IN THE H IGH COURT OF JUDICATURE AT MADRAS DATED: 10.08.2011 CORAM THE HONOURABLE Mr. JUSTICE T.RAJA W.P.Nos.12131 to 12133 of 2002 M/s.Maruthi Tex Print & Processors Pvt. Limited, 21-2-627/5&6, I Floor, Urdu Galli, Patel Market, Hyderabad. ... Petitioner in W.P.No.12131/2002 Ashok Kumar Rathi ... Petitioner in W.P.No.12132/2002 Krishna Gopal Agarwal ... Petitioner in W.P.No.12133/2002 Vs. 1.Customs & Central Excise Settlement Commission, Additional Bench, Narmada Block, II Floor, Custom House, No.33, Rajaji Salai, Chennai – 600 001. 2.Commissioner of Central Excise, Commissionerate – I, Hyderabad. ... Respondents in all petitions PRAYER IN W.P.No.12131/2002: Writ Petition filed under Article 226 of the Constitution of India praying to issue a writ of certiorarified mandamus to call for the records on the file of the first respondent relating to the impugned final order No.3/2002 CEX., dated https://hcservices.ecourts.gov.in/hcservices/ 08.03.2002, and quash the same and consequently, direct the first respondent to accept the duty liability of Rs.19,06,569/- admitted by the petitioners before the first respondent and also to grant immunity from prosecution, imposition of penalty, payment of interest and redemption fine. PRAYER IN W.P.Nos.12132 and 12133 of 2002: Writ Petitions filed under Article 226 of the Constitution of India praying to issue a writ of certiorarified mandamus to call for the records on the file of the first respondent relating to the impugned final order No.3/2002 CEX., dated 08.03.2002, and quash the same and consequently, direct the first respondent not to impose any penalty under Rule 209A of Central Excise Rules 1944 and grant immunity from prosecution in accordance with law. For Petitioner in all petitions :Mr.T.Ramesh For Respondents in all petitions :Mr.T.R.Senthilkumar, CGSC COMMON ORDER As the facts leading to all the writ petitions are identical, they are disposed of by this common order. 2. For better appreciation, the facts involved in one of the writ petitions i.e., W.P.No.12131 of 2002, are briefly stated hereunder:- The petitioner-M/s.Maruthi Tex Print & Processors Pvt. Limited, Hyderabad, is a concern registered with the Excise Department vide registration dated 05.08.1992 for manufacture of man-made fabrics (MMF) and also for manufacture of cotton fabrics under Tariff Heading 5406 of the Schedule to the Central Excise Tariff Act, 1985. During the course of business, search was carried out at various places, including the factory, registered office premises, their goodown and dealers' premises, which resulted in recovery of certain records relating to delivery of processed fabrics, and seizure of certain quantities of grey and processed fabrics. Resultantly, a show cause notice was issued to the petitioner's company demanding a duty of Rs.73,65,851/- on 24,24,846 LMTs of processed MMF allegedly manufactured and cleared surreptitiously between 03.03.1995 and 20.01.1997. On adjudication, the Commissioner of Customs and Central Excise, Hederabad, vide adjudication Order No.18/99, dated 05.05.1999, directed as follows:- "i. an amount of Rs.68,93,822/- was confirmed in terms of Rule 9(2) of Central Excise Rules, 1944 and Section 3 of the Additional Duties of Excise (Goods of Special importance) read with proviso to https://hcservices.ecourts.gov.in/hcservices/ Section 11A(1) of Central Excise Act, 1944, appropriating an amount of Rs.6,50,000/- already paid. ii. 37,983 L Mtrs of Grey Fabric (84cms) valued at Rs.3,03,864/- is liable for confiscation. iii. 30,312 L Mtrs of 112 cms width and 1191 Mtrs of 84 cms width seized in the business premises of M/s. Bhagwan Textiles are ordered for confiscation 1684 L Mtrs of 112 cms width seized at the business premises of M/s.Tirumala Textiles are ordered for confiscation. A penal of Rs.1,00,000/- each was imposed on Shri Krishna Gopal Agarwal, Managing Director and Shri Ashok Kumar Rathi, authorized signatory under Rule 209A of Central Excise Rules, 1944. A penalty of Rs.10,000/- each was imposed on Shri Ajay Kumar Agarwal of M/s.Tirumala Texties and Shri Jethmal Bung of M/s.Bhagwan Textiles under Rule 209A of Central Excise Rules, 1944. iv. an amount of Rs.47,11,332/- was demanded as mandatory penalty under Section 11 AC of Central Excise Act, 1944, and interest under Section 11AB of the Act was also demanded. v. A penalty of Rs.10,00,000/- was imposed for contravention of Rule 9(2), 52A(8), 173Q and 226 of Central Excise Rules, 1944." 3. Aggrieved by the said order, the petitioner filed an appeal before the CEGAT, Chennai. However, they withdrew the said appeal and thereafter, they have approached the Settlement Commission, Chennai, by moving an application under Section 32E of the Central Excise Act, 1944, making an initial true and full disclosure of Rs.8,76,864/-, which is mandatory requirement to go before the Settlement Commission. Finally, the Settlement Commission, by order dated 08.03.2002, passed the following order;- "i. An amount of Rs.68,39,393/- was confirmed. ii. A penalty of Rs.15 lakhs was demanded under Section 11 AC of the Act on the petitioner. iii. An interest @ 10% was levied under Section 11 AB of the Act. iv. Ordered for confiscation of fabric seized at the business premise of M/s. Bhagwan Textiles and M/s. Tirumala Textiles. v. No immunity for prosecution was given." The Settlement Commission while passing the above order, declined to grant immunity against prosecution. Aggrieved by the same, the petitioners have filed the present writ petitions. 