Telangana High Court
M/S Airan Comtrax Towers (P) Ltd vs The Superintendent, Additional Bench on 21 April, 2026
Author: P. Sam Koshy
Bench: P. Sam Koshy
IN THE HIGH COURT FOR THE STATE OF TELANGANA
AT HYDERABAD
THE HONOURABLE SRI JUSTICE P. SAM KOSHY
AND
THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA
WRIT PETITION NO.6376 OF 2008
Date: 21.04.2026
Between:
M/s. Airan Comtrax Towers (P) Ltd. and 2 others
...Petitioners
AND
The Superintendent, Additional Bench,
Customs & Central Excise, Settlement Commission,
Customs House, Chennai and another
...Respondents
O R D E R:
(As per the Hon’ble Sri Justice Narsing Rao Nandikonda)
Heard Ms. Mamatha, learned counsel representing
M/s. CKR Associates, learned counsel for the petitioners and
Ms. Pravallika, learned counsel representing Mr. Dominic
Fernandes, learned Senior Standing Counsel for Central Board
of Indirect Taxes and Customs (CBIC) appearing for the
respondents.
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2. This Writ Petition is filed under Article 226 of Constitution
of India seeking to call for the records relating to Order
No.6/2008-C.Ex. in C.No.V/15/37-39/2007-SC dated
28.02.2008 passed by respondent No.1 and set aside the same
and consequently direct respondent No.1 to admit the
application and consider the case of the petitioners under the
provision of Chapter V of Central Excise Act, 1944.
3. The brief facts of the case are that the petitioners are
manufacturers of MS ingots. They were operating under the
Compounded Levy Scheme w.e.f. September 1997, which was
introduced for sectors such as induction furnaces, steel
re-rolling mills etc., with the object of levying and collecting
excise duty based on the annual production capacity of the
manufacturer, as determined by the jurisdictional Commissioner
after considering Rule 3 of the Induction Furnace Annual
Capacity Determination Rules, 1997, the annual capacity of
production was required to be determined. In the present case,
the Commissioner of Central Excise determined the intrinsic
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capacity of the petitioners plant as 2.4 MTs and accordingly
fixed the duty liability at Rs. 4,00,000/- per annum.
4. The Compounded Levy Scheme, as provided under the
Central Excise Act, 1944 r/w. the erstwhile Central Excise
Rules, 1944, was withdrawn w.e.f. 31.03.2000. Thereafter, the
petitioners took over M/s. Giridhar Ispat Private Limited and
continued clearing the MS ingots on payment of duty under the
regular assessment procedure as declared by them. It is relevant
to mention that, at the time of takeover, the intrinsic capacity of
the plant was only 2.4 MTs.
5. It is further submitted that for the manufacture of
MS ingots, they had been procuring MS Scrap from several
parties. All receipts of raw material into the factory were properly
accounted in the statutory Form-IV Register, and Central Excise
duty was paid at the time of clearance of MS ingots from the
factory.
6. A Show Cause Notice dated 04.04.2005 was issued to the
petitioners by the learned Commissioner of Customs & Central
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Excise, Hyderabad-IV alleging the clandestine production and
removal of MS ingots during the period from April, 2000 to
03.09.2001. It is alleged in the said show cause notice that the
petitioners had produced 19,497.733 MTs of various raw
materials like MS Scrap, Sponge Iron, PCM Jams, Silico
Manganese etc. which was not accounted a major portion of the
same in the Raw Material Inward Registers and Form IV Raw
material accounts by using the name of Shakti Steels, a
proprietary concern with Shri Munnalal Agarwal who is also the
Managing Director of petitioner No.1, and procured raw
materials without proper accounting under kutcha slips and the
said production of the goods was deliberately suppressed.
7. The said cause notice called upon the petitioner to show
cause as to why a sum of Rs. 2,00,36,154/- towards the duty,
payable on 12,223.418 MTs of ingots and 399.401 MTs of
Runners and Risers valued at Rs.12,21,41,994/- and
Rs.30,84,020/- respectively, removed by them without payment
of duty during the period from April, 2000 to 03.09.2001 and not
paid by petitioner No.1 in terms of Section 11A (1) of the Central
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Excise Act, 1944. The payment of Rs. 10,00,000/- was already
paid by petitioner No.1 vide TR-6 Challans dated 18.09.2001
and 06.10.2001 and adjusted towards the part of the alleged
duty.
8. The petitioners have submitted a detailed reply along with
the numerous documents and further contended that the
Commissioner of Customs and Central Excise had taken up the
hearing of the case and at that stage considering the material on
record and in order to put a quietus to the issue approached the
Customs and Central Excise Settlement Commissioner under
Section 32E of the Act. Accordingly, they filed application No.
