THE HON'BLE SRI JUSTICE GODA RAGHURAM AND THE HON'BLE SRI JUSTICE M.S.RAMACHANDRA RAO C.E.A.Nos.54; 56 o”
06. 12-2012 M/s.Truwood Pvt. Ltd., Visakhapatnam. The Commissioner of Central Excise & Customs,Visakhapatnam C.E.A.NO.56 OF 200.M/s.Alpine Panels Private Limited, Visakhapatnam....APPELLANT The Commissioner of Central Excise & Customs,Visakhapatnam....RESPONDENT HEAD NOTE: Counsel for the appellant:Sri Shiv Das ^Senior Standing Counsel for the Revenue : Sri A.Rajasekhar Reddy ?Cases referred 1 It is the admitted case of the parties that the said provisions were amended by substitution with effect from 01-06-2007 by Section 121 of the Finance Act, 2007 and the amended provisions do not apply to the facts of the case. 22004) 1 S.C.C. 287 C.E.A.Nos.54 and 56 of 2008 COMMON JUDGMENT
(per Hon'ble Sri Justice M.S.Ramachandra Rao): The appellants in both these appeals filed under Section 35-G of the Central Excise Act, 1944 are assessees engaged in the manufacture of veneers, plywood, decorative plywood and block boards. The appeals are filed against the final order No. 1080-1083/2007 dated 06-09-2007 of the Customs, Excise and Service Tax Appellate Tribunal, Bangalore (for short 'CESTAT').
2. The facts leading to the filing of the above appeals are as under: In August, 2002, the Hyderabad Zonal Unit of the Directorate General of Central Excise, Intelligence (for short "DGCEI") started enquiries against the appellants. During the course of conducting the enquiries, the officers of the DGCEI recorded statements from the appellants' employees as well as from a few dealers. They also recovered certain private books and print outs at the premises of some of the dealers which allegedly contained details of actual prices chargeable for the plywood and of cash collected over and above the price indicated in the invoices issued by the appellants towards the sale of veneers/plywood/block boards.
3. A show cause notice dated 01-11-2003 was served on them contending (a) that the clearance of all excisable goods i.e. veneer made by the appellants during the financial years 1998-99 to 2002-03 (up to November 2002) were under valued resulting in short payment of duty, (b) that the amounts in excess of the invoice values were realized either through cash or through D.Ds., which was in- turn utilized for unaccounted expenditure and (c) the appellants in order to camouflage the excess amounts received through D.Ds. indulged in the fictitious sale of non-excisable goods like sawn timber door/window frames, trading etc. It proposed to demand from the Truwood Group consisting of the appellants and three other companies, a sum of Rs.21,48,55,018/- besides a penalty under Section 11-AC of the Central Excise Act, 1944 along with interest under Section 11 AB thereof.
4. A detailed reply dated 11-05-2004 was submitted rebutting the allegations made in the show cause notice by the appellants. On 11-05-2004, a personal hearing was provided to the appellants wherein the appellants also requested for permission to cross-examine the persons whose statements were recorded by the department.
5. The appellants also felt that it was appropriate to approach the Settlement Commission constituted under Section 32 of the Act and filed an application for settlement on 26-07-2004 under Section 32-E of the Act before the said Settlement Commission. On 28-07-2004, they informed the Commissioner of Central Excise, Visakhapatnam of filing of the above application before the Settlement Commission for settlement of the dispute and requested him not to adjudicate the matter.
6. Ignoring the said letter, the Commissioner of Central Excise proceeded to adjudicate the matter and passed the Order in Original No.14/2004 dated 30-07- 2004 wherein, as regards the appellant in CEA 5.of 2008, he dropped the demand of Rs.7,54,75,798/- and confirmed the demand of Rs.5,49,80,062/- under Section 11A (1) of the Act apart from an equivalent amount of penalty under Section 11AC of the Act. By the same order, as regards the appellant in CEA 5.of 2008, he dropped demand of Rs.3,77,46,799/- and confirmed the demand of Rs.2,67,20,666/- under Section 11A (1) of the Act apart from an equivalent amount of penalty under Section 11AC of the Act.
7. The total proposed demand in the show cause notice on the four group companies including the appellants was Rs.21,48,55,018/-. The Commissioner had reduced the demand to Rs.16,43,99,648/-.
