2025 (5) TMI 1011 - AT - Central Excise

SVLDRS discharge certificate bars reopening of proceedings when show cause notice issued before cutoff date

CESTAT New Delhi held that where a discharge certificate was issued under SVLDRS following payment after show cause notice dated before 30.06.2019, the ... SVLDRS - Reopening of case by adjudicating authority, where discharge certificate has already been issued in terms of Section 129 (C) of the Finance Act, 2019 - HELD THAT:- The appellant is eligible for this scheme as show cause notice has been issued to the appellant before 30.06.2019. Admittedly, it is a case where show cause notice has been issued to the appellant before 30.06.2019. Therefore, the appellant was entitled to opt for SVLDRS. Section 126 of the said scheme provides that the designated Committee shall verify the correctness of the declaration made by the appellant and thereafter issue a demand notice, if the amount payable by the appellant and shall issue a discharge certificate to the appellant on payment of amount for which demand notice is issued. Admittedly, in this case, discharge certificate has been issued. Further, Section 129 provides that if the discharge certificate has been issued, the matter shall be concluded and the appellant is not liable to pay any duty/interest/penalty. But, in a case, where it is a voluntary disclosure then within one year of the issuance of the discharge certificate the proceedings can be re-opened. Admittedly, the provision to Section 129 is not applicable to the facts of this case as it is a case, where show cause notice has been issued to the appellant before 30.06.2019 and after due verification, the demand was raised against the appellant and thereafter on payment, the discharge certificate has been issued to the appellant in form of SVLDRS–IV. Therefore, the proceedings against the appellant shall be concluded against the show cause notice dated 18.09.2017 issued to the appellant. Conclusion - As discharge certificate has been issued to the appellant, therefore, the demand confirmed in the impugned order amounting to Rs. 84,46,631/- alongwith interest and penalty under Section 11AC of the Act are not sustainable. With regard to the show cause notice dated 07.11.2017 the registry is directed to place the matter before the Division Bench of this Tribunal for consideration in due course. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal are:- Whether the adjudicating authority can reopen proceedings and confirm demand of duty, interest, and penalty against the appellant after a discharge certificate has been issued under the Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS) as per Section 129(1) of the Finance Act, 2019.- The applicability and effect of the discharge certificate issued under SVLDRS on show cause notices and related proceedings under the Central Excise Act, 1944.- Whether the appellant is entitled to relief from the demand confirmed by the adjudicating authority and upheld by the Commissioner (Appeals) in light of the discharge certificate obtained under SVLDRS.- Ancillary issue regarding another show cause notice dated 07.11.2014 involving seizure and its adjudication, which was not argued before the Tribunal.2. ISSUE-WISE DETAILED ANALYSISIssue: Reopening of proceedings after issuance of discharge certificate under SVLDRSRelevant legal framework and precedents: The Tribunal extensively examined the provisions of the Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS) laid down under Sections 124 to 129 of the Finance Act, 2019. Key provisions include:Section 124(1) specifies relief available to declarants depending on the nature and amount of tax dues related to show cause notices, appeals, arrears, investigations, or voluntary disclosures.Section 125(1) lists persons eligible and ineligible to make declarations under the scheme.Section 126(1) mandates verification of declarations by the designated committee and issuance of demand notice and discharge certificate upon payment.Section 129(1) provides that the discharge certificate issued under the scheme is conclusive regarding the matter and time period covered, barring further liability for duty, interest, penalty, or prosecution, and prohibits reopening of the matter in any other proceeding.Section 129(2) carves out exceptions, notably allowing reopening in cases of voluntary disclosure where false particulars are found within one year of issuance of the discharge certificate.The Tribunal also referred to Notification No. 5/2019 Central Excise NT dated 21.08.2019, which prescribes procedural rules under SVLDRS, and CBIC Circular No. 1071/4/2019 dated 27.08.2019, relied upon by the appellant to support non-sustainability of proceedings post discharge certificate.Court's interpretation and reasoning: The Tribunal found that the appellant was eligible to opt for SVLDRS since the show cause notice was issued before 30.06.2019, as required under Section 125(1). The appellant had made a declaration under the scheme, which was duly verified by the designated committee under Section 126(1). Subsequently, the appellant paid the demanded amount and was issued a discharge certificate (SVLDRS-IV) on 03.03.2020.The Tribunal emphasized the binding effect of Section 129(1), which states that the discharge certificate conclusively settles the matter and time period covered, precluding any further demand, interest, penalty, prosecution, or reopening of proceedings. The Tribunal noted that the exception in Section 129(2)(c) regarding voluntary disclosures and reopening within one year does not apply here, as the appellant's case involved a show cause notice issued before 30.06.2019 and a verified declaration, not a voluntary disclosure.Therefore, the Tribunal held that the adjudicating authority erred in reopening and confirming the demand of Rs. 84,46,631/- along with interest and penalty under Section 11AC of the Central Excise Act, 1944 after issuance of the discharge certificate. The proceedings against the appellant in respect of the show cause notice dated 18.09.2017 are not sustainable.Key evidence and findings: The appellant's registration date, the timing of the show cause notice, the declaration under SVLDRS, payment of dues, and issuance of discharge certificate were all undisputed. The Tribunal relied on these facts to apply the statutory provisions conclusively.Application of law to facts: The Tribunal applied the statutory scheme literally and purposively, recognizing the finality conferred by the discharge certificate under Section 129(1). The reopening of demand after issuance of the discharge certificate was held to be contrary to the scheme's intent and statutory mandate.Treatment of competing arguments: The appellant's contention, supported by CBIC Circular No. 1071/4/2019, that proceedings post discharge certificate are not sustainable was accepted. The respondent's argument that reopening is permissible because dues were voluntarily paid was rejected as inconsistent with the statutory scheme, which distinguishes voluntary disclosures from cases where show cause notices were issued and verified declarations made.Conclusions: The Tribunal concluded that the demand and penalty confirmed by the adjudicating authority and upheld by the Commissioner (Appeals) are unsustainable and set aside the impugned order in respect of the show cause notice dated 18.09.2017.Issue: Adjudication of another show cause notice dated 07.11.2014 involving seizureAnalysis: The Tribunal observed that the impugned order also adjudicated a separate show cause notice dated 07.11.2014 involving seizure of currency, input work in progress, and final products. However, since neither party argued this issue before the Tribunal, the matter was directed to be placed before the Division Bench of the Tribunal for consideration in due course.3. SIGNIFICANT HOLDINGS- 'Every discharge certificate issued under Section 126 with respect to the amount payable under this 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; (c) no matter and time period covered by such declaration shall be reopened in any other proceeding under the indirect tax enactment.' (Section 129(1))- The Tribunal held: 'As discharge certificate has been issued to the appellant, therefore, the demand confirmed in the impugned order amounting to Rs. 84,46,631/- alongwith interest and penalty under Section 11AC of the Act are not sustainable. Accordingly, the same are set aside.'- The Tribunal clarified that the exception permitting reopening within one year in case of voluntary disclosure with false particulars (Section 129(2)(c)) is not applicable where the show cause notice predates 30.06.2019 and the declaration was verified and accepted under SVLDRS.- The Tribunal directed that the issue relating to the show cause notice dated 07.11.2014, which was not argued, be placed before the Division Bench for consideration.