C.No.V/15/37-39/2007-SC for settlement of the proceedings
initiated vide show cause notice dated 04.04.2005, admitting the
duty liability of Rs.42,20,347/- based on the installed capacity
when the factory was operating under the compounded levy
scheme. It was further contended that based on the installed
capacity of the factory, a quantity of 2930.859 MT of ingots at
the most, could be manufactured during the relevant time and
duty liability comes to Rs.68,40,000/-. Out of this, an amount
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of Rs.26,19,563/- was already paid by the petitioners through
PLA at the time of clearance of goods. Thus, the differential duty
liability, according to the petitioners, was Rs.42,20,473/- out of
which Rs.10,00,000/- had been paid during the course of the
investigation and the petitioners expressed their willingness to
pay the balance amount of Rs.32,20,437/-.
9. When the matter came up for hearing on 03.12.2007, an
interim order was passed on 04.12.2007. The petitioner also
filed an affidavit admitting additional liability and submitted
written submissions on 20.02.2008 before the learned Customs
& Central Excise Settlement Commission. However, by order
dated 28.02.2008, the Additional Bench at Chennai rejected the
settlement application under Section 32F(1), holding that the
disclosure made by the petitioners could not be considered at
that stage as “full and true” as required under Section 32E of the
Act. The issues involved detailed examination and complex
investigation, which could be adjudicated only through regular
proceedings.
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10. Aggrieved by the same, the present writ petition is filed on
the ground that the learned Settlement Commissioner failed to
take into consideration the amendment to Section 32F of the
Act, making it mandatory to deal with the cases filed before
31.05.2007 and in the manner laid down under the New
Provisions and failed to take notice of the statutory provision
providing for calling for a report from the Commissioner
(Investigation), which could have assisted in resolving the issues
arising before the learned Commission, in case where the
applicant defers from the proposal in the show cause notice and
claims a lower sum as admitted liability and that the
Commission which has passed the order is a non-speaking order
and violating the principles of natural justice and liable to be set
aside for not considering of relevant material by the Settlement
Commission.
11. Learned counsel for the petitioners argued and contended
that the duty liability ought to have been calculated under the
Compounded Levy Scheme based on installed furnace capacity,
not on alleged actual production and the admitted liability of
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Rs.42,20,473/- was based on full and true disclosure under the
capacity-based method and also argued and contended that the
amendment to the 32F of the Act, made it mandatory for the
learned Commission to deal cases with effect from 01.06.2007,
whereas prior thereto, the provision of Section 32F of the Act
was referred to.
12. The provisions of Section 32F of the Central Excise Act,
which prescribes the application filed under Section 32E, the
Settlement Commission shall call for a report from the
Commissioner of Central Excise having jurisdiction, the manner
in which such liability has been derived and the learned counsel
for the petitioner also points out that on the basis of materials
contained in such report and having regard to the nature and
circumstances of the case and the complexity of investigation
involved therein, the Settlement Commission may, by order,
allow the application to be proceeded with or reject the
application and no such application can be rejected unless an
opportunity is being given. She also took us to the provisions of
Section 32L, wherein it provides that the Settlement Commission
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may send the case back to the Central Excise officer having
jurisdiction if the person who has made an application under
Section 32E has not cooperated with the Settlement Commission
in the proceedings.
13. The learned counsel for the petitioners further contended
that in view of the amended provisions of Section 32F, the
Settlement Commission ought to have decided the application on
or before 28.02.2008. Though, the application under Section
32E was filed on 02.03.2007, and the amendment came into
force on 01.06.2007. It was further argued that under Section
32F (1), the Settlement Commission could not have rejected the
application filed under Section 32E in the manner done in the
present case. Initially, a show cause notice was issued on
04.04.2005 and on 23.06.2007, the application under Section
32E was filed.
14. The petitioners were engaged in the manufacture of
M.S. Ingots under the Compounded Levy Scheme framed under
the Central Excise Act, 1944. Under the said scheme, excise
duty was determined on the basis of installed/assessed
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production capacity and not on actual production. The
competent authority had determined the annual production
capacity of the unit at 2.5 MTs per month, and the said
assessment remained operative for several years. The petitioner
consistently contended that the factory was technically
incapable of producing quantities beyond the assessed capacity.
15. Learned counsel for the petitioners contended that the
petitioner had filed an application under Section 32E of the
Central Excise Act before the Settlement Commission seeking
settlement of the dispute arising from the show cause notice,
with full disclosure of additional duty liability and its
computation. The allegations in the show cause notice regarding
excess production were based on assumptions relating to scrap
consumption, power usage, and certain statements, without any
technical or scientific basis.
16. Under the Compounded Levy Scheme, excise duty was
determined on the basis of installed production capacity and not
on actual production. The competent authority had already fixed
the plants production capacity at 2.4 MTs per month with a duty
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liability of Rs.4 lakhs per month, which remained unchanged
during the relevant period i.e., April 2000 to September 2001.
