1 hvn IN THE HIGH COURT OF JUDICATURE OF BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 45 OF 2008 1. M/s. Viva Herba Pvt. Ltd. a company incorporated under the Companies Act, 1956 and having its registered office at 10, Usha, Sasmira Road, Worli, Mumbai 400 025. ... Petitioner Versus 1. The Union of India, Ministry of Finance Law & Justice Aayakar Bhavan, New Marine Lines, Mumbai 400 020. 2. The Commissioner of Central Excise, Raigad Commissionerate, 4th Floor, Central Excise Building, Plot No. 1, Sector 17, Khandeshwar, Navi Mumbai 410 206. 3. Joint Commissioner of Central Excise, Raigad Commissionerate, 4th Floor, Central Excise Building, Plot No. 1, Sector 17, Khandeshwar, Navi Mumbai 410 206. ... Respondents Mr. S.S. Sekhan with Ms. Padmavati Patil i/by Mr. M.H. Patil for Petitioners. Mr. R.B. Pardeshi for Respondents. CORAM: V. C. DAGA, & S. J. KATHAWALLA, JJ. DATED: 10TH AUGUST, 2010 2 ORAL JUDGMENT (Per V.C. Daga,J.): This petition filed under Article 226 of the Constitution of India is directed against the order dated 2.6.2006 passed by the Settlement Commission (Customs and Central Excise) Mumbai directing the Petitioner to pay duty in the sum of Rs. 33,96,718/-. The Petitioner being aggrieved by the said part of the order has invoked writ jurisdiction of this court. The Facts : 2. The facts giving rise to the present petition in nutshell are as under : The Petitioners are 100% Export Oriented Unit (EOU), engaged in the manufacture of Vegetable extracts U/Chapter 13 of the Central Excise Tariff Act, 1985 (CETA, 1985 for short). 3. The Petitioners being 100% EOU are required to obtain permission from Development Commissioner for clearing their goods to Domestic Tariff Area (DTA). 4. The Petitioners are required to pay Excise duty in the case of DTA clearance as per section 3 of Central Excise Act, 1944 and Customs Act and in any other law for the time being in force. The goods cleared by the Petitioners are oleoresin covered under tariff items chapter heading 1301.10. At the relevant time the duty liable to be paid by the Petitioners was : 30% basic Customs duty + 16% CVD + 04% SAD. 3 5. Based on the intelligence report that the petitioners are clearing their goods without obtaining prior permission and payment of appropriate Excise duty in the DTA, the factory and office premises of the Petitioners together with residential premises of Director Dr. Ajay A. Pendse were searched by Central Excise department. In addition to these premises, the factory premises of M/s. Speciality Nutraceuticals located at Navi Mumbai was also searched by Central Excise Officers on 04.12.2003. During the said search, it came to the light that the Petitioners were clearing their goods in DTA without any permission and payment of duty leviable under provisions of the Central Excise Act, 1944 and Customs Act,1962. 6. The Petitioners in the aforesaid premises were served with the show cause notice for violation of the provisions of the Central Excise Act, 1944 and Customs Act, 1962. It was also alleged that they were issuing invoices suppressing the fact in the statutory returns ER-2; and that they having evaded payment of duty leviable on the goods have rendered themselves liable to pay duty, penalty and interest. The petitioners replied to the said show cause notice. They were heard. 7. The demand was confirmed by the Additional Commissioner, Central Excise, Raigad in the sum of Rs.33,96,718/- with interest u/s. 11AB together with equal penalty u/s. 11AC of the Act. In addition to this personal penalty of Rs.10 lakhs was imposed on the Managing Director u/r. 26 of Central Excise Rules, 2002. 8. The Petitioners filed an appeal before the Commissioner (Appeals) and pending the decision of the appeal, the petitioners approached for Settlement of the case before the Settlement Commission raising various 4 grounds mentioned therein. One of the contentions of the Petitioners was that considering the Notification 21/2002-Cus they were liable to pay Customs duty @ 15% only and that it was erroneously calculated and imposed @ 30%. It was urged that the duty liability taking cum duty price benefit @ 15% works out to Rs.21,14,563/- as against Rs.33,96,718/- quantified by the Settlement Commission. It was wrongly determined in the Order in Original by the Adjudicating Authority. 