8. The Settlement Commission, under Clause (1) of Section 32-F of the Act (as if stood then i.e. in 2003-04) called for a report from the Commissioner. He informed the Settlement Commission by letter dated 13-09-2004 that he had already adjudicated the matter and therefore the Settlement Commission had no jurisdiction to entertain the application.
9. Thereafter several hearings were held by the Settlement Commission in which the Revenue also participated. Vide admission order not A-341-342/CE/05-SC (PB) dated 31-05-2005, the Settlement Commission admitted the application filed by the appellants in which the appellants had declared and admitted a sum of Rs.1,16,23,724/- as duty payable in respect of the proceedings initiated by the show cause notice. It took note of the fact that the Commissioner of Central Excise, Visakhapatnam had passed an adjudication order even after the application for settlement was filed by the appellant and held that the said order was "non est" in the eye of law.
10. Challenging the same, the Revenue filed W.P.(C) No. 21055/2005 before the Delhi High Court only questioning the admission of the application filed by the appellants before the Settlement Commission but not challenging that portion of the order of the Settlement Commission wherein it had declared the Order dated 30-07-2004 in Order in Original No.14/2004 of the Commissioner of Central Excise as non est in law. By order dated 10-11-2005, the Delhi High Court held that the Settlement Commission was correct in law in admitting the application of the appellants for settlement under clause (1) of Section 32-F of the Act and its order did not suffer from want of jurisdiction.
11. This order was challenged in S.L.P.No.4715/2006 by the Revenue before the Supreme Court of India. On 10-07-2006, the S.L.P. was dismissed.
12. The appellants and the Revenue participated in the final proceedings before the Settlement Commission. Several hearings were held and a final order not F- 471-472/CE/07 SC(PB) dated 17-01-2007 was passed by the Settlement Commission rejecting the application for settlement filed by the appellants and remitting the case back to the adjudicating authority for adjudication of the matter in terms of the show cause notice dated 01-11-2003. This order was not challenged by the Revenue.
13. Meanwhile, the Revenue filed an appeal against that portion of the Order in Original No.14/2004 dated 30-07-2004 of the Commissioner of Customs and Central Excise, Visakhapatnam reducing the duty demand from Rs.21,48,55,018/- to Rs.16,43,99,648/-. It contended that the Commissioner had reduced the demand without properly bringing out as to how the method of quantification adopted in the show cause notice was not available, that he had allowed discount of 10% for certain years while calculating the value without any justification and that the dropping of demand on transaction between sister units on the ground of revenue neutrality was not proper.
14. These appeals of the Revenue were numbered as E/888/2005 and E/190/2005 by the Circuit Bench of the CESTAT, Hyderabad on 03-09-2007 and 05-09-2007.
15. The appellants herein (who were respondents in the appeal of the Revenue before the CESTAT) contended that the appeals by the Revenue are not maintainable as the order impugned is an order which has already been declared non est by the Settlement Commission in its order dated 31-05-2005; that the Chief Commissioner comprising the Committee of Revenue without examining the order by a Review Order directed the filing of the appeal against an order which did not exist on that day; that once the "case" has been sent back by the Settlement Commission by its order 17-01-2007 to the Commissioner for further disposal (as if no application for settlement is filed), the Revenue cannot pursue an appeal before the Tribunal as the whole order no longer existed. It was also contended on the merits that the Commissioner had correctly allowed discount of 10%; that since the duty paid by the appellants was available as credit to another unit in the same group, there could not have been any intention to evade payment of duty; and that the issues raised by the Revenue in these appeals could be examined in detail by the Commissioner if the matter was remanded.
16. The Tribunal vide final order No.1080-1083/07 dated 06-09-2007 impugned in these appeals held that there was no question of the Settlement Commission acquiring exclusive jurisdiction when an order of adjudication was passed before the admission of the application for settlement; that the appellate jurisdiction of the Tribunal cannot be taken away by the observation of the Settlement Commission that the adjudication order dated 30- 07-2004 was non est; and that the Settlement Commission did not have the power to decide upon the validity of the adjudication order. It further held that since the Committee of the Chief Commissioners is a statutory creation for a specific purpose of deciding whether the appeals have to be filed or not, the appeals filed by the Revenue against the impugned order were maintainable.