17. Learned counsel for the petitioners further contended that
the factory could not have produced quantities beyond the
assessed capacity and placed technical certificates and
supporting materials to substantiate the same. A detailed
worksheet showed total duty liability of about Rs.68 lakhs, out
of which Rs.26 lakhs was paid in cash (PLA) and Rs.31 lakhs
through CENVAT credit. The petitioners offered to pay the
remaining differential amount, later revised to about Rs.45
lakhs. Even according to the Department’s recalculation, the
duty liability would not exceed approximately Rs.65 lakhs,
broadly supporting the petitioner’s disclosure.
18. Further, the learned counsel for the petitioners relied upon
the judgment in SSF PLASTICS INDIA P. LTD. AND ANOTHER
V. UNION OF INDIA AND ANOTHER 1 , wherein the relevant
portion is extracted below:
1
(2016) 40 GSTR 94
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WP_6376_2008Pertinently, on this application the Settlement Commission
found that compliances pre-admission are made and that is how the
matter proceeded in terms of section 32F (1). The Revenue filed a
report and objecting to the computations and calculations, including
raising an issue about the correctness of the certificates obtained by
the petitioners. The matter was fixed by the Settlement Commission
before it on March 26, 2014. Submissions were canvassed with regard
to the chartered engineer’s certificate. From the record it appears that
the Settlement Commission gave time to the Department to examine
the chartered engineer’s certificate and submit a report. The
Department submitted its report on April 28, 2014. Then, the
Department was also informed that it has an option to go to another
chartered engineer and obtain appropriate certificates so as to place
them before the Commission.
And also relied upon the judgment in RAN INDIA STEELS P.
LTD. V. CUSTOMS, EXCISE AND SERVICE TAX
SETTLEMENT COMMISSION AND OTHERS 2 , wherein the
relevant portion is extracted hereunder:
Pursuant to the above directions dated April 29, 2013, an
Investigation report was submitted on June 21, 2013, wherein, the
following was, inter alia, recorded/observed:
(i) The claim that the said original hard disc examined by
GEQD is not genuine was rejected.
(ii) The website of the petitioner-company states that the
installed capacity has a production capacity of 43,800 M.T., of MS
ingots per year, which according to the report is in the nature of an
admission by the appellant as to its production capacity.
(iii) A close study of the production pattern revealed that the
maximum production of 14.07 M.T., per heat was achieved on2
(2023) 24 GSTR-OL 243
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WP_6376_2008October 6, 2005 and thus, the case of the appellant that it was
Incapable of producing in excess of 10 M.T., per heat was understood
to be disproved.
(iv) Finally, on an overall analysis, it was concluded that the
company is involved in large scale suppression of production and
clandestine removal to their own unit located nearby. That there is
large-scale manipulation of the data and that the data contained in
the GEQD Report was acceptable, while rejecting the appellant’s
claim of being incapable of manufacturing more than 10 M.T., per
heat and 10 heats per day as allegedly the appellant had on several
occasions exceeded 10 M.T., per heat and 10 heats per day.
Once a report is obtained from the Principal Commissioner
under sub-section (3) of the Act and if on examination of the same, the
Commission is of the opinion that a further enquiry/Investigation is
necessary, it may for reasons to be recorded in writing direct the
Commissioner (Investigation) within 15 days of the receipt of such
report to make or cause further enquiry/investigation and require a
report to be furnished by the Commissioner (Investigation) within a
period of 90 days of the communication. In the event of failure to
furnish the report within the prescribed period by the Commissioner
(Investigation), the Commission shall proceed to pass order under
sub-section (5) of the Act without such report.
19. Learned Standing Counsel for CBIC appearing for the
respondent contended that the learned Settlement Commission
initially admitted the application and issued interim directions,
thereby crossing the preliminary stage under Section 32F (1).
After admission, the Commission was required to proceed under
Sections 32F (3), (4) and (5) and decide the case on merits. The
subsequent rejection of the application on the ground that the
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disclosure was not full and true and that the matter required
complex investigation was illegal, as complexity of investigation
is not a valid ground for rejection after admission. The impugned
order defeats the objective of the settlement provisions and is
liable to be set aside with a direction to the Settlement
Commission to decide the application on merits.
20. Learned counsel for the respondent argued and contended
that the petitioner failed to meet the mandatory precondition for
settlement i.e., a full and true disclosure of duty liability. The
petitioner admitted to only Rs.44 to Rs.45 lakhs, while the
Department’s quantified demand was approximately Rs.2 crores.
The petitioners disclosure was based on theoretical assumptions
and outdated compound levy principles rather than verified
records under the petitioner’s own affidavit admitted an inability
to pinpoint the actual quantity of unaccounted goods, which the
respondent argues is a clear admission of non-disclosure.
21. The Department built a robust case against the petitioner
using private records and physical evidence including parallel
invoices, private production slips and labor payment sheets
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which corroborated the unaccounted clearance of goods.
Electricity consumption data indicated production levels far
exceeding declared quantities. The petitioner had previously
accepted the correctness of these private records in statements
made under Section 14 of the Act.
