What is "Settlement of Cases"?

Chapter V of the Central Excise Act 1944, Section 83 of the Finance Act, 1994 (Service Tax) and chapter XIV of the Customs Act 1962, contain provisions for "settlement of cases". Under these provisions, the Customs, Central Excise and Service Tax Settlement Commission has been set up and entrusted with the powers to settle tax disputes. The
Commission provides an alternate dispute resolution forum for taxpayers who wish to resolve tax disputes in a spirit of conciliation rather than litigation. Any taxpayer to whom a show cause notice has been issued and the case is still to be adjudicated, can make an application in the prescribed form, containing a full disclosure of his accepted duty liability & interest.

What is the advantage of approaching the settlement commission?

The advantage include:
a. Time - bound disposal of case (the order for settlement is passed within 9 months of
the date of filing of the application, which is extendable by 3 months)
b. The Commission can grant waiver from Fine, Penalty (in-part or full) & immunity from
c. The Order attains finality. No appeal will be filed against the order by the Department.

Who are eligible for availing the benefit of "settlement of cases"

An application for settlement of case can be filed in respect of a show cause notice issued to a taxpayer, under any of the three Acts (ibid), which is pending adjudication. If the case has been adjudicated, the procedure for settlement cannot be availed.

Where are the Benches of settlement commission located in India?

The Customs, Central Excise & Service Tax settlement commission consists of four Benches
-New Delhi (Principal Bench)
-Mumbai (Addl. Bench)
- Chennai (Addl. Bench)
- Kolkata (Addl. Bench)

What is the constitution of each Bench?

Please see public notice no. 1/2022 dated 13th December 2022, which is available on the website of the settlement commission (www.settlementcommission-cest.gov.in)

Which is the form in which an application for settlement is to be made and where are these available?

The prescribed format for submission of application are notified under the respective Acts as -
- SC(E)-1 for Central Excise,
- SC(ST)-1 for Service Tax,
- SC(C)-1 for Customs
These forms can be downloaded from the Commission's website
The manner for filing applications is contained in the procedure notified by the
Commission titled "Customs, Central Excise and Service Tax Settlement Commission
Procedure, 2007". The same is available on the website of the Commission.

What documents are to be submitted at the time of filing an application for settlement?

The documents include submission of the application for settlement in prescribed format (in quintuplicate) along with challan(s) evidencing payment deposit of accepted duty/tax and interest thereon along with application fee. For further details regarding procedures and preparation of "paper book", please refer to the "Customs, Central Excise and Service Tax
Settlement Commission Procedure, 2007". The same is available on the website of the Commission.

Once the application is filed, what is the next step?

Within seven days of the filing of the application, the Bench shall issue a notice to the Applicant, requiring the applicant to respond on the maintainability of the application. Upon receiving the reply from the Applicant, the Bench fixes a date for hearing for purposes of admission of the application. Thereafter, an order admitting or rejecting the application is issued by the Bench, no later than 14 days from the date of notice. As a measure of certainty for the Applicants, the law provides that if a notice is not issued in 7 days or if no order, either rejecting or admitting the application, is passed within 14 days, the application(s) would be deemed admitted. You can please refer to Section 32F of Central Excise Act, 1944 and Section 127C of the Customs Act, 1962 in this regard.

What is the procedure after the case is admitted by the settlement commission?

After the case is admitted:-
- The application is forwarded by the Bench to the jurisdictional Commissioner for comments.
- Applicants can obtain a copy of the report / comments of the jurisdictional commissioner on payment of prescribed fee of Rs 5 per page. (Please refer Customs (Settlement of Cases) Rules, 2007 or Central Excise (Settlement of Cases) Rules, 2007 or Service Tax (Settlement of Cases) Rules, 2012)
- Before the case is decided a hearing is granted to the applicant and jurisdictional commissioner.
- Final order by the Commission is passed within 9 months from receipt of application, extendable to another 3 months by the Bench, if required.

What happens if settlement commission rejects an application at the stage of Admission or in a Final Order?

If the case is not admitted by the Bench, the case remains under adjudication before the adjudicating authority. Further, Under Section - 32L(1) of the Central Excise Act, 1944, and Section 127-I(1) of the Customs Act, 1962, settlement commission may also send back the case for adjudication, if any person who made an application for settlement has not made full & true disclosure or refuses to cooperate in the proceedings before the Bench.

Is the proceeding before the settlement commission a judicial proceeding?

Yes, the proceedings before the Commission are judicial proceedings within the meaning of section 193 and 228 of IPC and for purposes of section 196 of Indian Penal Code [section 32P of Central Excise Act and section 127M of Customs Act, 1962 refer]

Is the order of settlement commission conclusive ?

The order of the settlement commission is conclusive with respect to the matters settled therein. The matter covered in the settlement commission's order cannot be re-opened in any proceedings under the Act or under any other law for the time being in force.

Is there any provision to transfer an application for settlement from one bench to another?

Yes, under section 32C of the Central Excise Act, 1944 {as also made applicable to Customs Act, 1962 and Finance Act, 1994 (Service Tax)}, the applicant is entitled to file a miscellaneous application seeking transfer of an application filed by him from one bench to another Bench. The application form for making such request is available on the Commission's website.

Once an application has been made before the settlement commission, what is the status of proceedings before the jurisdictional adjudicating authority?

Sub-section (2) of Section 32-I of the Central Excise Act (as also made applicable to the Finance Act 1994) and sub-section (2) to section 127F of the Customs Act, 1962 may please be referred. Once an application has been allowed by the settlement commission, till such time that orders are passed, the adjudicating authority is barred from proceeding with the Show Cause Notice for which application has been filed.

Can a co-noticee also file an application before the commission?

Yes, all co-noticees are entitled to file an application before settlement commission as coapplicants, provided the noticee from who duty is demanded has filed an application for settlement of case (Section 32E of Central Excise Act, 1944 as made applicable through Section 83 of Finance Act, 1994 and section 127B of the Customs Act, 1962 may be referred). The forms for making such application by co-noticees have been notified under Notification No. 9/2017-Cx(NT) dated 12th April 2017 in Form SC(E) - 2 and Notification No. 37/2017 - Cus (NT) dated 12th April 2017 in Form SC (C)-2 for cases under central excise/service tax and customs respectively. The forms are available on the Commission's website