Gujarat High Court
Messrs Synpol Products Pvt. Ltd. vs Union Of India on 24 December, 2019
Author: Harsha Devani
Bench: Harsha Devani, Sangeeta K. Vishen
C/SCA/21744/2019 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 21744 of 2019
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MESSRS SYNPOL PRODUCTS PVT. LTD.
Versus
UNION OF INDIA
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Appearance:
MR PARESH M DAVE with AMAL PARESH DAVE and MR ADITYA
TRIPATHI (260) for the Petitioner(s) No. 1,2,3,4
MR ANKIT SHAH(6371) for the Respondent(s) No. 1,2,3,4
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CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
Date : 24/12/2019
ORAL ORDER
(PER : HONOURABLE MS.JUSTICE HARSHA DEVANI)
1. Being aggrieved by the order passed by the Designated Committee made under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (hereinafter referred to as the "Scheme") rejecting the declarations made by the petitioners, the petitioners have invoked the writ jurisdiction of this court under article 226 of the Constitution of India.
2. The petitioners, against whom orders-in-original have been made by the adjudicating authority confirming demand of duty, ordering recovery of interest, imposing penalty and ordering confiscation of goods and imposing fine in lieu of confiscation, against which appeals are pending before the appellate forum, submitted requisite declarations under the Scheme. Separate notices were served upon the petitioners by Page 1 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER the Designated Committee calling upon them to show cause as to why the declarations should not be treated as void as the Scheme permits waiver of duty, interest and penalty, but not fine in lieu of confiscation.
3. After hearing the petitioners, the Designated Committee has held that the cases involving confiscation and redemption fine have not been covered under the Scheme and, therefore, the declarations cannot be accepted and no relief can be granted to the petitioners under the Scheme.
4. Mr. Paresh Dave, learned advocate for the petitioners submitted that the dispute involved in this case is, whether or not, waiver from payment of redemption fine is allowed under the Scheme. It was submitted that the Designated Committee has rejected the declarations made by the petitioners on the ground that no relief as regards confiscation and redemption fine has been allowed under the Scheme, and, therefore, the entire matter covered under the declarations cannot be accepted. It was submitted that the petitioners' submission has been that waiver of redemption fine is also allowed, and various FAQs, press releases and flyers published by the Government are relied upon in support of this submission. It was submitted that in the affidavit-in-reply by the Principal Commissioner, the stand adopted is that the Government has not granted any relief or immunity from confiscation and/or redemption fine under section 129 of the Finance Act, 2019 and that such relief or immunity is not covered under the Scheme. However, now by the letter dated 20th December, 2019 issued by the Ministry of Finance, a new case has been made out that waiver of fine was allowed under the Scheme Page 2 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER but it was "fine" under section 9 of the Central Excise Act, 1944 and not redemption fine under section 34 of the Act. It was submitted that, therefore, it is now accepted by the respondents that waiver of fine is also allowed under the Scheme, though fine is not specifically referred to under section 129 thereof. It was submitted that in view of the stand taken by the Government and the clarification issued, two issues arise: (i) whether the Scheme would apply to a case involving "tax dues" and also confiscation/redemption fine; and if yes, what relief can be granted in such cases; and (ii) when waiver of "fine" is allowed under the Scheme, whether that fine is "redemption fine" or "fine" levied by the court of law under section 9 of the Central Excise Act?
4.1 In respect of the first issue, it was submitted that the scheme would apply even in cases where confiscation and redemption fine are involved, because cases of redemption fine are not excluded from the Scheme. Reference was made to section 121(h) of the Finance Act which defines "declarant", to mean a person who is eligible to make a declaration and files such declaration under section 125. It was pointed out that section 125 of the Finance Act allows "all persons" to make a declaration except those covered under clauses (a) to
(h) thereof and that there is no exclusion for cases involving confiscation and redemption fine.
4.2 It was further submitted that section 123 of the Finance Act defines "tax dues" to mean the total amount of duty being disputed in appeal /cross appeals. Clause (b) of the section refers to cases where a show cause notice is pending, and the amount of duty stated to be payable in the notice is tax due.
Page 3 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDERThis qualifying condition is also satisfied in the present cases and the cutoff date of 30th June, 2019 is also not violated in the present cases. It was urged that since all qualifying conditions are satisfied and no exclusion of section 125 of the Finance Act is attracted, the declarations of the petitioners herein cannot be treated as void, and hence, ought not to have been rejected.