9. The above contentions raised by the Petitioner did not find favour with the Settlement Commission. They were rejected with the observation : "The Bench further finds that the applicant had prayed for cum duty benefit on the ground that the major chunk of clandestine removals were on the invoices. This can not be acceded to and the Bench concurs relation of clearance of goods made by the applicant." 10. The aforesaid order of the Settlement Commission dated 8.10.2007 is impugned in the present writ petition. SUBMISSIONS : 11. The learned counsel for the Petitioner submits that if the sale value of the clearance of EOU into DTA is considered inclusive of duties of excise demanded then the petitioners liability to pay would work out to Rs. 21,65,860.17 as against the duty demanded in the sum of Rs.33,96,718/-. 5 The basis of calculation disclosed is as under : i) Sale value considered in the SCN (P/39 & 41) Order-in Original (P/55). Rs.59,76,771.00 ii) Correct assessable value after excluding the element of duty @ 30% BCD,16% CVD and 4% SAD Rs.38,10,987.06 iii) Basic Customs Duty @ 30% Rs.11,43,296.12 iv) Assessable Value for the purpose of CVD Rs.49,54,283.18 v) CVD @ 16% Rs. 7,92,685.31 vi) Assessable Value for the purpose of SAD Rs.57,46,968.49 vii) SAD @ 4% Rs. 2,29,878.74 12. The Petitioner based on the above calculations reiterates that the correct amount of duty payable by invoking cum duty would be Rs. 21,65,860.17 and not as demanded in the impugned order. In support of his submission, he placed reliance on the judgment of the Apex Court in the case of C.C.E. Delhi Vs. Maruti Udyog 2002 141 ELT 3 SC. PER CONTRA : 13. Mr. Pardeshi, learned counsel appearing for the Respondent- Revenue submits that the cum duty principle cannot be allowed to be invoked since the subject goods were removed by the Petitioner clandestinely without payment of duty. In other words, goods removed did 6 not carry incidence of duty. He further submits that the said final products were manufactured from the duty free inputs since the Petitioner was 100% EOU. That in the circumstances, the submission made by the petitioner is without any merit. 14. Mr. Pardeshi further urged that the judgment of the Apex Court in the case of Maruti Udyog (supra) is not applicable to the case in hand. According to him in that case, the goods manufactured were scrap of Aluminium and Steel arising out of machining. The inputs used were duty paid. As such the Apex Court was pleased to grant abatement from the wholesale price under Section 4(4)(d)(ii) of CEA, 1944. Turning to the facts of the present case, he submits that the goods were removed clandestinely not carrying incidence of duty and that the input used in the Petitioner's EOU were duty free; whereas in the Maurti's case inputs were duty paid. The Maruti Udyog Ltd. was not 100% EOU. That in the present case, the inputs had not suffered duty. 15. Mr. Pardeshi further urged that the issue relating to cum duty dealt with in the case of Maruti was discussed and explained by the Apex Court in the subsequent Judgment in the case of Amrit Agro Industries Ltd. Vs. CCE reported in 2007 210 ELT 183 SC, wherein the Apex Court observed that in absence of payment of duty the question of abatement under Section 4(4)(d)(ii) of CEA 1944 does not arise. He also placed reliance on the judgment of the Apex Court in the case of Assistant Commissioner, Central Excise Vs. Bata India, reported in 1996 84 ELT 164 (SC) and Jyotindrasinghji Vs. S.I. Tripathi AIR 1993 SC 1991 wherein the Apex Court held that the entire proceedings before the Settlement Commission were in the form of package deal and that the writ court has a limited 7 jurisdiction while examining the legality of the order of Settlement Commission. According to him, the court could only examine whether the Settlement Commission has followed procedure which was legal and whether the order is contrary to any of the provisions of the Act. Beyond this the High Court has no jurisdiction. 16. Mr. Pardeshi further submits that the aforesaid judgments are followed by the Gujarat High Court in the case of Gujarat Cypromet Ltd. Vs. Union of India 2010 254 ELT 455 and Delhi High court in the case of Ashwani Tobacco Co. Pvt. Ltd. Vs. Union of India 2010 251 ELT 162 wherein the court ruled that the order of the Settlement Commission is in the form of package and it takes into consideration all the aspects of the case in a holistic manner. 