17. Challenging the said order, the present appeals have been filed by the assessees raising the following substantial questions of law; "(a) Whether the decision of the Tribunal is correct in holding that the adjudication order passed by the Commissioner of Central Excise, Visakhapatnam which was passed after filing of an application before the Settlement Commission under Section 32E of the Central Excise Act and was declared as "Non Est" by the Settlement Commission is valid in law. (b) Whether the decision of the Tribunal in holding that the Committee of Chief Commissioners can review an adjudication order passed by the Commissioner which has already been held as non est by the Settlement Commission is correct. (c) Whether the decision of the Tribunal in holding that the appeal filed by the Respondents against the order passed by the Commissioner is maintainable before the Hon'ble Tribunal under Section 35-B (1) (a) of the Central Excise Act and that the jurisdiction of the Tribunal was no way impaired by any observation of the Settlement Commission in its order dated 31-05-2005 that the adjudication order of the Commissioner is non est is correct. (d) Whether the decision of the Tribunal in holding that the Settlement Commission had no power to hold that the order of the Commissioner is non est is valid." 18. Heard Sri Shiv Das, learned counsel for M/s.Lakshmikumaran and Sreedharan for the appellants and Sri A.Raja Sekhar Reddy, learned Senior Standing Counsel for the Revenue.
19. The counsel for the appellants contended interalia: (a) that under Section 32E of the Act as it stood then, application for settlement can be filed once a show cause notice is issued and such an application would be entertained only if no appeal is pending before the Tribunal or any Court; that if an appeal is filed against an adjudication order, the Settlement Commission would not entertain an application for settlement; that in view of this, there is an embargo on an appeal being filed against any adjudication order that emanates in terms of the show cause notices which are the subject matter of the application for settlement before the Settlement Commission and therefore if an appeal cannot be filed, then an adjudication order also cannot be passed when the application for settlement is pending decision by the Settlement Commission. As on the date of the passing of the adjudication order in original by the Commissioner i.e. 30-07-2004, an application for settlement before the Settlement Commission had already been filed on 26-07-2004 and was pending and this was informed to the Commissioner by the appellants on 28-07-2004 itself. Therefore the Commissioner should have deferred adjudication of the matter. (b) that under Section 32-I (2) of the Act, where an application made under Section 32E has been allowed to be proceeded with under Section 32-F, the Settlement Commission (until an order is passed under sub section (7) of Section 32-F) has the exclusive jurisdiction to exercise the powers and perform the functions of any Central Excise Officer in relation to the "case" and it has all the powers which are vested in any Central Excise Officer under the Act. The admission by the Settlement Commission of the application for settlement vide its order dated 31-05-2005 took place after it took into account the letter dated 13-09-2004 of the Commissioner (informing the Settlement Commission about the passing of the adjudication order after the application for settlement was filed by the appellants). So the order of the Commissioner was non est in law having been passed after the application was filed for settlement. Therefore the view of the Tribunal (that the order of adjudication officer/Commissioner dated 30-07-2004 is correct), is perverse and unsustainable. It is also contended that the fact that the Delhi High Court and the Supreme Court have confirmed the order dated 31-05-2005 of the Settlement Commission admitting the application for settlement demonstrates that the Settlement Commission was correct in holding that the order of the Commissioner dated 30-07-2004 is non est in law.
20. Sri Rajasekhar Reddy, learned Senior Standing Counsel for the Revenue, supported the order of the Tribunal and contended interalia: (a) that there is no bar for the adjudicating officer/Commissioner to pass an adjudication order merely because an application for settlement was filed by an assessee before the Settlement Commission under Section 32E of the Act; (b) that on a true construction of the provisions of Section 32F and 32-I of the Act, the adjudicating officer's jurisdiction to pass an adjudication order is ousted only after an application for settlement was allowed to be proceeded with i.e. admitted by the Settlement Commission under clause (1) of Section 32F till the passing of a final order under Clause (7) of Section 32F of the Act and not prior to the passing of the order of admission by the Settlement Commission. (c) that the order of admission of the case by the Settlement Commission was passed on 31-05-2005, that only after 31-05-2005, there was a bar under Section 32-I (2) for the adjudication officer to pass an order once the application for settlement was admitted by the Settlement Commission (as exclusive jurisdiction is conferred on the Settlement Commission to exercise all the powers and perform all the functions of any Central Excise Officer under the Act until final order is passed under clause (7) of Section 32F of the Act). As the Commissioner passed the order on 30-07- 2004 prior to 31-05-2005, the bar under clause (2) of Section 32-I would not operate and invalidate the order passed on 30-07-2004 by the Commissioner.
