Summary of Judgement

The Judgement

JUDGMENT :- (Per Jitendra Jain, J.)

1. Rule. Rule made returnable forthwith. By consent of the parties taken up for final hearing at the admission stage.

2. This petition is filed under Article 226 of the Constitution of India, by limited liability partnership firm and its partners challenges the rejection of the application made by firm and its partners in Form-1 under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (“SVLDR Scheme”) for settlement of dispute arising under indirect tax. There are 32 declarations challenged by firm and its partners in the present petition, primarily being the declaration made by firm. Insofar as, rejection of declarations made by the partners are concerned, same is consequential to the outcome of the application made by firm. We propose to deal with the applications made by the firm and thereafter propose to deal with the declarations made by the partners.

3. Rejection of application of declaration No.LD2612190005231:-

3.1 On 26th December 2019, Petitioner No.1-Firm filed an application in Form-1 under SVLDR Scheme. In the said application, it is stated that Central Excise Appeal is pending before this Court arising out of show cause notice dated 8th August 2007 in which the duty of Rs.4,97,618/- was demanded, redemption fine of Rs.21 lakh and penalty of Rs.4,97,618/- was also imposed. The duty demanded of Rs.4,97,618/- was covered by another show cause notice and Petitioner had availed the benefit of SVLDR Scheme for the said show cause notice and the Revenue has accepted the same. Therefore, in the present application, Petitioner sought waiver of penalty and redemption fine under SVLDR Scheme since the basic duty was already covered and benefit availed under the SVLDR Scheme.

3.2 On 2nd March 2020, Respondents, in Form SVLDRS-3, rejected the application of Petitioner No.1-Firm on the ground that Petitioner No.1 has not paid the redemption fine of Rs.21 lakh imposed and further the waiver of redemption fine is not covered under the SVLDR Scheme.

3.3 It is the contention of Petitioner that the issue of waiver of redemption fine is covered by SVLDR Scheme or not is no more res integra in the light of the decision of (i) the Gujarat High Court in Synpol Products Pvt. Ltd. vs. Union of India 1 and SLP has also been dismissed by the Supreme Court, (ii) the Allahabad High Court in M/s. Jay Shree Industries vs. Union of India & Anr. 2 and (iii) this Court in HP Adhesives Limited vs. Union of India & Ors. 3 . Petitioner further submitted that under the Scheme what is required to be deposited is the amount of tax dues relating to the duty and, therefore, Respondents are not justified in rejecting the application since once the duty is settled under the scheme, waiver of penalty and fine is consequential.

3.4 Per contra, Respondents submit that Petitioner is not entitled to waiver of redemption fine on settlement of duty amount since the waiver can be of penalty only and not the redemption fine. Therefore, it is the contention of Respondents that if Petitioner wants to avail the benefit of the Scheme, they are required to pay the redemption fine also. 1 2020 (374) E.L.T. 851 2 2021 (8) TMI 446 3 WP No.3743 of 2021 dtd. 20th February 2023 Respondents have placed reliance on paragraph 10 of the decision of Gujarat High Court in case of Synpol Products Pvt. Ltd. (supra) in support of their submissions.

3.5 The benefit of SVLDR Scheme is available, if the applicant pays “tax dues” as per Section 124 of SVLDR Scheme. Section 123 defines “tax dues” for the purpose of the scheme to mean the “amount of duty” which is being disputed in the appeal. The phrase “amount of duty” is defined in Section 121(d) to mean ‘the amount of central excise duty, the service tax and the cess payable under the indirect tax enactment’. Therefore, on a conjoint reading of Sections 124, 123 and 121(d) of SVLDR Scheme what is required to be paid for availing the benefit of the Scheme is the amount of certain percentage of the amount of excise duty and not the amount of redemption fine. Once the applicant pays the amount of excise duty as required under the Scheme, the applicant is not liable to pay any further duty, interest or penalty with respect to the matters covered in the declaration. Therefore, in our view, the reasons given by Respondents in the application for rejecting the application that Petitioner is required to pay the redemption fine is not borne out from any provisions of SVLDR Scheme.

3.6 Once the applicant pays the amount of duty as per Scheme then Section 129 provides that the applicant shall not be liable to pay any further duty, interest or penalty with respect to the period covered in the declaration. Although in Section 129(1)(a) of SVLDR Scheme redemption fine is per se not included, but the Central Board of Indirect Taxes and Customs issued flyers, wherein it is stated that the benefit under the Scheme would be total waiver of interest, penalty and fine. To the same effect, is the press note dated 22nd August 2019 issued by the Ministry of Finance, Government of India, wherein it is clarified that there would be no other liability of interest, fine or penalty if the dispute is resolved under the SVLDR Scheme. This issue had come up for consideration before the Allahabad High Court in M/s. Jay Shree Industries (supra) wherein on similar facts, the High Court clarified by analysing the meaning of duty, penalty and fine and came to a conclusion that redemption fine under Section 34 of the Central Excise Act is only a payment akin to penalty and, therefore, a declarant is entitled to the waiver of redemption fine under Section 129 of SVLDR Scheme. The very same issue also arose before the Gujarat High Court in Synpol Products Pvt. Ltd. (supra) and the High Court in paragraph 4.5 of the said decision recorded that the Revenue has accepted that waiver of fine is allowed under the Scheme although Section 129(1) of the said Scheme does not refer to fine and the said stand of the Revenue is in line with the clarifications, press release and flyers issued by the Board. The Co-ordinate Bench of this Court in HP Adhesives Limited (supra) has also accepted the decisions Gujarat and Allahabad High Court mentioned above. Therefore, in our view, the basis of rejection that waiver of redemption fine is not covered is required to be rejected.

