- (1.) BY way of this petition under Article 226 of the Constitution of India, the petitioners have prayed for an appropriate writ, order and/or direction striking down Section 32F(6) of the Central Excise Act, 1944 (hereinafter referred to as "the Act") thereby holding and declaring that settlement proceedings shall not abate even if the Settlement Commission did not pass within time limit specified under Section 32F(6) a final order setting the case in respect of application filed on or after the 1st day of June, 2007. The petitioners have also further prayed for an appropriate writ, order and/or direction quashing and setting aside the order No.01/Final Order/CEX/KNA/2012 made by the Settlement Commission, Bombay on 3/1/2012 thereby directing the Settlement Commission to consider and decide settlement application No.SA(E)440/2010 filed by the petitioners for settlement of case arising out of Show Cause Notice F.No.DGCEI/AZU/12(4)19/2007 -08 dtd. 8/1/2010 issued by the Additional Director General, DGCEI, Zonal Unit, Ahmedabad, on merits.
(2.) THAT the petitioner No.1 is a Partnership Firm (hereinafter referred to as "the petitioner"). The petitioner No.2 is Partner of the petitioner No.1 firm. The petitioner firm is engaged in the business of manufacture of Patent of Proprietary medicines. That the petitioner firm was availing SSI exemption allowed by virtue of Notification No.8/2003 -CE issued by the Central Government. That the respondent No.4 initiated inquiry against the petitioners in the month of July, 2007. That the petitioners were served with the show cause notice by the respondent No.4 dtd. 8/1/2010, by which the petitioners were directed to show cause as to why Central Excise Duty amounting to Rs.1,34,52,047/ - towards Cenvat duty, plus education cess plus Higher Education Cess should not be demanded and recovered from them under section 11A of the Act and amount of Rs.20,00,000/ - voluntarily deposited by them during the course of investigation should not be confirmed and appropriated against the aforesaid demand of duty of Rs.1,34,52,047/ -, with interest at the prescribed rates should not be levied and recovered from them under the provisions of Section 11AB of the Act and penalty should not be imposed upon them under section 11AC of the Act and Rule 25 of the Central Excise Rules, 2002 for their acts and omission and commission as mentioned in the show cause notice. 2.1. That having served with the aforesaid show cause notice, the petitioners submitted appropriate application before the Settlement Commission under section 32E of the Act in the prescribed format and after complying with all requirements as provided under section 32E of the Act. That by approaching the Settlement Commission, the petitioners accepted the duty liability to the extent of Rs.51,04,783/ - as against the Central Excise duty of Rs.1,34,52,047/ - demanded in the show cause notice dtd. 8/1/2010. It is submitted that the said application was submitted on 18/12/2010. As per the record of the proceedings, hearing before the Settlement Commission was held on 4/5/2011. It appears that the learned advocate appearing on behalf of the petitioners submitted that they are not disputing clandestine clearance of medicaments or wrong availment of SSI benefit under Notification No.8 of 2003 -CE dtd. 1/3/2003 and that their prayer before the commission is limited to the plea that the figures of clandestine clearances of medicaments and wrong availment of SSI benefit and resultant differential Central Excise duty payable as worked out by the DGCEI, as alleged in the SCN, are incorrect figures and that they need to be substantially revised and further that the benefit of Cenvat Credit on inputs/raw materials should be allowed to them. It appears that on 4/5/2011 Settlement Commission heard the learned advocate appearing on behalf of the petitioners as well as the representative for revenue i.e. Senior DGCEI, ZAU. That the Settlement Commission adjourned the matter by observing in para 4.1 to 4.3 as under : "4.1. After hearing both sides, the Bench observed that there is high degree of variation between the facts and contentions raised by both the sides. The applicants have admitted duty liability of only Rs.51,04,783/ - as against the total demand of duty of Rs.1,34,52,047/ - raised in the show cause notice. Thus, while the applicants have made a disclosure by admitting part of the duty liability proposed against them in the show cause notice, they have raised several complex and contentious questions of fact to contest the sustainability of balance duty liability on multiple counts. The revenue have, on the other hand, strongly emphasized upon the correctness of duty as calculated and demanded in the show cause notice, mainly stressing upon their contention that various invoices and other documents now proposed to be relied upon by the applicant in the settlement proceedings were never disclosed or produced during the course of investigations into the case. 4.2. The Bench emphasized upon both the sides that the Settlement Commission is not the appropriate forum for resolving contentious disputes involving extensive scrutiny of voluminous facts and evidence for adjudging facts which stand proved or otherwise, since the scope and object of scheme of settlement of cases as enshrined in Chapter V of the Act is settlement and not adjudication of highly disputed questions of facts. Nevertheless, the Bench appreciates that in the present case the Revenue has not outrightly rejected the applicant's contentions as completely baseless but has questioned the veracity of applicant's claim by arguing that facts and evidence now relied upon by the applicant were never disclosed or produced during investigation or it has prayed that the Bench may direct the applicant to produce documents supporting its claim for examination and verification by the Revenue. 