4.3 Next, it was submitted that section 129(1) of the Finance Act lays down under clause (a) that the declarant shall not be liable to pay any further duty, interest or penalty. It was submitted that since the declarations made by the petitioners are maintainable under the Scheme, this relief can certainly be granted to them. It was contended that under clause (b) of the section, immunity from prosecution is allowed. Such relief can also be granted to the petitioners because their declarations are maintainable under the Scheme. It was submitted that under section 129(1) and also clause (c) thereof, the discharge certificate is conclusive as to the "matter" and time period stated in the declaration, and no "matter" and time period covered by such declaration shall be reopened in any other proceeding. It was submitted that a declaration in Form SVLDRS 1 is for the "matter", that is to say, the adjudication order, the appeal and the tax dues in the nature of duty and penalty. Once such "matter" covered under the declaration is concluded and a discharge certificate for such declaration is issued under section 127(8) of the Finance Act, then such matter cannot be reopened in any other proceeding, because it is a complete conclusion of such matter on payment of amount in accordance with section 124 of the Finance Act. It was contended that the relief admissible to a declarant who Page 4 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER qualifies under the Scheme is complete discharge and conclusion of the "matter" covered under the declaration.
4.4 Alternatively, the learned counsel submitted that if no complete discharge is admissible, then discharge from liabilities like the balance duty, whole of the penalty and interest, and also immunity from prosecution is in any case admissible, if all qualifying conditions of the Scheme are satisfied and the declaration is not hit by any of the exclusions. It was submitted that in such a situation, the case for confiscation and redemption fine may continue in accordance with law while discharging the declarant from other liabilities of balance duty, interest, penalty and prosecution. However, this is not the objective of the Scheme and, therefore, a complete discharge has to be allowed in all cases involving confiscation and redemption fine also.
4.5 As regards the second issue, namely, whether the waiver of fine allowed under the Scheme is redemption fine or fine levied under section 9 of the Central Excise Act, it was submitted that it is now accepted by the revenue that waiver of fine is allowed under the Scheme, and therefore, the objection that section 129(1)(a) of the Finance Act does not refer to fine, no longer survives. It was submitted that the revenue's stand is in line with the clarifications in FAQs, press releases and flyers issued by the Board.
4.6 According to the learned counsel, the only question in this regard, therefore, is which is this "fine", which is to be waived under the Scheme. It was submitted that the "fine" that is to be waived has to be redemption fine, and it can Page 5 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER never be imposed by the criminal court under section 9 of the Act. It was contended that ordinarily, a criminal case cannot be waived once instituted in the competent court of law. Therefore, the Government has issued Circular No.1072/05/2019-CX dated 25th September, 2019 laying down at para 2(ii) that the procedure laid down in Circular No.1009/16/2015-CX dated 23.10.2015 should be followed for withdrawal of prosecution after issuance of discharge certificate, if prosecution has already been launched. Vide para 10.2 of the other Circular dated 23.10.2015, it is provided that the appropriate Commissioner shall give direction to file an application through the Public Prosecutor to allow withdrawal of the prosecution. It was submitted that the procedure laid down for withdrawal of prosecution shows that a criminal case is to be withdrawn before its conclusion, that is, before it results in sentence of imprisonment or fine. It was submitted that the letter now issued on 20th December, 2019, is for waiver from fine under section 9 of the Act, but there is no question of waiver of such fine, which is not even ordered by the criminal court. It was contended that the excise authorities cannot waive "fine" if imposed by a competent criminal court and, therefore, the immunity from prosecution can be allowed under the Scheme only when no prosecution is instituted, or the prosecution already instituted is pending. In either case, there is no question of waiver of "fine" under the Scheme, and, therefore, waiver of fine allowed under the Scheme can only be waiver of redemption fine.
4.7 It was submitted that if fine is imposed by the criminal court under section 9 of the Act, then such fine can never be waived under the Scheme because such cases stand excluded Page 6 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER by virtue of section 125(1)(b) of the Finance Act. It was submitted that under the central excise law, the only fine is redemption fine and fine under section 9 of the Act is not under the central excise law. Therefore, when the respondents have now agreed that waiver of fine is allowed under the Scheme, such fine can only be redemption fine imposed or imposable under section 34 of the Central Excise Act.
