Hari Om Udyog vs Cce, Ghaziabad

(Arising out of OIA No.GZB-EXCUS-000-COM-24-13-14 dt.8.2.06 passed by Commissioner of CCE(Appeals), Ghaziabad)

Date of Hearing: 04/06/2015

Date of Order: 16.06.2015

1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of the order?

4. Whether order is to be circulated to the Department Authorities?

Hari Om Udyog Appellant

Ajay Gupta, Partner

Vs.

CCE, Ghaziabad Respondent

Appearance:

Present for the Appellant: Shri M.K.Gupta, Consultant

Present for the Respondent: Shri R.K.Gupta, DR

Coram: Honble Mr. Rakesh Kumar, Member (Technical)

Honble Smt.Sulekha Beevi C.S., Member (Judicial)

Final Order No.51890-51893/2014

Per: Sulekha Beevi C.S.

The grievance of the appellant is that the impugned order was passed ex parte and also that the adjudicating authority failed to consider his request to allow time to file an application before the Settlement Commission.

2. The appellant is a partnership firm with 3 partners, namely Shri. Ajay Kumar Gupta, Sh. Vijay Kumar Gupta (brothers) and Smt. Raj Rani Gupta (mother of Ajaiy Kumar Gupta). The appellant are engaged in the manufacture of plastic cases/boxes for batteries and various motor vehicle parts of plastic falling under heading 39, 23, 87.08 and 87.14 of the 1st schedule of Central Excise Tariff Act, 1985 in their unit at Ghaziabad. The factory premises of the appellant at Ghaziabad was searched by the officers of Excise Intelligence on 06. 11. 2009. Simultaneously searches were also conducted in the factory premises of the appellant at Roorkee, the depot premises at Rudrapur, the depot premises at Gurgaon and factory premises of M/S.Su -Kam Power System Ltd., at Baddi.

3. A show cause notice dated 09/07/2012 was issued to the appellants on the basis of documents/records resumed, statements recorded and enquiries conducted. The allegation is that the appellant, M/S Hari Om Udyog, Ghaziabad was indulging in evasion of excise duty by way of under valuation/suppression of actual value by showing clearances of finished goods and fabricated invoices and by showing clearances of finished goods, manufactured at the Ghaziabad plant, from their other plant situated in the exempted area at Roorkee, Uttarakhand. The disputed period is from June 2007 to 19/11/2009. A demand of Rs. 1, 11, 83, 866 (Rupees one crore eleven lakhs eighty three thousand eight hundred and sixty six.) was raised towards central excise duty.

4. Before going into the merits of the case, we think that it is necessary to consider the issue whether the impugned order is an ex parte order as contented by the appellant. Shri. M. K. Gupta, the learned counsel appearing for the appellant, submitted that after receiving the show cause notice, the appellant vide letter dated 25/10/2012 requested for return of documents/laptop resumed during the search in order to prepare the reply. To this, the Additional Commissioner (ADJ), Central Excise, Ghaziabad issued a letter to the appellant on 17/07/2013. In this letter the appellant was directed to contact Directorate General of Central Excise Intelligence for return of the documents as the seized documents/articles are lying in their possession. The appellant then issued a letter dated 01/08/2013 to the DG of Central Excise Intelligence requesting to return the documents / laptop. The laptop was received by the appellant on 03/09/2013. A letter dated 04/10/2013 was issued to the appellant for personal hearing fixed on 25/10/2013. The appellant sent letter dated 24/10/2013 requesting for adjournment of the personal hearing and also to allow two months time for filing reply to the show cause notice.

A, corrigendum in regard to show cause notice was issued to the appellants on 28/10/2013. Again a letter dated 28/10/2013 was issued to the appellant informing that the personal hearing has been fixed on 26/11/2013. The appellant vide letter dated 22/11/2013 intimated the adjudicating authority their intention to approach the Settlement Commission and also requested to keep in abeyance the adjudication proceedings. The Superintendent (ADJ) then sent letter dated 03.01.2014 requesting the appellant to furnish the details of the applications if any filed before the Settlement Commission. On 13/01/2014 the appellant replied saying that their application for settlement of the case is under process and shall be filed before the Settlement Commission within two months time and that the documents evidencing the filing of the application will be forwarded. On 22/01/2014 a letter was sent to the appellant informing that the date for personal hearing was fixed as 10/2/2014. The appellant then send a letter dated 31/01/2014 to the Supt (Adj) inviting his attention to the appellants earlier letter dated 22/11/2013, informing that all the noticees are going to file applications for settlement of the cases before the Settlement Commission shortly and requested to keep the adjudication in abeyance.