21. We have considered the submissions of both parties.
22. Before dealing with the respective contentions it is necessary to note the provisions of Section 32E, 32F and 32I of the Central Excise Act at the relevant point of time i.e. in 2003-04 insofar as they are relevant1. Section 32E states as follows: "32E- Application for settlement of cases. (1) An assessee may, at any stage of a case relating to him make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer having jurisdiction, the manner in which such liability has been derived, the additional amount of excise duty accepted to be payable by him and such other particulars as may be prescribed including the particulars of such excisable goods in respect of which he admits short levy on account of misclassification or otherwise of such excisable goods, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided: Provided that no such application shall be made unless,- (a) The applicant has filed returns showing production, clearance and Central Excise duty paid in the prescribed manner; (b) show cause notice for recovery of duty issued by the Central Excise Officer has been received by the applicant; and (c) the additional amount of duty accepted by the applicant in his application exceeds two lakh rupees; Provided further that no application shall be entertained by the Settlement Commission under this sub-section in cases which are pending with the Appellate Tribunal or any Court: Provided also that no application under this sub- section shall be made for the interpretation of the classification of excisable goods under the Central Excise Tariff Act, 1985 (5 of 1986)" Section 32F states as follows: "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 call for a report from the Commissioner of Central Excise having jurisdiction and on the basis of the materials contained in such, report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded with or reject the application: Provided that an application shall not be rejected under this sub-section, unless an opportunity has been given to the applicant of being heard: Provided further that the Commissioner of Central Excise shall furnish such report within a period of one month of the receipt of the communication from the Settlement Commission, ailing which it shall be presumed that the Commissioner of Central Excise has no objection to such application;; but he may raise objections at the time of hearing fixed by the Settlement Commission for admission of the application and the date of such hearing shall be communicated by the Settlement Commission to the applicant and the Commissioner of Central Excise within a period of not exceeding two months from the date of receipt of such application, unless the presiding officer of the Bench extends the time, recording the reasons in writing. (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) Subject to the provisions of sub-section (4), the applicant shall within thirty days of the receipt of a copy of the order under sub-section (1) allowing the application to be proceeded with, pay the amount of additional duty admitted by him as payable and shall furnish proof of such payment to the Settlement Commission. (4) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee that he is unable for good and sufficient reasons to pay the amount referred to in sub-section (3), within the time specified in that sub-section, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by instalments, if the assessee furnishes adequate security for the payment thereof. (5) Where the additional amount of duty referred to in sub-section (3) is not paid by the assessee within the time specified or extended period, as the case may be, the Settlement Commission may direct that the amount which remains unpaid, together with simple interest at the rate of eighteen per cent per annum or at the rate notified by the Central Board of Excise and Customs from time to time on the amount remaining unpaid, be recovered, as the sum due to Central Government by the Central Excise Officer having jurisdiction over the assessee in accordance with the provisions of section 11. (6) Where an application is allowed to be proceeded with under sub-section (1), the Settlement Commission may call for the relevant records from the Commissioner of Central Excise having jurisdiction and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner (Investigation) to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case. (7) After examination of the records and the report of the Commissioner of Central Excise received under sub-section (1), and the report, if any, of the Commissioner (Investigation) of the Settlement Commission under sub- section (6), 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 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 Commissioner of Central Excise and Commissioner (Investigation) under sub- section (1) or sub-section (6). Section 32-I states as follows: "Section 32-I: Powers and procedure of Settlement Commissions.-- (1) In addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in a Central Excise Officer under this Act or the rules made thereunder. (2) Where an application made under section 32E has been allowed to be proceeded with under section 32F, the Settlement Commission shall, until an order is passed under sub-section (7) of section 32F, have, subject to the provisions of sub-section (6) of that section, exclusive jurisdiction to exercise the powers and perform the functions of any Central Excise Officer, under this Act in relation to the case." 23. In our view under clause (7) of Section 32F of the Act, the Settlement Commission after considering the records and the reports of the Commissioner of Central Excise and Commissioner (Investigation) received under sub section (1) and under sub section (6) respectively and after hearing the parties may pass an order on (i) the matters covered by the application and (ii) any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner of the Central Excise and the Commissioner (Investigation) under sub section (1) or sub section (6).