22. The respondent argues that the petitioner misunderstood
the nature of the Settlement Commission and that the
Settlement Commission is to provide an opportunity for
voluntary and candid confessions, not for adversarial litigation.
By contradicting previous statements and seeking to demolish
the show cause notice rather than settle honestly, the petitioner
did not approach the Commission with clean hands. Under
Section 32F (1), the Commission has the absolute right to reject
an application at any stage, if statutory conditions are not met.
The petitioner is not remediless and may pursue regular
adjudication through standard legal channels. Prolonging the
interim stay prejudices the public interest by delaying the
collection of Rs.2 crores which is substantial revenue.
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23. However, a search was conducted at undeclared office
premises, during which the respondents allegedly recovered
private ledgers, parallel sets of invoices, and kachha slips
indicating large scale unaccounted procurement of raw materials
and clandestine removal of finished goods. The searches were
conducted on 07.09.2001. It was further revealed during
investigation that, between April 2000 to September 2001, the
petitioners had allegedly manufactured and clandestinely
removed substantial quantities of M.S. ingots without payment
of duty.
24. Learned counsel for the respondent relied on the following
judgments:
In UNION OF INDIA V. DHARAMPAL SATYAPAL 3, the relevant
portion is extracted hereunder:
It has been held in several judgments that the primary
condition for approaching the Settlement Commission is that the
application shall contain a full and true disclosure of the duty liability
and the manner in which it was derived. There are identical
provisions in the Income-tax Act relating to the Settlement
Commission proceedings. In Ajmera Housing Corporation [2010] 326
ITR 642 (SC) the Supreme Court held that disclosure of full and true3
[2014] 27 GSTR 484
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WP_6376_2008particulars of undisclosed income and the manner in which such
income was derived are the pre-requisites for a valid application
under section 245C(1) of the Income-tax Act. It was observed that the
Settlement Commission has to record its satisfaction on this aspect
and without recording of the satisfaction it will not have jurisdiction
to pass any order on the matter covered by the application. This is the
position prior to the amendment to Chapter XIX-A of the Income-tax
Act with effect from June 1, 2007. The position under the Central
Excise Act prior to the amendment made with effect from June 1, 2007
to Chapter V of the Act was considered by a Division Bench of this
court in CCE v. Woods P. Ltd. in W. P. (C) No. 21055 of 2005. The
judgment was rendered on November 10, 2005 CCE v. True Woods P.
Ltd. (2006) 199 ELT 388 (Delhi). In that case it was held by this court
that the requirement of a full and true disclosure is a continuing
requirement that needs to be satisfied from the beginning of the
proceedings till the conclusion thereof and if at any stage of the
proceedings it appears to the Settlement Commission that the
disclosure made by the assessee was incomplete or untrue, the
settlement application can be thrown out. The position is no different
under Section 32E(1) of the Central Excise Act even after the
amendment made with effect from June 1, 2007.
The requirement continues to be that the application shall
contain a full and true disclosure of the duty liability which has not
been disclosed before the Central excise officer and the manner in
which such liability was derived. It is true that on and after June 1,
2007 the Settlement Commission need not call for a report from the
Commissioner before the settlement application is allowed to be
proceeded with. However, the requirement that the settlement
application shall contain a full and true disclosure continues to
remain in the statute and it is, therefore, the duty of the Settlement
Commission to examine this aspect by itself on the basis of
explanation provided by the applicant.
The majority opinion has taken a view that though in principle,
a case involving deep or intensive investigation into complex issues of
facts of law is not to be brought within the purview of the Settlement
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Commission, the present case does not involve such an adjudication
and, therefore, can be settled. They have preferred to look upon the
need for testing a statement recorded under section 14 of the Act as
one which does not involve any complexity of facts or law and that
merely because the statements may have to be tested by cross-
examination, either at the instance of the applicant or at the instance
of the Revenue, it cannot be stated that the case is complex. The
dissenting member has, however, met this finding effectively by
pointing out in the quote extracted earlier that this is not the complete
picture on the basis of which complexity of facts and law and the need
for adjudication was put forth by the Revenue. He has noticed that
both the Revenue and the assessee are to be accorded the right of
cross-examination and this procedure is not conducive for a
settlement of the case and it properly belongs to the domain of
adjudication by the adjudicating authority.
We are inclined to agree with this view taken by the dissenting
member as against the rather simplistic view of the issue taken by the
majority. The majority of the Settlement Commission have expressed
the opinion that “the question of adjudication would arise where there
is a huge gap between the duty demanded in the show-cause notice
and the amount of duty admitted by the applicant and the applicant
does not accept the amount of duty, which appears to the
Commissioner, as payable by him, on looking at the evidence
produced by both sides during the proceedings before the
Commission”. The amount of duty admitted by the applicant is only
Rs. 81,75,625 along with the interest at Rs. 66,91,245 as against the
demand of Rs. 245.65 crores raised in the show-cause notice.