3.7 Assuming we accept the contention of respondents that “redemption fine” is nothing but a “duty” then even in that case, the SVLDR Scheme grants immunity/waiver from such “redemption fine” if the basic excise duty is paid as per the Scheme. This is so because under Section 124, what is required to be paid is the prescribed percentage of “tax dues” which is defined in Section 123 to mean the amount of duty disputed and the “amount of duty” is further defined in Section 121 (d) to mean the amount of “central excise duty”. Therefore, when Section 124 speaks of payment required to be made of the tax dues, it is certain percentage of central excise duty which entitles the applicant to waiver/immunity under Section 129 of the SVLDR Scheme. Therefore, payment has to be of basic excise duty and not redemption fine to avail benefit of SVLDR Scheme. Admittedly, “redemption fine” cannot be considered as “central excise duty”. Section 129 (1) (a) which provides immunity/waiver states that the declarant shall not be liable to pay any further duty, interest or penalty. The phrase “further duty” by accepting the contention of respondents would cover redemption fine also. To put it simply, what is required to be paid for availing benefits of the scheme is the prescribed percentage of central excise duty which is payable as per Section 3 of the Central Excise Act and when Section 129(1)(a) which grants immunity/waiver refers to “any further duty”, it would mean any payment other than central excise duty and, therefore, by accepting the contention of respondents, “redemption fine” would fall within the phrase “any further duty”. Therefore even on this count, the rejection of the application by respondents is not justified.

3.8 The reliance placed by Respondents on paragraph 10 of the decision of the Gujarat High Court in Synpol Products Pvt. Ltd. (supra) to justify their rejections is not acceptable since the issue before us is interpretation of Section 121(d) which defines “amount of duty” which is the phrase used in Section 123 which defines “tax dues”, whereas the observations made in paragraph 10 of the Gujarat High Court is in connection with the definition of the phrase “amount in arrears” defined by Section 121(c). In the instant case, the provisions of Section 121(c) is not applicable since Petitioner No.1-Firm has filed an appeal which has not attained finality and, therefore, none of the clauses of Section 121(c) of the Scheme applies to Petitioner’s case. Therefore, on facts the observations in paragraph 10 of the Gujarat High Court is not applicable to the case before us.

3.9 In view of above, rejection of declaration No.LD2612190005231 by Respondents of the application made by Petitioner in Form SVLDRS-1 is quashed and set aside and Respondents are directed to issue Form SVLDRS-4 to Petitioner No.1-Firm within a period of four weeks from the date of uploading this judgment.

4. Rejection of application in Form SVLDRS-1 No.LD2612190005177 dated 26th December 2019.

4.1 The second declaration which is challenged in the present petition was filed on 26th December 2019 by Petitioner No.1-Firm for settling the disputes under the SVLDR Scheme arising out of show cause notice dated 3rd March 2008, wherein under the SVLDR Scheme excise duty of Rs.38,30,075/- and penalty of Rs.33,32,457/- was demanded.

4.2 On 26th December 2019, the said application was rejected on the ground that assessee had requested to withdraw the said application vide letter dated Nil.

4.3 Respondents in their affidavit-in-reply of Shri Dange affirmed on 5th July 2024 have accepted in paragraph 5 that the said remark has been erroneously made. There is no rebuttal that petitioner has not made any application for withdrawing. Counsel for Respondents has not disputed this position.

4.4 In view thereof, the ground for rejection of the application No.LD2612190005177 made by Petitioner-Firm does not survive and, therefore, Respondents are directed to accept, within a period of four weeks from the date of uploading the present order, the application of Petitioner by issuing SVLDRS-2 to Petitioner calling upon them to make the payment, if any. Petitioner, would thereafter, make the payment within further period of 30 days from the date of receipt of Form SVLDRS-2 and intimate the same to Respondents. Thereafter, Respondents shall issue a final certificate in Form SVLDRS-4 within four weeks from the date of intimation by Petitioner of having made the payment.

5. Rejection of declaration Form SVLDRS-1 Nos.LD2612190006053, LD2612190006039, LD2612190006027, LD2612190005855, LD2612190005844, LD2612190005743, LD2612190005724, LD2612190005678, LD2612190005698, LD2612190005893, LD2612190005909, LD2612190005959, LD2612190005978 and LD2612190006006 dated 26th December 2019.

