2021 (9) TMI 522 - HC - Central Excise

Tax declaration order set aside under Sabka Vishwas Scheme due to quantification interpretation. CBIC circulars binding.

M/s Magma Industries Limited Versus Designated Committee Office Of Commissioner Central Goods And Service Tax And 2 Others

The court set aside the order rejecting the declaration filed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, finding that the tax dues ... Rejection of declaration by the petitioner on SVLDRS-1 - seeking settlement of dispute under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - short payment of Central Excise duty against shortage of stock - CBIC Circular No. 1071/4/2019-CX.8, dated 27.8.2019 - HELD THAT:- In the present case, Section 133 of the Scheme is pari materia (in material parts) to Section 119(1) of the Income Tax Act, 1961. Under clause 10(g) of Circular issued by the CBIC under Section 133 of the Scheme, the CBIC had forsaken the power it wielded, to its own advantage, under the Scheme. Thus, it waived that advantage and relaxed the rigor of law - to make the Scheme more purposeful and successful by maximizing amicable/consented resolution of legacy disputes, under all indirect taxation enactments, in the context of the imminent enforcement of the G.S.T. Regime, at the relevant time. That being the emphasis laid by the CBIC, it clearly sought to maximize the number and quantum of settlements under the Scheme. The CBIC has only clarified the meaning to be given to the word 'quantified' used under the Scheme – to include thereunder any duty liability admitted (in writing) by a person (during an enquiry or investigation) – as a 'written communication' spoken of under Section 121(r) of the Scheme. Also, ₹ 45,38,231/- is the exact amount ‘quantified’ while issuing the subsequent show-cause-notice dated 06.09.2019. The reasoning given by the Designated Committee in the impugned order runs contrary to law. The Designated Committee was obligated to deal with the declaration filed by the petitioner, on merits. No discretion was vested in the Designated Committee to take a different view. Even though the Circular has not been referred to or dealt by the Designated Committee, by virtue of the clear language of Section 133 of the Scheme, it was further obligated to necessarily act in accordance with that law. The impugned order is set aside. In absence of any other dispute or objection, the matter is remitted to the Designated Committee to issue the necessary SVLDRS-3, within a period of thirty days from today - Petition allowed by way of remand. Issues Involved:1. Challenge to the rejection of the declaration filed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.2. Determination of whether the 'tax dues' were 'quantified' before the cut-off date of 30.06.2019.3. Interpretation of the term 'quantified' under the Scheme.4. Binding nature of CBIC circulars on revenue authorities.5. Purposive construction of the Scheme.Issue-wise Analysis:1. Challenge to the rejection of the declaration filed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019:The petitioner challenged the order dated 05.05.2020 by the Designated Committee rejecting its declaration on SVLDRS-1 under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The rejection was based on the grounds that the tax liability was not 'quantified' before the cut-off date of 30.06.2019.2. Determination of whether the 'tax dues' were 'quantified' before the cut-off date of 30.06.2019:The court examined whether the 'tax dues' were 'quantified' before 30.06.2019. It was noted that the 'Panchnama' dated 10.02.2016 mentioned a duty short payment of Rs. 2,18,516/-, and a statement by the petitioner’s director on 13.05.2016 admitted duty avoidance of Rs. 45,38,231/-. The total amount was Rs. 47,56,751/-. The court found that these written communications satisfied the requirement of 'quantification' under Section 121(r) of the Scheme.3. Interpretation of the term 'quantified' under the Scheme:The term 'quantified' under Section 121(r) of the Scheme means a written communication of the amount of duty payable. The court interpreted that this does not necessarily need to be a communication issued by a Central Excise authority. The admissions made in writing by the petitioner during the investigation were deemed sufficient to meet this criterion.4. Binding nature of CBIC circulars on revenue authorities:The court emphasized that the CBIC Circular No. 1071/4/2019-CX.8 dated 27.8.2019 clarified that 'quantified' includes duty liability admitted by the person during enquiry, investigation, or audit. This circular is binding on revenue authorities as per Section 133 of the Scheme. The court cited Supreme Court precedents establishing that revenue authorities cannot deviate from CBIC circulars.5. Purposive construction of the Scheme:The court highlighted that the Scheme is a piece of reform legislation aimed at resolving legacy disputes and facilitating the transition to the GST regime. It requires a purposive construction to maximize settlements. The Designated Committee's rejection of the petitioner’s declaration was found to be contrary to the Scheme's purpose and the binding CBIC circular.Conclusion:The court set aside the impugned order dated 05.05.2020 and remitted the matter to the Designated Committee to issue the necessary SVLDRS-3 within thirty days. The petitioner was given thirty days thereafter to deposit the amount and obtain a Discharge Certificate. The petition was allowed with no orders as to costs.