Therefore, even on the very opinion expressed by the majority, it
would be a question for adjudication and not settlement. In fact, the
Division Bench of this court in the case of Director General of
Central Excise Intelligence v. Murarilal Harishchandra Jaiswal P.
Ltd. [2010] 5 GSTR 403 (Delhi) have expressed the view that in a
case where at the admission stage the case shows a high degree of
variation between the facts and contentions of both the parties before
the Settlement Commission, then in such a case the Settlement
Commission should not even admit the application because it is clear
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that the Department of customs does not accept the duty which an
applicant feels is payable by him and therefore the Settlement
Commission would be bound to enquire into highly disputed question
of facts. The Division Bench, of course, excluded from the sweep of
their observations cases of astronomical demands raised by the
Revenue which may be totally unsupported even by the admitted facts
appearing from the records.
In VELA SMELTERS PVT. LTD. V. CUSTOMS AND CENTRAL
EXCISE SETTLEMENT COMMISSION 4, the relevant portion is
extracted hereunder:
The first question to be considered is as to whether this Court
exercising jurisdiction under Article 226 would be justified in
interfering with the order passed by the Settlement Commission in the
light of the fact that there is no allegation made by the petitioner that
there is any violation of principles of natural justice. The object of
establishing a procedure for settlement of cases under the provisions
of the Central Excise Act as well as the Customs Act was with a view
to resolve the dispute by conferring powers on the Settlement
Commission to settle the matters. However, the Settlement
Commission does not grant immunity as a matter of course and
exercise of its jurisdiction is discretionary. Even in cases, where the
Settlement Commission grants immunity, it can impose conditions
while doing so, even attached properties of the applicant to secure the
interest of revenue during the pendency of the proceedings Before it
which power is not exercisable by the adjudicating authority. The
scheme of the Act provides that the Settlement Commission cannot be
forced to entertain and accept all settlement application, but after
scrutiny, it may or may not entertain the same. The settlement of cases
by the commission is an exception to the normal procedure of
adjudication of duty liability and other deterrent provision like
penalty and prosecution. Any order passed by the Commission, which4
[2015] 49 GST (Madras)
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was obtained by fraud or misrepresentation would render the order as
void. One of the foremost essential condition for settlement of the
dispute is that the application for settlement shall contain a full and
true disclosure of duty liability, which was not being disclosed before
the proper officer, the application shall contain the manner in which
such liability has been incurred and the additional amount of customs
duty accepted to be payable.
As pointed out earlier, this disclosure should not be
misunderstood or taken to be the same as regards the additional
amount of customs duty accepted to be payable. The petitioner would
state that they imported goods under 74 Bills of entry and availed the
benefit of an exemption notification and the requirement for benefit
under the notification is that the petitioner should produce an end-use
certificate. The petitioner would contend that in respect of the quantity
imported under 64 bills of entry, they have produced end-use
certificate and in respect of the quantity in the remaining 10 bills of
entry, they have admitted the duty liability. Therefore, the petitioner
would state that it is a full and true disclosure of the duty liability,
which was not admitted before the proper officer. This contention is
wholly misconceived and this appears to be the case of the petitioner
right through.
The full and true disclosure of duty liability in fact is that
which was not disclosed before the proper officer. For which purpose,
the allegation in the show cause notice against the petitioner has to be
looked into. The allegation is wrong availment of CENVAT credit
stating that investigation conducted, revealed that the petitioner
imported MS Scrap and diverted the same in the local market and
various other allegations have been made in the show cause notice as
to how the goods imported never reached the factory gate and that the
end-use certificate was issued based on the raw material register
maintained by the petitioner and the range superintendent did not visit
the factory for verification of the receipt of the raw material and that
the issue of end-use certificate alone does not prove the receipt of the
imported raw material and such certificate is not reliable as
utilization of raw materials not physically verified.
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Apart from this, there are other allegations made against the
petitioner stating that the vehicle numbers given by the petitioner,
which are said to have transported the imported raw material do not
tally with the records maintained in the Regional Transport Office
and several such vehicles are either two wheelers or four wheelers
and do not match description given by the petitioner. The petitioner
contend that 400 vehicles were utilized for transportation of the
material and the percentage of the discrepancy in the registration
number is very meagre and therefore that could not have been a
reason to disbelieve the end-use certificate in respect of the entire
consignment.
After considering all the facts, which were placed, the
Commissioner recorded that the petitioner has not made a full and
true disclosure. In the light of the said finding, this Court is not
inclined to exercise its jurisdiction under Article 226 of the
Constitution of India and examine the factual finding recorded by the
Settlement Commission, as if, this court is the Appellate Authority
over the findings of fact recorded by the Settlement Commission, by
which the Settlement Commission declined to entertain the petitioner’s
application and directed the matter to be proceeded by the second
respondent under the normal procedure under the Act.
