The Delhi High Court clarified that the redemption fine, as a consequence of non-payment of the excise duty, should be considered as part of the Excise Duty for purposes of the Sabka Vishwas (Legacy Disputes Resolution) (SVLDR) Scheme. Hence, once such a duty stands settled under the Scheme, the redemption fine will be waived too as part of the overall settlement.
The case revolves around the eligibility of the petitioners (taxpayers) to avail the benefits of the SVLDR Scheme despite having challenged the original order-in-original (OIO) before the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT). The Respondents (Department) argued that since the Petitioners had already contested the OIO before CESTAT, they are ineligible to make a declaration under the SVLDR Scheme.
However, upon reviewing the record, including the final order passed by CESTAT, the Court found that the Tribunal did not adjudicate the merits of the case but instead remanded it back to the original adjudicating authority for fresh consideration, primarily due to apparent infirmities in the OIO. Therefore, the case was never definitively decided by the CESTAT, and while the issue was pending adjudication, the SVLDR Scheme came into play.
Therefore, while considering the key issue as to whether redemption fines, imposed for the release of confiscated goods under the Central Excise Act, 1944, fall under the categories of duty, interest, or penalty covered by the SVLDR Scheme, the Court clarified that the SVLDR Scheme applies to legacy disputes, including those involving SCNs, late fees, penalties, and arrears, and it outlines various percentages of tax dues that, if paid, would result in the issuance of a discharge certificate.
The Court examined the provisions of the Central Excise Act, particularly Section 12F, which allows for the seizure of goods due to non-payment of excise duty and mandates the payment of a redemption fine to release the goods. Since the redemption fine is a consequence of non-payment of excise duty, the Court asserted that it should be considered part of the Excise duty for the SVLDR Scheme.
The Division Bench comprising Justice Prathiba M Singh and Justice Shail Jain addressed the scope of the SVLDR Scheme, specifically Section 123(b), which defines “tax dues” as the duty payable in a show cause notice issued before June 30, 2019. Since the matter was remanded by CESTAT and the show cause notice (SCN) was yet to be adjudicated, the demand raised therein was still pending, making the petitioners eligible for the Scheme.
Speaking for the Bench, Justice Singh held that the purpose of the SVLDR Scheme is to bring finality to disputes and to resolve them comprehensively, including the waiver of redemption fines. Therefore, rejecting the argument of the Department that redemption fines should not be waived contradicts the intent of the Scheme.
The Bench accordingly directed the Department to issue a discharge certificate to the petitioners within two months, confirming the settlement of the SCN in accordance with the SVLDR Scheme.
Appearances:
Advocates Bharat Bhushan, Nidhi Gupta, and Anunay Mishra, for the Petitioner/ Taxpayer
NA, for the Respondent/ Revenue