4.8 Inviting attention to paragraph 2 of the letter dated 20th December, 2019, it was pointed out that the Ministry of Finance has linked imprisonment and fine, both being in the nature of punishment under section 9 of the Act. According to the Ministry, if immunity from one, that is, imprisonment is allowed under the Scheme, then waiver of fine follows. It was submitted that the same would be the position in respect of redemption fine, which is a liability clearly linked to short payment or non-payment of excise duty on the goods. It was pointed out that in the order-in-original annexed along with the petition, duty demand of Rs.17,79,479/- is confirmed for the goods detailed in Annexures A-1 to A-5 to the show cause notice, and it is also clear from clause (iii) that the goods detailed in Annexures A-1 to A-5 to the show cause notice are held to be liable for confiscation in view of short payment of Rs.17,79,479/- as excise duty. It was contended that interest under clause (2) and penalty under clause (4) are also clearly linked to the same duty demand on the same goods. It was submitted that the Scheme provides for payment of 30% of the duty demand of Rs.17,79,479/- with waiver of the rest of the duty, entire interest and penalty. When waiver from all such liabilities including even the short payment of duty is allowed under the Scheme, confiscation and redemption fine clearly Page 7 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER cannot be left out, which are clearly linked to the subject matter of the declaration. It was submitted that in view of the Ministry's clarification dated 20th December, 2019 for waiving linked liabilities, the waiver of redemption fine has to be read under section 129(1)(c) of the Finance Act.
4.9 Reference was made to para 3(b) of the letter dated 20th December, 2019, to submit that the Ministry's stand is that a show cause notice involving redemption fine is excluded if it was not adjudicated and the redemption fine quantified under the adjudication order was not paid by the declarant before lodging the declaration. It was submitted that getting a notice pending on 30th June, 2019 to be adjudicated and paying redemption fine imposed under the order-in-original is a virtually impossible exercise for a declarant; and when section 123(b) specifically provides that a show cause notice received on or before the 30th June, 2019 can also be settled under the Scheme because the duty stated to be payable in such notice was "tax dues", such cases cannot be excluded from the Scheme only because such show cause notice may involve a possible liability of confiscation and redemption fine upon its adjudication. It was submitted that in case of a pending show cause notice also, the declarant can file a declaration under the Scheme and discharge its liabilities by paying 30%, or 50%, as the case may be, of the tax dues, that is, the amount of duty stated to be payable in such notice. In case of pending show cause notices, waiver of fine is allowed as regards possible confiscation, and therefore, waiver of fine can only be that of redemption fine.
4.10 Lastly, it was submitted that the stand of the Page 8 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER respondents that waiver of fine imposable by the criminal court under section 9 of the Central Excise Act is allowed under the Scheme and not waiver of redemption fine, is ex-facie illegal and unjustified, and not borne out from the provisions of the Scheme. Therefore, the declarations involving "tax dues" along with other liabilities like interest, penalty and also redemption fine deserve to be accepted under the Scheme, and discharge certificates under section 127(8) of the Finance Act are required to be issued in all such cases on payment of the amount of 30% or 50% of the tax dues indicated in the declarations.
5. Opposing the petition, Mr. Ankit Shah, learned senior standing counsel for the respondents, submitted that if the petitioners are not entitled to relief available under section 124 of the Finance Act, their applications have to be rejected. Referring to section 129(9) of the Finance Act, it was submitted that the Scheme does not provide for waiver of fine and hence, final certificate of discharge cannot be issued in favour of the petitioners. It was submitted that the expression "fine" used in the press notes and flyers issued by the Government have to be read as fine under section 9 of the Central Excise Act, 1944. It was further submitted that the legality of the issue has to be decided on the basis of the language employed in the enacted piece of legislation, inasmuch as, the law is not governed by press notes but by the provisions of the Finance Act, 2019 and the rules made thereunder. It was submitted that considering the Scheme as a whole, it is apparent that the legislature has not granted any relief or immunity insofar as confiscation and/or redemption fine is concerned.
Page 9 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER5.1 Reference was made to the Board's letter dated 20th December, 2019, wherein it has been stated thus:
"2. The matter has been examined. 'Fine' and 'Redemption Fine' denote different things. Section 9 of the Central Excise Act, 1944 provides for the offences and penalties under the Act. The penalties for the offences under the Act may extend to seven years of imprisonment and fine. Needless to say that once the person is granted immunity from prosecution, he also gets waiver from such 'fine'. However, redemption fine is levied in lieu of confiscation Section 34 of the Act, whereby the party can 'redeem' the confiscated goods. Under the Scheme, no immunity (Section 129) or relief (Section 124) has been granted for redemption fine.
3. A 'case' under the Scheme means 'a show cause notice, or one or more appeals arising out of such notice which is pending as on 30.06.2019' [Explanation to rule 3, SVLDRS Rules, 2019]. In the instant case, the SCNs also involve imposition of redemption fine. There are two scenarios that can emerge;
(a) The SCN involving redemption fine has been adjudicated. In this case, redemption fine has been imposed and quantified.