As already pointed out that the petitioner has not challenged
the order passed by the Commission on any technical grounds such as
violation of principles of natural justice, failure to afford reasonable
opportunity etc. The contention that the Commission has not examined
the merits of the case is also not sustainable, as a bare reading of the
order passed by the Commission would reveal that the merits of the
case has been gone into and this Court is not inclined to go into the
factual aspects of the matter, as it has to be adjudicated on merits. As
long as the petitioner has failed to fulfil the twin essential tests as
pointed out earlier, the application before the Settlement Commission
was not maintainable and therefore, the Commission was fully
justified in refusing to entertain the application.
The case of Ran India Steels (P.) Ltd. (supra) was a case,
where the application for settlement was dismissed at the threshold
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without even considering the Commissioner’s report, therefore, this
Court interfered. The said decision is factually different and cannot
advance the case of the petitioner. The decision of the Bombay High
Court in the case of Noshire Moody (supra), was a Writ Petition filed
by the Department against the order of Settlement Commission, which
entertained the application and granted the relief to the applicant. On
facts, the Court found that the findings recorded by the Settlement
Commission cannot be interfered. The said decision is of no
assistance to the case of the petitioner. Apart from the fact that the
petitioner has not made full and true disclosure, the Settlement
Commission has recorded a finding that the petitioner has not co-
operated, this is all the more a good and substantial reason to reject
the petitioner’s application.
Hence, for all the above reasons, the challenge to the order
passed by the Settlement Commission is devoid of merits and
consequently, W.P.No.30162 of 2012, is dismissed.
In SAURASHTRA CEMENTS LTD. V. COMMISSIONER OF
CUSTOMS 5, the relevant portion is extracted hereunder:
It is well-settled that no finality clause in a statute would oust
the jurisdiction of the High Court under Article 226 of the
Constitution or that of the Supreme Court under Article 32 or 136 of
the Constitution. Nevertheless, the parameters of judicial intervention
in a decision rendered by an administrative Tribunal are well-
recognized and well laid down Ordinarily, the court would, interfere
if the Tribunal has acted-without-jurisdiction or failed to exercise
jurisdiction vested in it or the decision of-the-Tribunal is wholly
arbitrary perverse or mala fide or is against the principles of natural
justice or when such decision is ultra vires the Act or the same is
based on irrelevant considerations.
When examining the scope of judicial review in relation to a
decision of Settlement Commission, we must further bear in mind that5
[2014] 46 GST 543
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the Settlement Commission is set up under the statute for settlement of
revenue claims. Its decision is given finality and it also has power to
grant immunity from prosecution, of course, subject to satisfaction of
certain conditions. The scope of court’s inquiry against the decision of
the Settlement Commission, therefore, is necessarily very narrow. The
Apex Court in the case of State of UP. v. Johri Mal [2004] 4 SCC 714
observed that the scope and extent of power of judicial review of the
High Court under Article 226 of the Constitution of India would vary
from case to case, the nature of the order, the relevant statute as also
other relevant factors including the nature of power exercised by the
public authorities, namely, whether the power is statutory, quasi-
judicial or administrative.
Despite such narrow confines of judicial review of the decision
of the Settlement Commission, is undeniable that the jurisdiction
under Article 226 of the Constitution is not totally ousted. In a given
situation if the Settlement Commission has taken into consideration
irrelevant facts and such consideration has gone and prejudice to the
party then narrow confines of the judicial review, interference would
still be open.
In UNION OF INDIA V. MOHIT MINERALS (P) LTD. 6 , the
relevant portion is extracted hereunder:
127. The term “recipient” of a supply of service has been
exhaustively defined by Section 2(93) of the CGST Act:
“2. (93) “recipient” of supply of goods or services or both, means–
(a) Where a consideration is payable for the supply of
goods or services or both, the person who is liable to
pay that consideration;
(b) Where no consideration is payable for the supply of
goods, the person to whom the goods are delivered or6
(2022) 10 SCC 700
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made available, or to whom possession or use of the
goods is given or made available; and
(c) Where no consideration is payable for the supply of a
service, the person to whom the service is rendered,
And any reference to a person to whom a supply is made shall be
construed as a reference to the recipient of the supply and shall
include an agent acting as such on behalf of the recipient in relation
to the goods or services or both supplied;”
Thus, the language employed in Section 2(93)(a) of the CGST
Act clearly stipulates that when a consideration is payable for the
supply of services, the recipient would mean the person who is liable
to pay that consideration. However, when no consideration is payable
for the supply of a service, Section 2(93)(c) states that the recipient
shall be the person to whom the service is rendered. Further, Section
2(93) provides that “any reference to a person to whom supply is
made shall be construed as a reference to the recipient”. Hence,
where the statute refers to a person to whom a supply is made, it has
to be construed as a reference to the recipient of service.