4.3. In view of the above circumstances, the Bench considers it appropriate to direct both the applicant and the Revenue to carry out a joint exercise whereby the applicant shall produce and submit to Revenue within a fortnight from today all documents and records on which it proposes to rely on for substantiating its claim for recalculating the duty liability on various counts. Revenue may thereafter carry out necessary scrutiny verification and such further enquiry as deemed appropriate to affirm the correctness of the applicant's contentions for revision of duty liability. The applicant is directed to fully co -operate with Revenue during such verification and enquiry and provide such further information and clarification on documents so produced as may be desired by Revenue. The applicant and Revenue shall both endeavour to jointly arrive at admissible reductions in duty liability on each of the various counts contended by the applicant and the revision in aggregate duty liability which may thus be called for. If, however, the Revenue finds that the claim of the applicant is not factually or evidentially tenable in relation to one or more counts, it may clearly state the grounds for rejecting the applicant's contention in its Report to be furnished on completion of the joint exercise within a period of two months from the date of hearing. Revenue shall endorse a copy of its further Report to the applicant who may decide to make additional disclosures, if any, and seek suitable modification of its application or may file a re -joinder in response to Revenue's Report within one week of receiving it." 2.2. That thereafter the matter was heard by the Settlement Commission on 5/10/2011 and the matter was again adjourned on 21/10/2011 by directing the revenue to complete the exercise of verification within a period of 15 days and submit a final tabulated chart and the original applicant was also directed to extend full cooperation so that the matter gets disposed of early. It appears that thereafter in the meantime, 12 months from the date of submitting application has expired, and therefore, the Settlement Commissioner has passed the impugned order of determining proceedings as having been abated and remitting the matter to the adjudicating authority in terms of section 32F of the Act by observing that there is a non -cooperation from the office of the respondent No.4 DGCEI, Ahmedabad. Being aggrieved by and dissatisfied with the impugned order of abatement of the proceedings passed by the Settlement Commission, petitioners have preferred present Special Civil Application challenging the vires of Section 32F(6) of the Central Excise Act, 1944.
(3.) MR .Paresh Dave, learned advocate appearing on behalf of the petitioners has vehemently submitted that provisions of Section 32F(6) of the Central Excise Act are ultra vires the Constitution and/or violative of Article 14 of the Constitution of India. It is submitted that Section 32F(6) of the Act, which prescribes the time limit for deciding the Settlement application within a period of 9 months from the date of submitting application with a further extension to the extent of 3 months and not passing a final order by the Settlement Commission within the stipulated time mentioned in the said provision to declare the proceedings abated and remit the case to the adjudicating authority, even when the applicant is not at fault, is nothing but punishing a person for no fault of him and the same can be said to be violative of Article 14 of the Constitution of India. 3.1. Mr.Dave, learned advocate appearing on behalf of the petitioners has submitted that on true and harmonious interpretation, section ought to be read as providing for abatement only with respect of such applications wherein the applicant in any manner prevented the Settlement Commission from passing a final order within the stipulated time stated in Section 32F(6) of the Act. It is submitted that any other interpretation would result in section being struck down. It is submitted that the effect of declaring the proceedings abated as provided under Section 32F(6) of the Act would be prejudiced to the interest of the petitioners as the petitioners were induced to part with the confidential information based on the bonafide belief and legitimate expectations that the settlement order would be passed and the confidential information disclosed by the petitioners would not be made available to the authorities for use against the petitioners in assessment proceedings, penalty and other proceedings launched by the department. It is submitted that thus, the provisions which stipulates abatement of the application for no fault of the petitioners would be violative of Article 14 of the Constitution of India. 