5.1 All the above declarations were filed by Petitioner-Firm on 26th December 2019.

5.2 Respondents rejected the said application on the ground that as per report of DGCI dated 3rd February 2020, no enquiry was pending on 30th June 2019 since the earlier investigation had already culminated into issuance of show cause notice and has been adjudicated vide OrderIn-Original dated 30th December 2011 and the said matter is presently pending before this Court. Therefore, declaration is not covered under the category of “investigation” in terms of Section 125(1)(e) of SVLDR Scheme.

5.3 Petitioner had filed the declaration under the category of “enquiry, investigation or audit”. The dispute sought to be resolved under SVLDR Scheme pertained to whether the goods manufactured by Petitioner-Firm were liable to be assessed under Section 4 of the Central Excise Act or under Section 4A of the said Act. On a challenge, by Larsen & Toubro Limited to whom the goods were supplied by Petitioner, the Co-ordinate Bench of this Court in Writ Petition No.394 of 2007 vide order dated 12th March 2007 permitted provisional clearance of the goods manufactured on payment of duty under Section 4 of the Central Excise Act read with Valuation Rules and giving requisite bond alongwith bank guarantee for 25% of the differential duty on the basis of notional MRP of Petitioner, viz., the list price plus 15% of the list price to cover the local taxes minus 40% abatement. On compliance of the said directions, the vendors of the Larsen & Toubro Limited, Petitioner herein, were allowed to clear the goods pending investigation.

5.4 Pursuant to above, the statement of Petitioners’ representative was recorded on 6th July 2007 under Section 14 of the Central Excise Act which is evident from the show cause notice issued on 8th August 2007. In the light of the above facts, the short issue which arises for our consideration is whether Petitioner No.1-Firm is eligible to avail the benefit of SVLDR Scheme.

5.5 Section 125(1) of SVLDR Scheme provides that all persons shall be eligible to make a declaration under the Scheme except the persons who are mentioned in clauses (a) to (f). Clause (e) disqualifies person who have been subjected to an enquiry or investigation or audit and the amount of duty involved in the said enquiry or investigation or audit has not been quantified on or before 30th June 2019. Section 121(m) of SVLDR Scheme defines “enquiry or investigation” to include the actions specified therein and sub-clause (iv) refers to ‘recording of statement’. In the instant case, as noted above the statement of the representative of Petitioner No.1-Firm was recorded on 6th July 2007 and, therefore, same would fall within the phrase “enquiry or investigation” as defined in Section 121 of the SVLDR Scheme. The amount of duty involved is also quantified in the order of the Coordinate Bench of this Court in Writ Petition No.394 of 2007 dated 12th March 2007, wherein in paragraph 5 of minutes of order the formula of such quantification of duty has been prescribed for release of goods on provisional basis. Therefore, the disqulaification specified in Section 125(1)(e) of SVLDR Scheme is not applicable to the facts of the Petitioner’s case inasmuch as, the twin conditions, viz., subjected to an enquiry or investigation and non-quantification of duty before 30th June 2019 is not satisfied since the formula for quantification was prescribed in the High Court order. Therefore, in our view, the basis of rejection by Respondents of the aforesaid 14 SVLDR Scheme application is not justified and same is quashed and set aside.

5.6 Respondents are directed to accept 14 applications mentioned above and, within four weeks from the date of uploading of the present judgment, issue SVLDR Scheme Form-2 intimating the payment, if any, to be made by Petitioner. Petitioner would make the payment of the amount intimated by Respondents within four weeks from the date of intimation and inform the same to Respondents who would issue SVLDR Scheme Form-4 within a period of four weeks from the date of such intimation by Petitioner.

6. Rejection of declaration by 8 partners for settlement of penalty demanded under show cause notice dated 8th August 2007 and show cause notice dated 3rd April 2008 of Rs.1,25,000/- each and Rs.8,25,000/- each. Form SVLDRS-3 Nos.L030320SV300131, L030320SV300123, L030320SV300120, L030320SV300112, L030320SV300105, L030320SV300100, L030320SV300096, L030320SV300091, L030320SV300125, L030320SV300122, L030320SV300116, L030320SV300106, L030320SV300102, L030320SV300098, L030320SV300094 and L030320SV300090.

6.1 The aforesaid 16 applications by the partners of Petitioner No.1-Firm were rejected on the ground that Respondents have rejected the SVLDR applications made by Firm.

6.2 The firm challenged the rejections which we have already dealt with above and held that the rejection by Respondents of the applications made by firm was not justified. Since basis of rejection of the applications made by the firm has been quashed and set aside, the consequential benefit would flow to the 8 partners who have made 16 applications.

6.3 In view of above, rejections by Respondents of 16 applications made by partners is quashed and set aside and Respondents are directed to accept 16 applications made by the partners and, within a period of four weeks from the date of uploading of the present judgment, intimate the same of the payment, if any, to be made against the said application. The partners would make the payment as intimated by Respondents within four weeks from the date of such intimation and inform Respondents of the same, who shall issue Form SVLDRS-4 within four weeks from the date of such intimation by the partners of having made the payment.

7. In view of above, petition is allowed in above terms.

8. Petition disposed.