In VINAY WIRE & POLY PRODUCT (P.) LTD. V. DIRECTOR
GENERAL OF CENTRAL EXCISE 7 , the relevant portion is
extracted hereunder:
The first contention is that the Settlement Commission could
have sent the case back to the adjudicating authority only if it was of
the opinion that any person who made an application for settlement
under section 32-E did not co-operate with the Settlement
Commission.
As noticed hereinabove, under sub-section (5) of section 32-F,
the Settlement Commission, after examination of the records and the
report of the Commissioner of Central Excise and the report, if any, of7
[2015] 30 GSTR 213
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the Commissioner (Investigation) and after giving opportunity to the
applicant and to the Commissioner of Central Excise to be heard, has
to pass such order as it thinks fit on the matters covered by the
application. Under sub-section (8) of section 32-5, the order passed
by the Settlement Commission under sub-section (5) shall provide for
the terms of the settlement and in case of rejection contain reasons
therefore. Thus, on a plain reading of the provisions of sub-sections
(5) and (8) of section 32-F, it is clear that the Settlement Commission
has to pass such order as it thinks fit and it has the power to not only
provide for the terms of the settlement but also to reject the
application in which eventuality, reasons have to be recorded. The
power conferred on the Settlement Commission under section 32-L to
send the case back to the Central Excise Officer is in addition to the
aforesaid powers of the Settlement Commission. Such a power is given
to the Settlement Commission under section 32-L, if it finds that any
person who has made an application for settlement under section 32-
E, has not co-operated with the Settlement Commission in the
proceedings before it. This power given to the Settlement Commission
under section 32-L does not and cannot take away the powers
conferred the Settlement Commission under sub-sections (5) and (8)
of section 32-F. It is, therefore, not possible for the Court to accept
the first submission of learned counsel for the petitioners.
The second submission of learned counsel for the petitioners is
that once the application filed under section 32-F has been allowed to
be proceeded with under sub-section (1) of section 32-F. the
Settlement Commission has to settle the case by passing an
appropriate order under sub-sections (5) and (8) of Section C32-F
and it cannot reject the application even if it finds that the application
does not contain a full and true disclosure of the duty liability or that
the case involves complex questions of fact which require detailed
appreciation of evidence.
This submission of learned counsel for the petitioners cannot
also be accepted. Under sub-section (1) of section 32-E, the applicant
is required to make a full and true disclosure of his duty liability and
merely because the Settlement Commission has, after considering the
explanation offered by the applicant, allowed the application to be
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proceeded with under sub-section (1) of section 32-F, will not mean
that the Settlement Commission has accepted that the applicant has
section (1) of section 32-F, will his duty liability because that is not
the stage to make such an inquiry. It is clear from sub-section (3) of
section 32-F that it is only when an application is allowed to be
proceeded with that the Settlement Commission shall call for a report
along with the records from the Commissioner of Central Excise
having jurisdiction. It is after examination of the records and the
report of the Commissioner of Central Excise that the Settlement
Commission, after giving an opportunity to the applicant and to the
Commissioner of Central Excise to be heard, is required to pass an
order as it thinks fit under sub-section (5) on the matters covered by
the application. It cannot, therefore, be asserted that once the
application filed under sub-section (1) of section 32-E has been
allowed to be proceeded with under sub-section (3) of section 32-F,
the Settlement Commission has necessarily to make a settlement. If
that was so, then in that event power would not have been conferred
on the Settlement Commission under sub-section (8) of section 32-F to
reject the application.
The third submission of learned counsel for the petitioners is
about the mala fides of the officers of the department.
It is sought to be asserted that since a complaint had been filed
under section 200 of the Code of Criminal Procedure in which
charges had been framed on 10 December 2013, the officers, with a
mala fide intention made attempts to ensure that the case was not
settled. The officers have not been impleaded by name as party
respondents and even otherwise the allegations are very vague and
have not been substantiated.
The last submission is that the Settlement Commission should
have settled the dispute even if complex questions of facts were
involved and should not have sent the matter back to the adjudicating
authority.
This submission cannot also be accepted. The Settlement
Commission has given good and cogent reasons for sending the case
back to the adjudicating authority. The Settlement Commission
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noticed that the applicants had not accepted a substantial part of the
duty liability and had in fact contested the evidence collected by
Revenue as being fabricated and tampered with. It also noticed that
the Revenue had given reasons substantiate its position regarding the
investigation as well as the quantification of duty liability. In such
situation, the Settlement Commission thought it appropriate,
particularly when the applicants had not ma full and true disclosure
and that complex questions of fact, which required appreciation of
evidence, required to be settled through adjudication. A fair amount
of discretion has to be given to the Settler Commission in cases where
matters are placed before it for settlement keeping in mind the well se
principle that settlement is not akin to adjudication. Unless it is
established that the discretion has exercised in an arbitrary or
perverse manner or that it is not based on relevant considerations or
has taken consideration irrelevant matters, Courts will not interfere in
the exercise of such discretion by the Settle Commission under Article
226 of the Constitution.
