Judicial Review Cannot Re-Appreciate Settlement Commission Evidence: Delhi High Court
The Delhi High Court on 21 August held that while exercising judicial review over orders of the Settlement Commission, it cannot re-appreciate evidence considered by the Commission or substitute its own assessment for that of the Commission.
A Division Bench of Justices Anil Kshetarpal and Manmeet Pritam Singh Arora made the observation while dismissing a writ petition filed by Jindal Lifestyle Ltd. challenging the rejection of a claim for adjustment of Rs. 31.93 lakh towards reversal of CENVAT credit against Central Excise duty liability. It observed:
“The Settlement Commission considered the material placed before it and recorded a finding that the Petitioner had not furnished sufficient documentary evidence to substantiate the claim for adjustment. This Court, exercising writ jurisdiction, cannot undertake a re-appreciation of such material as if sitting in appeal over the Impugned Order.”
Jindal Lifestyle had undertaken activities relating to the manufacture of Stainless Steel Cladding and Railing between January and December 2005. Believing that the activities did not amount to manufacture, it discontinued payment of Central Excise duty. It subsequently admitted its liability and approached the Settlement Commission.
During the relevant period, the company claimed to have reversed CENVAT credit amounting to Rs. 31.93 lakh, partly on a pro rata basis and partly at the rate of 10% of the sale price under Rule 6(3) of the CENVAT Credit Rules, 2004, which requires reversal of credit in specified circumstances where inputs or input services are used for exempted goods or services. It sought adjustment of this amount against its duty liability.
The Settlement Commission had earlier passed an order which the petitioner challenged before the High Court. In 2010, the Court directed the Commission to re-examine the claim regarding reversal of CENVAT credit and permitted it to call for further information from either party.
Upon remand, the Settlement Commission sought further documents, including the RG-23A Part II register and input invoices. The petitioner contended that the ER-1 returns, statutory records, sales working sheets and correlation statement already furnished were sufficient to establish the reversal. The Commission, however, rejected the claim after finding that the documentary material was insufficient.
The petitioner argued that the Settlement Commission had travelled beyond the scope of the 2010 remand order by requiring further documents and had failed to properly consider the material already available on record.
The Court rejected the challenge, holding that the dispute essentially concerned the sufficiency, adequacy and evidentiary value of the material placed before the Settlement Commission. It held that these matters fell within the Commission's domain and could not be reassessed by the High Court in writ jurisdiction.
It further held that the earlier remand order had expressly permitted the Settlement Commission to seek further information. Therefore, the Commission's decision to call for supporting statutory records and invoices to verify the correctness of the claim did not exceed its jurisdiction.
The Bench also held that the Department's failure to dispute the availment of CENVAT credit did not justify interference. Whether the documents sufficiently established the reversal claimed by the petitioner was a matter for the Settlement Commission to determine. It observed:
“This Court cannot substitute its own assessment of the evidentiary material for that of the Settlement Commission.”
Referring to the limited scope of judicial review laid down by the Supreme Court, the Bench noted that orders of the Settlement Commission can be interfered with only on narrow grounds, including contravention of statutory provisions, prejudice, fraud, bias or malice.
Accordingly, the High Court declined to interfere with the Settlement Commission's rejection of the claim for adjustment and dismissed the writ petition.
For Petitioner: Mr. Yogendra Aldak, Mr. Kunal Kapoor, Mr. Yatharth Tripathi, Advs.
For Respondents: Mr. Rajesh Kumar, SPC with Mr. Siddharth Shekhar, Mr. Yash Narain, Advs. for UOI. Ms. Anushree Narain, SSC with Mr. Apurv Yadav, Mr. Naman Choula, Advs.