The High Court of Delhi, on tuesday reinstated that the Settlement Commission is not intended to operate as a parallel, summary adjudicatory forum, to substitute the process of regular adjudication before the competent adjudicating authority.
The court held that the Settlement Commission fell into serious error of jurisdiction, in settling the case arising from the Show Cause Notice without allowing the case to move through a formal adjudicatory body.
The division bench comprising of Chief Justice Dhirubhai Naranbhai Patel and Justice C. Hari Shankar made this observation in the judgement of Commissioner, Central Excise, Customs & Service Tax, Sonepat & Ors v. Amit Decorative Plywoods Pvt. Ltd. & Ors.
The Court pronounced this while considering the matter of an order of the settlement commission in the case of tax evasion by extrapolating data and manipulating records. The Respondents were found to be evading Central Excise duty and also found to be indulging in clandestine removal and undervaluation of goods manufactured by them. The Respondents without responding to the show cause, moved to the settlement commission. The orders of the commission were challenged by the Petitioners in the writ.
The court, while considering the matter of the nature of jurisdiction exercised by the Settlement Commission ruled that, “the Settlement Commission does not transmute itself into an adjudicating authority, in respect of the case before it”. The Court further stressed that the Commission, by the conferment of the powers of the Customs officer as under Section 127F(2), does not become a parallel adjudicating authority, adjudicating a Show Cause Notice.
The Court while deciding the case held that the “Complex issues of fact, or cases in which determination of the liability of the assessee is dependent on the detailed appreciation of evidence would, by their very nature, stand excluded from the purview of jurisdiction of the Settlement Commission”.
The court reprehended the Settlement Commission stating the Commission could not have returned the findings in the absence of the adjudicatory procedures, as it could only have emerged from a formal adjudicatory process.
The court pointed out that a “Show Cause Notice is the terminus a quo of the adjudicatory process, and not the terminus ad quem thereof”.