INDORAMA SYNTHETICS (INDIA) LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) This petition under Article 226 of the Constitution of India challenges the order dated 8/2/2011 of the Settlement Commission, Customs and Central Excise (Settlement Commission) to the extent it (i) rejects the claim of the petitioner for reduction of demand of Rs.29,65,850 from and out of the demand of duty of excise on special discount; (ii) imposes a penalty of Rs.15 lacs on the petitioner; and (iii) directs payment of simple interest at the rate of 10% from the period settled amount is due till the date of payment. However, at the hearing, Mr. Sridharan, the learned Senior Counsel appearing for the petitioner has made submissions only challenging imposition of penalty of Rs.15lacs by the impugned Order.

(2.) Consequent to a search, show cause notice dated 30/11/2005 demanding in the aggregate a duty of Rs.3.30 crores was issued to the petitioner. The notice alleged that during the period April, 2001 to September,2002 the petitioner had cleared partially oriented yarn (POY) of higher grade by downgrading the variety of POY in its invoices and thus discharging duty on a lower value. Further during the period from 2000-01 to 2002-03 the petitioner had allowed special discount to certain select customers so as to reduce the value of its goods. This resulted in paying duty on lower value. However, these special discounts were received back by the petitioner from the select customers. Therefore evasion of duty is alleged. Therefore the petitioner was called upon to show cause why equivalent penalty under Section 11AC of the Act should not be imposed as valuation fraud was alleged. The petitioner was also served with another show cause notice dated 30/11//2005 seeking to confiscate POY valued at Rs.44.30 lacs.

(3.) On receipt of the show cause notice dated 30/11/2005 the petitioner opted to settle the dispute before the Settlement Commissioner. On 1/6/2006 the petitioner filed a Settlement Application before the Settlement Commission under Section 32E of the Act. In its application the petitioner accepted the duty liability of Rs.1.89 crores as against the total demand of Rs.3.30 crores while praying for immunity from penalty, interest and prosecution. In its application for settlement, the petitioner has admitted and accepted the allegations contained in the show cause notice.