SVLDR scheme covers SCNs issued before 30 June 2019; discharge certificates on payment waive redemption fines and end proceedings

The HC allowed the petition, holding that SCNs issued before 30 June 2019 qualified as tax dues under the SVLDR Scheme and that discharge certificates issued on payment under the Scheme conclude related proceedings. The court found redemption fine arises from non-payment of duty and falls within the scheme's waiver of duty, interest and penalties; consequently redemption fines are waived where a taxpayer avails the SVLDR Scheme and pays the specified amount. The Department's FAQs and publicity interpreting redemption fine as covered were given effect, and seizure/confiscation cases likewise fall within the Scheme's finality.

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ISSUES PRESENTED AND CONSIDERED

1. Whether "redemption fine" imposed under provisions authorising confiscation and fine in lieu of confiscation constitutes "duty", "penalty" or an independent category outside the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme) for purposes of relief under the Scheme.

2. Whether a discharge certificate under the SVLDR Scheme, issued on payment of amounts determined by the designated committee, extinguishes liability for redemption fine and confiscation-related consequences in matters covered by the discharge certificate.

3. Whether show cause notices issued on different dates but relating to the same subject matter must be treated as coextensive for the purpose of relief under the SVLDR Scheme, so that payment in respect of one SCN leads to discharge of liabilities in the other.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Characterisation of "redemption fine" under the SVLDR Scheme

Legal framework: The SVLDR Scheme defines key terms: "amount of duty" (Section 121(d)), "amount in arrears" (Section 121(c)), "tax dues" (Section 123) and prescribes reliefs (Section 124) with discharge consequences (Sections 127, 129). The Central Excise Act, 1944 empowers seizure (Section 12F) and provides for option to pay a fine in lieu of confiscation (Section 34).

Precedent treatment: Multiple High Court decisions (including judgments discussed from Allahabad, Gujarat, Punjab & Haryana, Bombay and coordinate benches of this Court) have held that redemption fine is a species of penalty or is relatable to the duty demand such that it falls within the scope of amounts covered by the SVLDR Scheme. An SLP against the Gujarat decision was dismissed.

Interpretation and reasoning: The Court analyses statutory language and scheme purpose. Under the Central Excise Act, redemption fine is an option payable in lieu of confiscation and is a consequence of non-payment of excise duty. The SVLDR Scheme's object is finality of legacy disputes by waiving duty, interest and penalty and issuing a discharge certificate on payment of prescribed amounts. The Scheme's definitions and the Board's contemporaneous explanations (FAQs/flyer/press notes) referring to "total waiver of interest, penalty and fine" are relied upon as legitimate aids to construction and to ascertain legislative intent. The Court reasons that excluding redemption fine from "penalty" would frustrate the Scheme's purpose to provide complete closure of disputes arising from the same transaction.

Ratio vs. Obiter: Ratio - redemption fine, being a payment in lieu of confiscation under Section 34 of the Central Excise Act, is a form of penalty or is included in the "penalty/fine" which the SVLDR Scheme intends to waive upon compliance. Obiter - remarks on policy considerations and reliance on CBIC publicity material as persuasive contemporary exposition.

Conclusion: Redemption fine is covered by the SVLDR Scheme; it either falls within the concept of "penalty" or is otherwise included within amounts waived by a discharge certificate under Section 129 once the prescribed scheme payment is made.

Issue 2 - Effect of discharge certificate on redemption fine and confiscation-related liabilities

Legal framework: Section 127(8) requires issuance of discharge certificate on payment indicated by the designated committee and production of proof of withdrawal of appeal; Section 129(1) prescribes that the discharge certificate is conclusive that the declarant shall not be liable to pay any further duty, interest or penalty for the matter and time period covered and provides immunity from prosecution and reopening.

Precedent treatment: Courts interpreting Section 129 have held that once the prescribed payment is made, the discharge certificate bars any further liability in respect of the covered period and matter, and that "penalty" in Section 129 includes penalties in rem (confiscation/redemption fine). Earlier High Court decisions reached the same conclusion and rejected revenue contentions requiring separate payment of redemption fine.

Interpretation and reasoning: The Court emphasises the Scheme's objective of finality and relief. Given that redemption fine is consequential to non-payment of duty and tantamount to a penalty in rem, Section 129's bar on further duty, interest or penalty must be interpreted to include redemption fine. The Court further relies on the Scheme's language, CBIC explanations and consistent judicial authority to hold that issuance of the discharge certificate upon payment of amounts determined under Section 124 extinguishes redemption fine liability in respect of the declared matter/time.

Ratio vs. Obiter: Ratio - a discharge certificate under the SVLDR Scheme, issued after payment of the amount determined by the designated committee, operates to relieve the declarant of redemption fine and confiscation-related liabilities for the matter/time covered. Obiter - statements concerning taxpayer reliance on CBIC FAQs and the department's responsibility for publicity material.

Conclusion: Once the declarant pays the required amount under the Scheme and obtains the discharge certificate, redemption fine and confiscation consequences for the declared matter/time are waived and no separate deposit of redemption fine is permissible as a precondition to issue of the discharge certificate.

Issue 3 - Coextensiveness of multiple SCNs and effect of SVLDR discharge across related notices

Legal framework: The SVLDR Scheme applies to show cause notices issued on or before 30 June 2019 (Section 123(b)). Section 129's bar applies to "the matter and time period stated therein" and precludes reopening of that matter/time period.

Precedent treatment: Courts have addressed cases where multiple notices or confiscation orders arise from the same transaction, holding relief under the Scheme must be given effect to the extent the matters are the same and the Scheme's object of finality is achieved.

Interpretation and reasoning: The Court examines the facts: the SCNs dated 18 June 2013 and 16 June 2014 arose from the same seizures and related facts; one SCN led to adjudication with redemption fine/penalty and the other to duty/penalty. Given the SVLDR Scheme's purpose and the Court's conclusion that redemption fine is covered by the Scheme, payment and discharge in relation to one SCN that covers the same subject matter operates to discharge liabilities in respect of the connected SCN(s) for the same period/matter.

Ratio vs. Obiter: Ratio - where multiple SCNs relate to the same subject matter and time period, discharge under the SVLDR Scheme upon payment as determined must be given effect across those connected notices to effect finality. Obiter - none beyond factual application.

Conclusion: Payment and issuance of a discharge certificate in respect of one SCN covering the same subject matter/time extinguishes redemption fine and related liabilities in the connected SCN(s); designated committee must issue discharge certificates accordingly.

Ancillary findings and directions

1. Contemporaneous explanatory material published by the tax administration (FAQs, flyers, press notes) stating "total waiver of interest, penalty and fine" is a legitimate aid in construing the Scheme and must be given weight where it explains the administration's consistent position, particularly when taxpayers reasonably rely on such material.

2. The Scheme must be interpreted to effectuate its remedial and finality-driven purpose; an interpretation that excludes redemption fine would frustrate that object.

3. Direction: The Department is to issue discharge certificates under Section 129 of the SVLDR Scheme in favour of eligible declarants within specified timeframes where the designated committee has determined payment under the Scheme for the relevant SCN(s) covering the same matter/time.

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