3.2. It is further submitted by Mr.Dave, learned advocate appearing on behalf of the petitioners that even the confidential material / information disclosed in strict confidence to the Commission being made available to the Assessing Officer can be used not only for making assessments but also for levying penalty and criminal prosecution. It is submitted that if the proceedings are not declared abated under Section 32F(6) of the Act, and application of the petitioners is decided and disposed of by the Settlement Commission on merits considering the material disclosed by the petitioners, in that case, even the petitioners' case for immunity from prosecution, as provided under Section 32K of the Act, would be considered. It is submitted that, however, on declaring the proceedings abated by the Settlement Commission, considering Section 32F(6) of the Act, the Settlement Commission could not pass final order, reasons which are not attributed to the petitioners, the petitioners cannot be made to suffer. It is further submitted that even criteria for abatement as per Section 32F(6) of the Act being inability of the Commission to dispose of the application within stipulated time mentioned in the said provision, is not a valid and reasonable one in the eyes of law and suffers from vice of inoperative and violative of Article 14 of the Constitution of India. 3.3. It is further submitted by Mr.Dave, learned advocate appearing on behalf of the petitioners that in the present case as observed by the Settlement Commission, there was noncooperation on the part of the revenue and therefore, the Settlement Commission was handicapped in passing final order within stipulated time as mentioned in Section 32F(6) of the Act and therefore, the Settlement Commission was compelled to pass an order of abatement of settlement proceedings. It is submitted that if that be so, and in such a situation to provide statutory abatement is nothing but arbitrary and violative of Article 14 of the Constitution of India and therefore, it is requested to struck down such a provision i.e. Section 32F(6) of the Act. 3.4. In the alternative, Mr.Dave, learned advocate appearing on behalf of the petitioners has requested to read down the provision in such a manner and while upholding the constitutionality of Section 32F(6) of the Act. 3.5. Mr.Dave, learned advocate appearing on behalf of the petitioners has requested to read down the aforesaid provision to the extent declaring the settlement proceedings abated in case, the Settlement Commissioner is unable to pass final order within stipulated time stated in the said provision due to the reasons attributable to the assessee. It is submitted that in other words, the aforesaid provision is required to be read in such a harmonious manner that the Settlement Commission must fulfill its mandatory / statutory duty in disposing of such application as referred to in Section 32F(6) of the Act within the time specified in Section 32F(6) of the Act except where prevented from doing so due to any reasons attributable on the part of the applicant. In support of his above submissions, Mr.Dave, learned advocate appearing on behalf of the petitioners has heavily relied upon the decision of the Bombay High Court in the case of Star Television News Ltd. Versus Union of India and others, 2009 317 ITR 66. Relying upon above decision, it is submitted that considering para -materia provisions in Income Tax Act i.e. Section 245D(4A) of the Income Tax Act, Bombay High Court while upholding the constitutionality of the said provision has read down the aforesaid provision to mean that the proceedings declared as having been abated would be where failure owing to reasons attributed to the applicant. It is submitted that by reading down the aforesaid provision, the Bombay High Court has directed the Settlement Commission to proceed with the application as is not abated where delay is not attributable to the applicant. By relying upon the aforesaid decision of the Bombay High Court, it is requested to read down the similar provision in the Central Excise Act i.e. Section 32F(6) of the Act so that the proceedings under Section 32F(6) of the Act are abated only where the failure owing to reasons attributable to the applicant, meaning thereby the failure on the part of the Settlement Commissioner in not passing final order within stipulated time prescribed under Section 32F(6) of the Act are attributable to revenue and/or failure is not owing to reasons attributable to the applicants. By making above submissions and relying upon above decision, it is requested to declare Section 32F(6) of the Act as unconstitutional and in the alternative to read down Section 32F(6) of the Act as submitted hereinabove. Present petition is opposed by Mr.P.S. Champaneri, learned Assistant Solicitor General of India appearing on behalf of the Union of India, Mr.R.J. Oza, learned counsel appearing on behalf of the respondent No.4 and Dr.Amee Yajnik, learned counsel appearing on behalf of the respondent No.3.;