4. Learned counsel appearing for the petitioners submitted that when the petitioners approached the Settlement Commission, what is to be considered by the Settlement Commission in law is as to whether there is a voluntary application of the petitioners admitting to https://hcservices.ecourts.gov.in/hcservices/ certain commissions/omissions and was there any failure to discharge duty as alleged in the show cause notice. It is well settled principle that the burden is on the department to prove the allegations and also about the nature of the goods cleared without payment of duty. It is further contended that the first respondent has erroneously observed that the petitioners have not proved with commercially acknowledged or standard trade or textile definition in support of their claim about the nature of the fabrics. Such an observation is factually incorrect, because in the trade parlance the term 'poonam' and 'spun' are related to the cotton fabrics only. When the seized documents are relied upon to quantify the fabrics cleared, the same has to be taken into consideration to determine the nature of the fabrics and its value also. 5. It was further contended that the petitioners, aggrieved by the order dated 05.05.1999, passed by the Commissioner of Customs and Central Excise, Hyderabad, after filing an appeal before the CEGAT, Chennai, thinking that they can settle their matter before the Settlement Commission under Section 32E, withdrew the pending appeal before the CEGAT, Chennai, only for the purpose of getting immunity from prosecution and for that, when they completely disclosed the full details, thereby, fully complied with the mandatory requirement to go before the Settlement Commission, the Settlement Commission, after confirming an amount of Rs.68,39,393/-, and additionally imposing a penalty of Rs.15 lakhs under Section 11 AC of the Act with further interest @10% , again ordered for confiscation of the fabrics seized at the business premise of M/s.Bhawan Textiles and M/sTirumala Textiles and thereby, erroneously declined to grant immunity for prosecution. Such an approach on the part of the first respondent is totally against the very object of Section 32E of the Central Excise Act. 6. In reply, though the learned counsel appearing for the respondents submitted that the present writ petitions are not maintainable both in law and on facts, because the order passed by the Settlement Commission is not appealable, in light of Section 32-M of the Central Excise Act, the said contention is not in order. Because, the the first respondent has passed the order under Section 32-F(7) of the Central Excise Act. 7. Further, it is seen that the petitioners, aggrieved by the order passed by the Commissioner of Customs and Central Excise, Hyderabad , filed an appeal before the CEGAT. But, however, Section 32-E of the Central Excise Act, gives a benefit to settle the matter, if the party comes to the Settlement Commission containing a full and true disclosure of his duty liability, which has not been disclosed before the Central Excise Officer, having jurisdiction. Accordingly, the petitioner, by withdrawing the appeal from the file of the CEGAT, filed an appeal making an initial true and full disclosure of Rs.8,76,864/-, which is mandatory requirement to go before the https://hcservices.ecourts.gov.in/hcservices/ Settlement Commission. However, the Settlement Commission, by order dated 08.03.2002, while confirming the entire order passed in Order in Original dated 05.05.1999, declined to grant immunity for prosecution. 8. It is an admitted fact that the petitioner, while approaching the first respondent, has made a true and full disclosure of his duty liability, which was not disclosed before the Central Excise Officer, having jurisdiction. The first respondent declined to grant the immunity for prosecution, wherein out of four members, minority view shows that there is no clear evidence to hold that all the fabrics mentioned in the delivery challans were manmade fabrics attracting higher rate of duty. However, the majority view differs with that. 9. It must be borne in mind that when an allegation of clandestine manufacture and clearances is made, the person making the allegation should establish the complete charge including the nature of the goods and its value involved for determining the appropriate demand of duty . Secondly, the principle to approach the Settlement Commission is, if a person, who suffered a show cause notice on the charge of evasion of duty, finally wants to settle the matter, by making full disclosure admitting certain omissions/commissions, the Settlement Commission, by looking at the onus upon the department to prove about the nature of goods cleared without payment of duty, should decide the matter. But, in the present case, without placing the burden on the department to prove their case as per the decision of the Apex in Union of India v. Garware Nylon Limited (1996 (87) ELT 12(SC)), again found that the petitioner failed to prove his case. Therefore, the Settlement Commission should not have refused the benefit of immunity from prosecution. Hence, that part of refusal to grant immunity for prosecution is alone interfered with. Accordingly, this Court is constrained to set aside the order relating to non-grant of immunity for prosecution. Resultantly, the petitioners are hereby granted immunity from being prosecuted. 10. With the aforesaid observations, the writ petitions are partly allowed. No Costs . sd/- Assistant Registrar True Copy/- Sub Assistant Registrar rkm https://hcservices.ecourts.gov.in/hcservices/ To 1.Customs & Central Excise Settlement Commission, Additional Bench, Narmada Block, II Floor, Custom House, No.33, Rajaji Salai, Chennai – 600 001. 2.Commissioner of Central Excise, Commissionerate – I, Hyderabad. W.P.Nos.12131 to 12133 of 2002 PA-CO KV- 11/01/2012 https://hcservices.ecourts.gov.in/hcservices/