A further letter dated 12/02/2014 was sent by the appellant to the Commissioner, Ghaziabad informing that the application to be filed before the Settlement Commission is under process and that they would submit the evidence of filing the same within one month. Thereafter it is seen that the impugned order was passed on 28/02/2014. The counsel for the appellant submitted that the appellants were denied opportunity not only to file reply and also of personal hearing but also to approach the Commission to have the case settled.

5. The Ld. DR, defended the impugned order and submitted that the appellants where given three chances for personal hearing and also sufficient time to file reply. He urged that there is no statutory provision under the Central excise Act, 1944 or in the rules made there under to keep the adjudication proceedings in abeyance on the request of the party to file an application before the Settlement Commission.

6. On examination of the factual scenario with regard to the various dates preceding to the passing of the impugned order, we find that the impugned order suffers from infirmity of being an ex parte order. The search of the premises of the appellant and resumption of documents /laptop was done on 06/11/2009. The show cause notice pertaining to these appeals has been issued after more than 2 = years. In between show cause notices dated 4th of May 2010 were also issued. The appellant had to prepare reply to all these show cause notices. The appellant requested for return of the documents /laptop on 25/10/2012. After lapse of more than a year a letter was sent to the appellant on 21/06/2013 to collect the document/laptop from the DG (AE) office. The appellant then sent the request to the DG (AE) to return the laptop, CPU and other documents. As per the receipt of acknowledgement the laptop was returned to the appellant only on 03/09/2013. The matter was thereafter posted for personal hearing on 20/10/2013, 26/11/2013, and 10/02/2014. The appellant had promptly responded to all notices of personal hearing by filing a request for adjournment and also has intimated his intention to move the Settlement Commission for settlement of his case. The authority below has remained in a peaceful slumber for more than two and half years to issue the show cause notice pertaining to these appeals , after search and resumption of documents and then also for more than a year, to return the laptop. On such factual backdrop the time allowed to the appellant for submitting a reply and defending the case appears to be very less. The adjudicating authority has completed the proceedings hastily and passed the order in a hurried manner, for reasons which we do not know. The impugned order suffers the infirmity of an order being passed violating the principles of natural justice. We, therefore have no hesitation to hold that the impugned order has to be set aside and the matter has to be remanded to the adjudicating authority for de novo adjudication after giving the appellant time to file reply and opportunity of personal hearing.

7. The second argument advanced by the Ld. counsel for the appellant is that the adjudicating authority without granting sufficient time for defending the case has passed the order, in a hasty manner thereby depriving the appellant the opportunity to file an application before the Settlement Commission even though the appellant had intimated his intention for the same before the adjudicating authority. It is his further argument that this tribunal has ample powers to refer the matter to the Settlement Commission and prayed that an order be passed by this Tribunal referring the case to the Settlement Commission. At this juncture, it is worthy to mention that the appellant had filed writ petition (writ tax no. 242/2014) before the Honble High Court of Allahabad, the jurisdictional High Court, praying among other things to set aside the impugned order and an order allowing the appellants (petitioners) to file an application before the Settlement Commission. The Honble High Court vide order dated 16/04/2014 dismissed the writ petition holding that the appellant has an alternative remedy before this Tribunal against the order of adjudication. The appellant, has, thereafter, filed this appeal.

8. Reverting back to the factual scenario, it is correct that the appellant had intimated more than once, the adjudicating authority, about his intention to file application before the Settlement Commission for settlement of case. Moreover, out of the duty demand of 1.11 crores the appellant deposited an amount of Rs. 75. 14 lakhs. The copy of the challan s produced along with the appeal shows that the appellant has paid an amount of 50 lakhs on different dates from the date of the search, 06/11/2009 to 13/11/2009. This action of the appellant depositing part of the demand raised reflects the genuineness of the request of the appellant seeking time to prepare and file applications before the Settlement Commission. However, the request by the appellant made in various letters not to conclude the proceedings and grant time to file application before the Settlement Commission has apparently been not heeded to by the authority below. In our opinion, the adjudicating authority ought to have examined whether the request of the appellant is genuine or not and allowed reasonable time before passing the adjudication order.

9. Section 32E provides that the assessee has to make an application to the Settlement Commission before adjudication. Sub clause (c) of section 31 of the Central Excise Act, 1944 defines case as under;

(c ) case means any proceeding under this Act or any other Act for the levy, assessment and collection of excise duty, pending under an adjudicating authority on the date on which an application under sub-section (1) of section 32E is made:

Provided that when any proceeding is referred back in any appeal or revision, as the case may be, by any court, Appellate Tribunal or any other authority, to the adjudicating authority for a fresh adjudication or decision, as the case may be, then such proceeding shall not be deemed to be a proceeding pending within the meaning of this clause.

