Settlement Commission - The interregnum
WHEN Settlement Commission, Customs & Central Excise came into being in August, 1998 and the Benches started functioning in New Delhi, Mumbai and Chennai, in July, 1999, what was required on priority basis was ‘applicants'.
Without applicants, there was no way the Benches would function.
So, the provisions were made inviting for an applicant. The application fees were Rs.1000/- and the "additional amount of duty required to be accepted by the applicant in his application was anything in excess of two lakh rupees".
As time passed, the Bench started doling out benefits to the applicants in the form of immunity from prosecution, waiver of penalty and interest or imposing a nominal rate of interest of 5% whereas the statute rate was almost four times.
Since the orders passed by the Bench were final and the High Courts' too had upheld such orders, the Revenue formations started getting the jitters.
When the word spread that benefits galore were being disbursed by the Settlement Commission if one made a full and true disclosure of the additional amount of duty liability, the applicants started queuing up before the Commission Registry and the Commissioners started squirming in their seats thinking of ways and means to thwart this exodus.
New ideas began to take birth amongst the ‘applicants' and the Commissionerates.
The applicants knew that once they made an application for settlement in respect of a pending ‘case', the adjudication process was stopped dead in its tracks. So, when the case was posted for hearing, the applicant used to inform that they are ‘contemplating filing an application for settlement/have already filed an application' and that the Commissioner should wait.
Letters began pouring into the Settlement Commission registry from the department enquiring whether the applicant had ‘really' filed an application!
In some cases, the Commissioner used to ask the ‘applicant' to submit proof and he would be informed that he is not supposed to supply a copy of the application to the Commissioner for these are ‘in-camera' proceedings.In the result, he began asking them to produce a copy of the challan evidencing payment of application fees of Rs.1000/-. This, the applicant could not avoid so he supplied a photocopy of the TR-6 challan. In some cases, he would make a deposit of Rs.1000/- as settlement application fee but the application would be filed after a couple of months. There were also instances when no application was filed at all.
Rs.1000/- was a minuscule amount but had the power to restrain the Commissioner from adjudicating their case and this, the applicant realized. For had the case been adjudicated, the next stage of appeal would be the Appellate Tribunal and any ‘case' pending in Tribunal was barred from entering the palatial Settlement Commission. The insertion of section 32PA by the FA, 2000 [ Certain persons who have filed appeals to the Appellate Tribunal entitled to make applications to the Settlement Commission] applied only to appeals pending as on 29.02.2000 in the Tribunal, but that is a different story to be told on some other occasion.
Coming back to our case study, the Commissioner too had few aces up his sleeve. He noticed that the provisions of section 32I(2) of the CEA, 1944 read -
"(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."
So, he concluded that since the Settlement Commission assumes jurisdiction only after the application has been allowed to be proceeded under section 32F, for the interregnum period, the jurisdiction of the ‘case' still lies with him. And, therefore, he could very well adjudicate the case.
He did so but such orders were held to be non est by the Settlement Commission.
Now, a similar issue came to be decided by the Bombay High Court because the Majority Bench of the Settlement Commission held that the settlement application, which was filed on 14 January 2011, was not maintainable since the Commissioner had already adjudicated upon the notice to show cause on 13 January 2011.
We report this order today. See Breaking News.