The Rajasthan High Court (Jaipur Bench) has held that redemption fine imposed in lieu of confiscation of goods is covered within the ambit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. Since Section 125 of the Finance (No. 2) Act, 2019 does not exclude cases involving confiscation or redemption fine, a declarant cannot be held ineligible merely because the declaration includes redemption fine. The amount of redemption fine forms part of the recoverable amount under the indirect tax enactment and cannot be separated from the duty demand for the purposes of settlement under the Scheme.
The Division Bench comprising Justice Arun Monga and Justice Maneesh Sharma closely examined Section 125 of the Finance (No. 2) Act, 2019, which lists the categories of persons who are ineligible to make a declaration under the Scheme. It found that neither confiscation cases nor cases involving redemption fine are included in the list of excluded categories. On that basis, the Court held that a person asked to pay redemption fine in lieu of confiscation cannot be treated as ineligible under the Scheme only for that reason. The Court made it clear that if the legislature intended to exclude such cases, it would have said so expressly in Section 125.
The Court referred to the Gujarat High Court’s ruling in Synpol Products Pvt Ltd., whereby it had held that redemption fine forms part of the amount recoverable under the indirect tax enactment and cannot be artificially separated from the duty demand for the purposes of the Scheme. The Court also found the Department’s reliance on the CBIC communication dated Dec 20, 2019 to be misplaced. It observed that the interpretation sought to be drawn from that letter was contrary to the object and provisions of the Scheme. The Scheme was intended as a one-time dispute resolution measure to end old indirect tax disputes, and the Board’s restrictive reading could not override the statute.
The Court further noted that the Scheme and its official FAQs, flyers and press notes indicated waiver of interest, penalty and fine. Since persons convicted for offences under Section 9 were already excluded by Section 125(1)(b), the Court accepted the reasoning that the “fine” referred to in the Scheme would necessarily relate to redemption fine, which is the relevant fine in such cases.
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Briefly, Premier Bars Private Limited, a company engaged in manufacturing and allied businesses, was registered under the Central Excise Act, 1944. By an Order-in-Original dated Mar 30, 2017, the excise authorities directed confiscation of 291.218 MT of MS Ingots valued at Rs. 78.62 lakhs, while giving the company the option to redeem the goods on payment of a redemption fine of Rs. 10 lakhs. A penalty of Rs. 3 lakhs were also imposed. The company’s first appeal was dismissed by the Commissioner (Appeals), after which it filed a second appeal before CESTAT, New Delhi.
During the pendency of the appeal, the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 was introduced for settlement of legacy central excise and service tax disputes. The petitioner filed a declaration in Form SVLDR-1 seeking settlement of the arrears arising out of the adjudication order. However, on Nov 12, 2019, the Designated Committee rejected the declaration on the ground of “ineligibility”, stating that redemption fine was not covered under the Scheme.
The petitioner challenged that rejection before the Rajasthan High Court. Its main case was that Section 125 of the Finance (No. 2) Act, 2019 does not exclude cases involving confiscation of goods or redemption fine from the Scheme, and therefore the declaration could not have been rejected merely because redemption fine was involved. The respondents defended the rejection by arguing that the Designated Committee had acted in line with the Scheme and that the CBIC’s letter dated Dec 20, 2019 clarified that the expression “fine” under the Scheme referred to fine under Section 9 of the Central Excise Act and not redemption fine under Section 34.
