The Court reaffirms the necessity for full and true disclosure in excise duty settlement applications under the Central Excise Act, 1944.
In a significant ruling, the Telangana High Court has dismissed the writ petition filed by M/s Airan Comtrax Towers (P) Ltd., thereby upholding the decision of the Customs and Central Excise Settlement Commission to reject their application for settlement of excise duty liability. The bench comprising Justices P. Sam Koshy and Narsing Rao Nandikonda emphasized the statutory requirement for a full and true disclosure, which the petitioners failed to meet.
M/s Airan Comtrax Towers, engaged in the manufacturing of MS ingots, had approached the Settlement Commission under Section 32E of the Central Excise Act, 1944, seeking resolution of a dispute arising from a show cause notice issued in 2005. The notice alleged clandestine production and removal of MS ingots, demanding a duty payment of over Rs. 2 crore.
The petitioners admitted to a lesser liability of Rs. 42,20,473, based on installed production capacity under the Compounded Levy Scheme, arguing that their factory was incapable of producing quantities beyond its assessed capacity. However, the Settlement Commission rejected the application, citing the lack of comprehensive disclosure and supporting evidence for the claimed duty liability.
The High Court, in its judgment dated April 21, 2026, concurred with the Commission's findings that the petitioners' disclosure was partial and based on assumptions rather than verified records. The Court noted that the complexity of the investigation and absence of documentary evidence warranted a detailed adjudication process instead of summary settlement proceedings.
The judgment highlighted that the petitioners did not furnish clear evidence regarding unaccounted goods and failed to provide a transparent method for computing the admitted liability. It reiterated that the Commission is empowered to reject applications if statutory conditions are unmet, without being bound to call for a report from the Commissioner.
The Court also addressed the petitioners' argument regarding the procedural amendments to Section 32F, clarifying that the statutory requirement for full and true disclosure remains irrespective of procedural changes. It found no merit in the petitioners' claims that the Commission violated principles of natural justice or failed to consider relevant materials.
The ruling serves as a reminder of the stringent disclosure requirements under the Central Excise Act, reaffirming the role of the Settlement Commission in ensuring compliance and integrity in the settlement process.
Bottom line:-
Central Excise Act, 1944 - Settlement Commission proceedings - Mandatory requirement of full and true disclosure of duty liability by the applicant - Partial or unsupported admissions of liability cannot satisfy the statutory precondition for settlement under Section 32E.
Statutory provision(s):
Central Excise Act, 1944 Sections 32E, 32F, 11A
Constitution of India Article 226