17. Mr. Pardeshi based on the aforesaid judgments submits that the settlement proceedings are, obviously, distinct from the adjudication proceedings in which the Adjudicating Authority has no power to accord immunity from prosecution while determining the duty liability. Mr. Pardeshi, thus, submits that this is not a fit case where this court should exercise writ jurisdiction. CONSIDERATION: 18. Having heard the rival parties, at the outset, we must observe that the submission of the Respondent Revenue that this court cannot examine legality of the order of the Settlement Commission and that every order of the settlement passed under Section 127C(7) of the said Act is final and conclusive is stated to be rejected. The orders of the Settlement 8 Commission are amenable to the writ jurisdiction and the judicial review thereof is permissible under Article 226 of the Constitution of India as held by the Hon ’ble Supreme Court in the Case of Jyotendrasinhji Vs. S. I. Tripathi, 1993 Supp (3) SCC 389. In the case in hand, not only the decision but also the decision making process is not in accordance with the law since the Settlement Commission has not followed the provisions of Rule 5(3) of the Valuation Rules which are part of the Act. 19. In the present case core issue raised by the Petitioner based on various provisions of the Central Excise and Customs Act were brushed aside by the Settlement Commission by three line observations quoted in Para 9 above. In the above manner, the submissions made by the Petitioner were rejected by the Settlement Commission without seconding reasons much less cogent reasons. 20. In State of West Bengal Vs. Atul Krishna Shaw & Anr. AIR 1990 SC 2205, this Court observed that "giving of reasons is an essential element of administration of justice. A right to reason is, therefore, an indispensable part of sound system of judicial review." 21. In State of Uttaranchal & Anr. Vs. Sunil Kumar Singh Negi AIR 2008 SC 2026, this Court held as under: "Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before Court. Another rationale is that the affected party can know why the decision has 9 gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made". 22. In Raj Kishore Jha Vs. State of Bihar & Ors. AIR, 2003 SC 4664, this Court observed as under: "Before we part with the case, we feel it necessary to indicate that non-reasoned conclusions by appellate Courts are not appropriate, more so, when views of the lower Court are differed from. In case of concurrence, the need to again repeat reasons may not be there. It is not so in case of reversal. Reason is the heartbeat of every conclusion. Without the same, it becomes lifeless". 23. In fact, "reasons are the links between the material, the foundation for these erection and the actual conclusions. They would also administer how the mind of the maker was activated and actuated and their rational nexus and synthesis with the facts considered and the conclusion reached". (vide: Krishna Swami Vs. Union of India & Ors. AIR 1993 SC 1407) . 24. Therefore, the law on the issue can be summarized to the effect that, while deciding the case, court is under an obligation to record reasons, however, brief, the same may be as it is a requirement of principles of natural justice. Non- observance of the said principle would vitiate the judicial order. 25. As observed by the Apex Court in the case of Jyotendrasinghji Vs. Tripathi the writ court is entitled to know the process of adjudication by the Settlement Commission determining the contentions raised by the parties. In the absence of reasons, it is not possible for this court to read the 10 mind of the Settlement Commission. In these circumstances, the order of the Settlement Commission to the extent it rejects the submission advanced by the Petitioner is liable to be rejected. The Settlement Commission was expected to record reasons. Thus the impugned order being in breach of principles of natural justice, we have no option but to set aside the same to the extent it has determined the duty liability of the Petitioner and the proceedings are remanded back to the Settlement Commission for consideration afresh. All rival contentions of the parties on the issue are kept open. The Settlement Commission is expected to pass a reasoned order following the principles of natural justice dealing with all the contentions of the parties with expeditious dispatch at any rate within the period of three months from the date of receipt of copy of this order. In the result, petition is partly allowed. Rule made absolute in terms of this order. No order as to costs. ( S. J. KATHAWALLA, J.) (V. C. DAGA, J.)