(b) The SCN involving redemption fine is yet to be adjudicated. In other words, the redemption fine has not been imposed or quantified.
The discharge certificate [Section 129] which is issued at the end of the proceedings under the Scheme is a full and final closure of the matter and time period stated therein. Therefore, the discharge certificate in such cases can only be issued after settlement of redemption fine. In scenario (a) above, it would be mean payment of redemption fine. In scenario (b) above, it would mean adjudication of show cause notice for imposition of redemption fine and payment thereof."
5.2 It was submitted that, therefore, in cases involving imposition of redemption fine, the concerned persons are required to pay redemption fine and then avail the benefit of the Scheme and in case where a show cause notice has been Page 10 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER issued involving redemption fine, the show cause notice would be required to be adjudicated and after payment of redemption fine, the relief available under the Scheme can be availed of. It was, accordingly, submitted that since waiver of redemption fine is not contemplated under the Scheme, the Designated Committee was wholly justified in not accepting the declarations made by the petitioners.
6. Chapter V of the Finance Act, 2019 bears the heading "Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019". The Scheme is comprised of sections 120 to 135.
7. Clause (h) of section 121 of the Finance Act defines "declarant"to mean a person who is eligible to make a declaration and files such declaration under section 125. Section 125 of the Finance Act reads thus:
"Declaration under the Scheme
125. (1) All persons shall be eligible to make a declaration under this Scheme except the following, namely:--
(a) who have filed an appeal before the appellate forum and such appeal has been heard finally on or before the 30th day of June, 2019;
(b) who have been convicted for any offence punishable under any provision of the indirect tax enactment for the matter for which he intends to file a declaration;
(c) who have been issued a show cause notice, under indirect tax enactment and the final hearing has taken place on or before the 30th day of June, 2019;
(d) who have been issued a show cause notice under indirect tax enactment for an erroneous refund or Page 11 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER refund;
(e)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 the 30th day of June, 2019;
(f) a person making a voluntary disclosure,--
(i) after being subjected to any enquiry or investigation or audit; or
(ii)having filed a return under the indirect tax enactment, wherein he has indicated an amount of duty as payable, but has not paid it;
(g) who have filed an application in the Settlement Commission for settlement of a case;
(h) persons seeking to make declarations with respect to excisable goods set forth in the Fourth Schedule to the Central Excise Act, 1944.
(2) A declaration under sub-section (1) shall be made in such electronic form as may be prescribed."
8. On a plain reading of clauses (a) to (h) of section 125 of the Finance Act, it is abundantly clear that persons whose cases involve confiscation and fine in lieu of confiscation are not placed in the categories of persons who are not eligible to make declarations under the Scheme. Thus, persons who have been ordered to pay fine in lieu of confiscation or to whom show cause notices proposing confiscation of goods have been issued, have not been declared to be ineligible to make a declaration under the Scheme.
9. Sub-section (1) section 129 of the Finance Act provides Page 12 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER that every discharge certificate issued under section 126 thereof with respect to the amount payable under the Scheme shall be conclusive as to the matter and time period stated therein and (a) the declarant shall not be liable to pay any further duty, interest, or penalty with respect to the matter and time period covered in the declaration; (b) the declarant shall not be liable to be prosecuted under the indirect tax enactment with respect to the matter and time period covered in the declaration; and (c) no matter and time period covered by such declaration shall be reopened in any other proceeding under the indirect tax enactment. Thus, while clause (a) of sub- section (1) of section 129 of the Finance Act provides that the declarant shall not be liable to pay further duty, interest or penalty, it does not expressly provide that the declarant shall not be liable to pay fine/redemption fine; which is why the present controversy has arisen. It may be noted that while under the Scheme no express provision has been made discharging the declarant from the liability to pay fine, the Directorate General of Taxpayer Service, Central Board of Indirect Taxes and Customs (hereinafter referred to as "the Board") has issued FAQs, flyers and press notes wherein it is specifically stated that the most attractive aspect of the Scheme is that it provides substantial relief in the tax dues for all categories of cases as well as full waiver of interest, fine and penalty. In all these cases, there would be no other liability of interest, fine or penalty. There is also complete amnesty from prosecution.
10. Thus, in terms of the FAQs, press notes and flyers issued by the Board, the Scheme provides substantial relief in the tax dues for all categories of cases as well as full waiver of Page 13 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER interest, fine and penalty. Thus, having regard to the fact that:
(i) section 125 of the Finance Act says that all persons shall be eligible to make declaration under the Scheme except for the categories specifically enumerated therein; and (ii) under section 125 of the Finance Act, cases involving confiscation and fine in lieu of confiscation (redemption fine) are not excluded from the benefit of the Scheme, and (iii) according to the Board, the Scheme provides relief in tax dues for all categories of cases; prima facie it appears that the legislature did not have the intention of excluding cases involving confiscation and fine in lieu of confiscation from the purview of the Scheme.
