2013 Supreme(Del) 1262

High Court of Delhi
S. RAVINDRA BHAT & R.V. EASWAR, JJ.
Union of India & Another
Versus
Dharampal Satyapal & Others
W.P. (C) No. 4376 of 2012
Decided On : 27-09-2013

Headnote:

The writ petition was filed by the Union of India, through the Secretary, Ministry of Finance, Department of Revenue, North Block, New Delhi and the Assistant Director (Investigation), Directorate General of Central Excise Intelligence, West Block-VII Wing No.VI, Second Floor, R. K. Puram, New Delhi as petitioner Nos.1 & 2 respectively for issuance of a writ of certiorari or any other order or direction in the nature of a writ quashing and setting aside the majority opinion of the Customs and Central Excise Settlement Commission (Principal Bench, New Delhi) in its order dated 12.03.2012 and for upholding the minority opinion expressed therein, and for issuance of any other directions or orders deemed fit and proper, in favour of the petitioners.

Fact of the Case:

The first respondent is a private limited company carrying on the business manufacturing of various brands of paan masala, gutkha containing tobacco and mouth freshner. It has 11 factories in all, of which two are located in Noida and the rest all are located in Guwahati, Assam. Respondent Nos.2 to 5 are directors of the first respondent. Information is stated to have been received by the petitioner that the first respondent was suppressing the production and clandestinely clearing its products which resulted in evasion of payment of excise duty. There was also intelligence to the effect that all the close relatives of the Chairman and CMD of the first respondent were managing all the activities of the first respondent. A search was therefore conducted on 16.07.2008 in the course of which documents showing accounts of purchase of catechu and supply of the same to the various units of the first respondent, who is hereinafter referred to as “DSL”, were recovered. The following amounts of cash were also recovered: Rs.47,00,000/- from the residence of Subhash Chand Gupta, a senior member of the family and uncle of respondent No.2, Rs.9,00,000/- from respondent No.2, Rs.1,50,000/- from the residence of respondent No.3 and Rs.4,00,000/- from the residence of respondent No.5. The cash seized totalled to Rs.61,50,000/-. According to the petitioner, no proper explanation was available for the cash and, therefore, the same was seized under panchnama. In the course of the search proceedings, DSL and its director, Ajay Kumar Gupta, who is respondent No.2 in the present proceedings, were asked to furnish the details of purchase of raw materials and to explain the cash but this was not complied with. After some time, however, DSL furnished a list of 35 suppliers of catechu along with their addresses who had supplied catechu to DSL during the period from April, 2004 to June, 2008. The information was supplied by DSL in the form of the chart which showed the quantity of catechu supplied by each of the suppliers during the aforesaid period. These details are reproduced at pages 4 to 6 of the show-cause notice. Summons were issued to all the 35 suppliers calling upon them to furnish the details of the catechu supplied by them to DSL between April, 2004 and June, 2008. 18 suppliers, whose names are given in pages 6 and 7 of the show-cause notice, furnished the details called for. The central excise authority compared the details furnished by DSL with those furnished by 18 suppliers of catechu and found that either the suppliers have supplied excess catechu than what was shown by DSL or supplied less than what was shown by DSL. From a comparison of the details, it appeared to the central excise authorities that DSL was not correctly recording the receipt of catechu supplied by the 18 suppliers and that the same was used in the suppressed production of paan masala, gutkha and mouth freshner. Several persons employed with DSL were examined during the search and their statements were recorded to show unaccounted receipt of catechu and the utilisation thereof. All the information gathered during the search were collated and analysed in the show-cause notice issued to DSL. The gist of the show-cause notice was that the quantities as furnished by the supplier were more than the quantity of purchase as furnished by DSL and the excess was used in the manufacture of products where catechu was used and such production was suppressed and cleared without payment of duty. The central excise authorities also prepared a product-wise chart, in addition to a supplier-wise chart, of production in all their factories from April, 2004 to June, 2008. They worked out the consumption of catechu in each product in each factory for each year and compared the same with the supplies of catechu as furnished by DSL. The comparison revealed that substantial quantity of catechu was purchased by DSL but not shown to have been utilised in the manufacture of their products; the excess quantity of catechu, according to the authorities, had been used in the manufacture of products, which production was suppressed and clandestinely cleared without payment of any excise duty.

Finding of the Court:

The writ petition was allowed with costs which were assessed at Rs. 25,000/-. The opinion of the majority was quashed and the minority opinion was upheld.

Issues: Whether the Settlement Commission erred in holding that the applicant had made a full and true disclosure of the duty liability which was not admitted before the central excise authorities and the manner in which such liability was derived.

Ratio Decidendi: The Settlement Commission erred in holding that the applicant had made a full and true disclosure of the duty liability which was not admitted before the central excise authorities and the manner in which such liability was derived. The case was complex and involved disputed questions of fact or law which could only be decided by the adjudicating authority and therefore it was a case for adjudication and not for settlement by the Settlement Commission.

Final Decision: The writ petition was allowed with costs which were assessed at Rs. 25,000/-. The opinion of the majority was quashed and the minority opinion was upheld.