In COLLECTOR OF CENTRAL EXCISE V. PRADYUMNA STEEL
LTD. 8, the relevant portion is extracted hereunder:
An application for rectification was made by the Department
to the tribunal for rectification of its order dated 23/6/1987 deciding
the appeal. In the main order, the only relevant part is contained in
para 4 thereof, with which alone the other member of the bench
expressed his concurrence. In that part of the order, it was held that
the provision mentioned in the show-cause notice being inapplicable,
the show cause notice was invalid and the correct provision to show-
cause could not be seen to support the validity of the notice. The
application for rectification made by the Department was on the
ground that the mere mention of an incorrect provision of law in the
show cause notice was not sufficient to invalidate the same and a
decision was relied on in support of this proposition to make out the8
(2003) 9 SCC 234
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WP_6376_2008ground of an error apparent on the face of the order. This application
has been rejected by the tribunal. Hence, this appeal by special leave.
It is settled that mere mention of a wrong provision of law
when the power exercised is available even though under a different
provision, is by itself not sufficient to invalidate the exercise of that
power. Thus, there is a clear error apparent on the face of the
tribunals order dated 23/6/1987. Rejection of the application for
rectification by the tribunal was, therefore, contrary to law.
25. It is an admitted fact that the above judgments clearly
indicate that full and true disclosure is mandatory in settlement
proceedings and the Settlement Commission may reject an
application at any stage if such disclosure is absent, even after
allowing it to proceed. Mere reference to a wrong statutory
provision does not vitiate proceedings if the authority otherwise
has the power.
26. It is pertinent to mention here that the Settlement
Commission rejected the application under Section 32E on the
ground that the petitioner had not made a full and true
disclosure of its duty liability or its modus operandi. Though the
petitioner admitted certain additional duty liability, the
Commission found that the actual amount of unaccounted
goods could not be pinpointed, alleged gap in accounting of
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production was not satisfactorily explained, no clear evidence
was furnished regarding unaccounted scrap, the admission
made by affidavit was not supported by documentary records
and the manner in which the additional duty liability was
derived was not properly disclosed. Hence, the Commission held
that the statutory requirement of full and true disclosure was
not satisfied and dismissed the settlement application.
27. Considering the nature and circumstances of the case, the
Settlement Commission took note of the complexity of the
investigation as reflected in the Show Cause Notice. The notice
disclosed that the Department had relied upon several materials,
including excess power consumption, Procurement and
consumption of raw materials, the pattern of accounting
maintained by the unit and the alleged clandestine clearance of
finished goods.
28. The Commission observed that the applicant had failed to
effectively rebut these allegations. Instead of furnishing a
comprehensive explanation supported by records, the applicant
admitted only a limited additional duty liability, which was not
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correlated with the data relating to raw material receipts,
electricity consumption, or production records. Such partial
admission, according to the Commission, was inconsistent with
the materials available on record.
29. Learned counsel for the petitioner further contended that
power consumption should be determinative of actual
production, which was also considered and rejected by the
Commission. The Commission held that the issue required a
detailed factual examination involving technical and
documentary scrutiny, which could appropriately be undertaken
only in regular adjudication proceedings and not in summary
settlement proceedings under Section 32E of the Central Excise
Act, 1944.
30. The Commission further concluded that the applicant had
not satisfied the mandatory requirement of making a full and
true disclosure of duty liability as contemplated under Section
32E. Though the petitioner had admitted certain additional duty,
such admission was not supported by any documentary
evidence showing actual production, details of clearance of M.S.
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ingots, runners and risers, records relating to procurement and
consumption of raw materials or a clear and transparent method
of computation of the admitted liability.
31. The contention of the petitioner that the Commission ought
to have first called for a report from the Commissioner of
Customs and Central Excise was also addressed. It was held
that the Settlement Commission is empowered to consider any
relevant material on record and is not confined to a specific
procedural sequence before determining whether the statutory
requirement of full and true disclosure is satisfied.
32. On an overall assessment, the Commission found that the
materials indicated large scale manufacture and removal of
ingots, runners and risers without proper accounting and
without payment of duty. In the absence of documentary
evidence and complete disclosure of facts by the applicant, the
Commission held that the statutory precondition for entertaining
the settlement application was not fulfilled.
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33. Accordingly, the Settlement Commission rejected the
application, holding that the applicant had failed to make a full
and true disclosure of its duty liability, and that the matter
required detailed adjudication in regular proceedings.
34. We are of the considered opinion that there is no error
committed by the learned Settlement Commission in rejecting
the application and does not require any interference with the
said findings nor the petitioner is entitled for any such relief and
liable to be rejected.
35. Accordingly, this Writ Petition is dismissed. There shall be
no order as to costs.
As a sequel, miscellaneous applications, if any pending,
shall stand closed.
_______________________________
JUSTICE P. SAM KOSHY
________________________________________________
JUSTICE NARSING RAO NANDIKONDA
Date: 21.04.2026.
vjb