As the law bars the assessee from filing an application before the Settlement Commission after adjudication, the adjudicating authority, on receiving a request from the assessee seeking time to file application before the Settlement Commission, the adjudicating authority has to first examine genuineness of the request. If satisfied with bonafide of the assessee, the adjudicating authority ought to grant reasonable time to prepare the application and present the same before the Settlement Commission. What is reasonable time would depend upon the facts and circumstances of each case. The adjudicating authority is not justified in totally ignoring the request on the ground that there is no provision in the statute to keep the proceedings in abeyance when such request is made by assesee. Some cases may have voluminous documents, complex issues, or detailed evidence to be placed by the asessee. Further the assesse may have obligations of legal, administrative or other decision makings involved. In such situation, to deny reasonable time to the asseessee totally ignoring his request is not warranted.

10. In the case in hand, the show cause notice itself is dated two and a half years after conduct of search. There is much delay to return the documents resumed. In such circumstances, the appellant /assessee ought to have been given reasonable time to prepare the application for presenting before the Settlement Commission when the adjudicating authority has nothing to suspect the bona fides of the appellants request.

11. The objectives of setting up of the Settlement Commission are to provide an alternative channel for dispute resolution for the assessee and to expedite payment of customs, central excise, and service tax, involved in disputes by avoiding costly and time-consuming litigation process. It also provides an opportunity to taxpayers to come clean who may have evaded payments of duty. The scheme encourages quick settlement of disputes and saves the worries of prosecution in certain situations. As such the scheme is an alternative dispute resolution scheme which augments tax collection preventing the revenue being held up in litigation process. The adjudicating authority has failed to appreciate the law contained in chapter V of the Central Excise Act,1944 in the correct perspective. However, the plea of the Ld. counsel for appellant to pass an order referring the present case to Settlement Commission cannot be granted.

12. Sub clause (1) of section 35C states that the Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision or order with such directions as the Appellate Tribunal may think fit, for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary. The section does not say that the Tribunal can pass an order referring a case for settlement to the Settlement Commission.

13. The Learned counsel for appellant submitted that Rule 41 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure)Rules, 1982 gives ample powers to the tribunal to issue orders necessary to secure the ends of justice which would include an order referring a case for settlement before the Settlement Commission. He relied on the decision rendered by the Apex Court in J. K. Synthetics Ltd. Vs CCE reported in 1996 (86) E. L. T. 472 (SC) and made a frail attempt to convince us that this Tribunal has wide powers under rule 20, 21 and 41 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure)Rules, 1982 to make such orders or give such directions as might be necessary or expedient to give effect or in relation to its orders or to prevent abuse of its process or most importantly, to secure the ends of justice. That such power would include issuing an order referring the matter to Settlement Commission. We are fully aware of the regrettable situation in which the appellant is put due to denial of natural justice of giving reasonable time to file a reply and defend the case. But we cannot agree with the argument advanced by the learned counsel. Section 35C does not lend any ambiguity and therefore this tribunal is hand tied in regard to the submission made by the counsel. He again relied on the decision rendered in M/S Thirumurugan enterprises Vs The Addl. CCE, Puducherry dated 17/04/2015 reported in 2015  T I OL  1201  HC  MAD  ST. The Honble High Court therein has set aside the impugned order and allowed two weeks time to the petitioner to approach Settlement Commission. The said decision of the Honble High Court of Madras cannot be applied to the case in hand, for the simple reason that the Honble High Court while deciding the case was exercising its writ jurisdiction. The national litigation policy is to reduce litigations by promoting alternate dispute resolution mechanism by settlement of cases. It is unfortunate that the appellant was denied such an opportunity to settle the case by not allowing reasonable time even after repeated requests. For the above reasons , we are not able to accept the contention of the appellant that this Tribunal ought to allow the appellant a chance to approach the Settlement Commission after setting aside the impugned order.

14. From the foregoing discussions, we set aside the impugned order and remand the matter to the adjudicating authority for de novo adjudication. The adjudicating authority shall give the appellant time to file reply and also provide opportunity of personal hearing. The appeal is disposed accordingly.

(Pronounced in the open court 16/6/2015)

(Sulekha Beevi C.S.) (Rakesh Kumar)

Member (Judicial) Member (Technical)

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