24. Admittedly in the report submitted under sub section (1) of Section 32F of the Act to the Settlement Commission on 13-09-2004, the Commissioner of Central Excise stated that the matter had already been adjudicated by him in his Order in Original No.14/2004 dated 30-07-2004 and therefore the Settlement Commission has no jurisdiction to entertain application for settlement filed by the appellants. After considering the same, the Settlement Commission had admitted the application of the appellants for settlement vide admission order not A-341- 342/CE/05-SC (PB) dated 31-05-2005. This order also held that the Order in Original No.14 of 2004 of the Commissioner of Central Excise dated 30-07-2004 is non est in eye of law. The admission of the application by the Settlement Commission alone was challenged before the Delhi High Court and the Supreme Court by the Revenue and the said challenge was negatived by order dated 10-11- 2005 in W.P.No.21055/2005 and SLP No.4715/2006 dated 10-07-2006.
25. In view of the language of clause (7) of Section 32F of the Act, the Settlement Commission was entitled to pass final orders not only in relation to matters covered by the application for settlement but also 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 (1) or sub section (6). The matter relating to the lack of jurisdiction of the Settlement Commission was specifically raised by the Commissioner of Central Excise in his report dated 13-09-2004 submitted to the Settlement Commission under clause (1) of Section 32F and the said issue has been decided by the Settlement Commission in its order of admission dated 31-05- 2005. Therefore its finding that the order of the Commissioner of Central Excise dated 30-07-2004 is non est in law is a finding given by it in exercise of jurisdiction conferred on it under Section 32F (7). Therefore, it cannot be said that the said finding given by the Settlement Commission is without jurisdiction. Therefore the said order of the Settlement Commission cannot be denuded of its efficacy by any collateral attack or in incidental proceedings. In Rafique Bibi (Dead) by L.Rs. v. Sayed Waliuddin (dead) by L.Rs. and Others2, at para8, it was held as follows: "A distinction exists between a decree passed by a Court having no jurisdiction and consequently being a nullity and not executable and a decree of the Court which is merely illegal or not passed in accordance with the procedure laid down by law. A decree suffering from illegality or irregularity of procedure, cannot be termed inexecutable by the executing Court; the remedy of a person aggrieved by such a decree is to have it set aside in a duly constituted legal proceedings or by a superior Court failing which he must obey the command of the decree. A decree passed by a Court of competent jurisdiction cannot be denuded of its efficacy by any collateral attack or in incidental proceedings." 26. As this portion of the order of the Settlement Commission dated 31-05-2005 was admittedly not challenged by the Revenue in W.P.No.21055 of 2005 or in S.L.P.No.4715 of 2006, the Revenue is barred by the principle of constructive resjudicata from reagitating the said finding of the Settlement Commission before the Tribunal collaterally. The Tribunal therefore is bound to proceed on the footing that the order dated 30-07-2004 of the Commissioner is non est in law and therefore it ought to have held in the impugned orders that the Revenue could not have challenged the order dated 30-07-2004 of the Commissioner in the appeals E/888/2005 and E/890/2005 before it. It should have therefore rejected the said appeals filed by the Revenue as not maintainable.
27. As the Settlement Commission in its final order dated 17-01-2007 had rejected application for settlement and remitted the case back to the adjudicating authority for adjudication of the matter in terms of the show cause notice dated 01-11-2003, the said authority should consider the matter afresh uninfluenced by the order in original No.14/2004 dated 30-07-2004 of the Commissioner of Central Excise, the order dated 17-01-2007 of the Settlement Commission or the impugned orders dated 06-09-2007 of the CESTAT.
28. Therefore the appeals are allowed and the impugned orders of the CESTAT are set aside. ____________________________ JUSTICE GODA RAGHURAM __________________________________ JUSTICE M.S.RAMACHANDRA RAO Date: -12-2012