2022 (7) TMI 88 - HC - Central Excise

Court sets aside rejection under Sabka Vishwas Scheme, finds distinct liabilities

The court allowed the writ application, setting aside the decision to reject the declaration under the 'Sabka Vishwas (Legacy Dispute Resolution) Scheme, ... Short paid duty by firm - liability of the partners to make good such shot paid duty - joint and several liability - two / three partnership firms with common partners (or relatives of partners) - Seeking direction to respondents to accept the form of declaration and to undertake process of verification by designated committee - seeking direction to issue statement under sub-section (1) and (4) of Section 127 of the Act and issue discharge certificate - HELD THAT:- Indisputably one composite show cause notice was issued in the case on hand. The writ applicant cannot be held liable for the alleged duty short paid by M/s Sunshine Corporation. In the show cause notice nowhere it has been stated that M/s Sunshine Paints (writ applicant) is jointly and severally liable for the alleged duty short paid by M/s Sunshine Corporation. The reason is not far to seek. The liability alleged to have been incurred by M/s Sunshine Corporation is for the period of F.Y. 2001 to 2002, 2002 to 2003 and 2003 to 2004 during which the writ applicant was not in existence at all. The partners of the writ applicant firm cannot be made liable to make good the duty alleged to have been short paid by M/s Sunshine Corporation. In other words M/s Sunshine Corporation cannot be considered as a co-noticee for the purpose of the said scheme. A co-noticee is the one who is liable for the very same amount along with the others. Such is not the case on hand. When the notice segregates the liability and the demand is made separately from M/s Sunshine Corporation the reason given for rejecting the declaration would not be sustainable in law. Whether the writ applicant can be treated as co-noticee? - HELD THAT:- It is apparent that the Sunshine Corporation is being considered as principal noticee whereas M/s. Sunshine Paints (writ applicant) has been considered as the co-noticee for the sole reason that the writ applicant took over the business of M/s. Sunshine Corporation. As noted, for the period during which M/s. Sunshine Corporation incurred liability writ applicant firm was not even in existence and in such circumstances, the writ applicant cannot be treated as a co-noticee. Bombay High Court in the case of THOUGHT BLURB VERSUS UNION OF INDIA AND ORS. [2020 (10) TMI 1135 - BOMBAY HIGH COURT] after examining the budget speech of the Hon'ble Finance Minister while introducing the scheme as well as considering the statement and objects of the scheme and the views expressed by the Board held that a liberal view is required to be taken to make the scheme successful - Similarly, in JYOTI PLASTIC WORKS PVT. LTD., JAI PLASTICS, N.D. PATEL VERSUS UNION OF INDIA [2020 (11) TMI 156 - BOMBAY HIGH COURT], a Division Bench of Bombay High Court took note of the objective of the scheme and thereafter took the view that a reasonable and pragmatic approach has to be adopted. The decision of the committee dated 11.2.2020 is set aside and the matter remitted to the committee (respondent No.2) to take a fresh decision in accordance with law after giving due opportunity of hearing to the writ applicant by treating its declaration under the litigation category as a valid declaration - matter on remand. Issues Involved:1. Validity of rejection of the declaration under 'Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019'.2. Distinction of liabilities between M/s Sunshine Corporation and M/s Sunshine Paints.3. Eligibility of M/s Sunshine Paints to file a declaration under the scheme.4. Interpretation of 'co-noticee' under the scheme.5. Requirement of reasons in administrative orders.Issue-wise Detailed Analysis:1. Validity of Rejection of the Declaration under 'Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019':The writ applicant challenged the rejection of their declaration under the scheme. The rejection was based on the grounds that the main noticee (M/s Sunshine Corporation) had not discharged the duty demand, and hence, the co-noticee (M/s Sunshine Paints) could not avail the scheme's benefits. The court found merit in the submission that M/s Sunshine Corporation and M/s Sunshine Paints had distinct liabilities, and the rejection was not sustainable.2. Distinction of Liabilities Between M/s Sunshine Corporation and M/s Sunshine Paints:The court highlighted that the show cause notice issued by the Additional Director General, Directorate General of Central Excise Intelligence, clearly segregated the liabilities of M/s Sunshine Corporation and M/s Sunshine Paints. M/s Sunshine Corporation was not called upon to make good the duty short paid by M/s Sunshine Paints and vice versa. The court noted that the liabilities were not joint and several, and the writ applicant (M/s Sunshine Paints) could not be held liable for the duty short paid by M/s Sunshine Corporation.3. Eligibility of M/s Sunshine Paints to File a Declaration Under the Scheme:The court examined the eligibility criteria under Section 125 of the Finance (No.2) Act 2019 and found that M/s Sunshine Paints was eligible to make a declaration under the scheme. The court emphasized that the writ applicant had paid the entire duty amount and interest, and the rejection of their application was wrongful and appeared to be a typographical error.4. Interpretation of 'Co-Noticee' Under the Scheme:The court clarified that M/s Sunshine Corporation could not be considered a co-noticee for the purpose of the scheme. A co-noticee is one who is liable for the same amount along with others. Since the writ applicant (M/s Sunshine Paints) was not in existence during the period of liability incurred by M/s Sunshine Corporation, they could not be treated as co-noticees. The court noted that the scheme's proviso to sub-section (b) of Section 123 was not applicable as the notice did not make the writ applicant jointly and severally liable.5. Requirement of Reasons in Administrative Orders:The court referred to the principles laid down by the Supreme Court regarding the necessity of providing reasons in administrative orders. It emphasized that reasons introduce clarity and ensure fairness in decision-making. The court found that the Settlement Commission's order lacked reasons for rejecting the waiver of penalty and fine, making it unsustainable in law. The court remitted the matter to the Settlement Commission for fresh consideration with a direction to provide specific reasons while dealing with the matter.Conclusion:The court allowed the writ application, set aside the decision of the committee dated 11.2.2020, and remitted the matter to the Commissioner (South) Designated Committee Ahmedabad for fresh consideration. The committee was directed to treat the declaration under the litigation category as valid and complete the exercise within six weeks. The court emphasized the need for a liberal and pragmatic approach to ensure the success of the scheme.