11. It may be further noted that in the communication dated 20th December, 2019 of the Board, the contents whereof have been reproduced hereinabove, it has been stated that when a person gets immunity from prosecution, he also gets waiver of such fine for the offences under section 9 of the Central Excise Act, 1944. Thus, it is not the case of the Board that the Scheme does not provide for waiver of fine, but only that it does not provide for waiver of redemption fine. Testing the explanation put forth by the Board in the context of the relevant statutory provisions, section 9 of the Central Excise Act, 1944 specifies the categories of offences and the punishment thereunder, which may be punishable with imprisonment and fine or imprisonment or fine. Thus, the question of imposing fine arises only upon conviction for an offence specified in section 9 of the Central Excise Act. However, clause (b) of section 125 of the Finance Act, clearly excludes persons who have been convicted for any offence punishable under any provision of the indirect tax enactment Page 14 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER for the matter for which he intends to file declaration. As a necessary corollary therefore, it follows that the legislature would not have contemplated waiver of fine under section 9 of the Central Excise Act, 1944. The only other fine envisaged under the Central Excise Act, 1944 is fine in lieu of confiscation/redemption fine. Under the circumstances, when the Board has issued FAQs, press notes and flyers stating that the Scheme grants waiver of interest, penalty and fine, it appears that the same would be relatable to redemption fine, inasmuch as, it is the only other fine contemplated under the Act. Besides, as noticed earlier, persons whose cases involve confiscation/ fine in lieu of confiscation are not placed in the categories of persons enumerated in section 125 of the Finance Act, who are not eligible to file declarations thereunder.
12. By the communication dated 20th December, 2019, the Board has stated that in case where redemption fine has been imposed and quantified, the discharge certificate can be issued only after settlement of redemption fine, namely payment of redemption fine. Therefore, it is not the case of the Board that declarations involving redemption fine cannot be accepted. This court, however, is prima facie of the view that the stand of the Board that in case where redemption fine is imposed and quantified, discharge certificate can only be issued after settlement of redemption fine, is not in consonance with the Scheme which contemplates putting an end to the matter.
13. In the light of the above discussion, this court is of the view that the matter requires consideration. Hence issue Rule, returnable on 23rd January, 2020. This court is further of the Page 15 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER view that a prima facie case has been made out for grant of interim relief inasmuch as if the interim relief as prayed for is not granted, the petitioners would not be in a position to file fresh declarations before the last day for filing declarations under the Scheme, which may either create an irreversible situation or unnecessary complications. However, if conditional interim relief is granted, the same would take care of the interests of the petitioners as well as the revenue. Accordingly, the impugned orders passed by the Designated Committee are hereby stayed. Since the last date for filing declarations under the Scheme is 31st December, 2019, the respondents are directed to permit the petitioners to file fresh declarations under the Scheme without payment of redemption fine, subject to the final outcome of the petition. Upon such declarations being submitted, the same shall be further processed by the Designated Committee, and shall not be turned down on the ground that the Scheme does not cover cases involving confiscation and redemption fine.
14. At this stage, Mr. Paresh Dave, learned advocate for the petitioners states that there are many persons similarly situated to the petitioners who have filed declarations which have been rejected by the Designated Committee but are not before the court and that if these persons come to the court, it would lead to multiplicity of proceedings before this court. It was, accordingly, urged that the benefit of the present order also be granted to the persons who have not approached this court.
15. Considering the fact that it is the case of the respondents in their affidavit-in-reply that out of approximately 450 Page 16 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019 C/SCA/21744/2019 ORDER applications received by the said Commissionerate, 22 applications, that is, five percent, pertain to confiscation and redemption fine; it appears that approximately five per cent of the declarants have matters involving confiscation and redemption fine. Having regard to the fact that if all similarly situated declarants were to approach this court, the same would needlessly lead to multiplicity of proceedings, the court is of the view that the benefit of this order may be granted to even those declarants who have not approached this court, subject to the declarants filing an undertaking before the Designated Committee that in case the outcome of the present petition is against the petitioners, they would pay the redemption fine, failing which, the discharge certificate shall be revoked.
(HARSHA DEVANI, J) (SANGEETA K. VISHEN, J) Z.G. SHAIKH Page 17 of 17 Downloaded on : Thu Dec 26 22:30:42 IST 2019