurisdiction and passing order under Section 32F(5) of the Act with respect to demand of duty amounting to Rs. 35,13,847/- under Section 11D of the Act, which was disputed by the petitioner. According to Ms. Manisha Lavkumar, learned advocate appearing on behalf of the Department, as such, as per the report submitted by the Commissioner, duty liability under Section 11D of the Act raised by the department has been established. If that be so, in that case also, after giving an opportunity of being heard to the petitioner to meet with the report submitted by the Commissioner, Settlement Commission was required to pass appropriate order as per Section 32F(5) of the Act, which the learned Commissioner has failed to do. If that be so, in that case also, after giving an opportunity of being heard to the petitioner to meet with the report submitted by the Commissioner, Settlement Commission was required to pass appropriate order as per Section 32F(5) of the Act, which the learned Commissioner has failed to do. Under the circumstances, the impugned order deserves to be quashed and set aside and the matter is to be remanded to the learned Settlement Commission to pass appropriate order in accordance with law and on merits and after following due procedure as required under Section 32F of the Act and pass appropriate order under Section 32F(5) of the Act even with respect to the third issue i.e. demand of duty amounting to Rs. 35,13,847/-, under Section 11D of the Central Excise Act and pass appropriate order on the same and thereafter, after such determination, the petitioner is liable to make such payment and if the amount, if any, due and payable under Section 32F(5) of the Act is not paid, necessary consequences as mentioned under Section 32(9) shall follow. The aforesaid exercise shall be completed within a period of six months from the date of receipt of writ of the present order. Rule is made absolute to the aforesaid extent. In the facts and circumstances of the case, there shall be no order as to costs.