Goods found in excess confiscated; release on redemption fine; penalties under Rules 25 and 26; SVLDR relief denied

CESTAT held goods found in excess were rightly confiscated, with option for release on payment of redemption fine and imposition of penalties under Rules 25 and 26, Central Excise Rules, 2002. Proceedings stemmed from separate show-cause notices leading to the impugned order. The appellants failed to file the mandatory SVLDR declaration; SVLDR relief is available only to declarants, so relied judgments were inapplicable and SVLDR benefit denied. Matters listed for final merits hearing on 25.09.2025 via virtual mode.

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ISSUES PRESENTED AND CONSIDERED

1. Whether appellants are entitled to relief under the SVLDR Scheme in respect of confiscation, redemption fine and penalties where (a) separate show cause notices arose from the same search but concern different alleged irregularities (shortage versus excess stock), and (b) no declaration under the SVLDR Scheme was filed for the impugned demand.

2. Whether pleaded judicial precedents holding that SVLDR Scheme covers redemption fine and penalties apply where the declarant status and the identity/scope of show cause notices differ from those in the relied-on decisions.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Applicability of SVLDR Scheme to demands involving confiscation, redemption fine and penalties where no declaration under the Scheme was filed

Legal framework: SVLDR Scheme (notification dated 21.08.2019) conditions relief on filing of a declaration by the person seeking benefit; the Scheme's ambit includes settlement of specified demands and, as interpreted by some courts, may extend to confiscation and redemption fine subject to meeting Scheme conditions.

Precedent Treatment: The appellants relied on judicial decisions that construed the Scheme to include redemption fine and penalties where declarations were filed and Scheme conditions met. The Tribunal noted those authorities but evaluated their factual parity.

Interpretation and reasoning: The Tribunal examined the mandatory requirement of filing a declaration under the Scheme and held that benefit under SVLDR can be afforded only to a declarant. Because the appellants did not file the mandatory declaration for the impugned demand (confiscation/redemption/penalties), the Tribunal found the relied precedents inapplicable as they involved declarants who complied with Scheme procedural prerequisites. The Tribunal also emphasized that proceedings leading to the impugned order were initiated by a separate show cause notice and concluded in a separate impugned order; hence, settlement of a distinct demand under SVLDR does not automatically extend to demands for which no declaration was filed.

Ratio vs. Obiter: Ratio - The Scheme's relief (including potential coverage for confiscation and redemption fine) is available only to those who file the mandatory declaration; non-declarants cannot claim Scheme benefits. Obiter - Observations that the Scheme can cover confiscation and redemption fine as a general proposition (derived from cited precedents) were discussed but distinguished on facts.

Conclusion: The appellants are not entitled to SVLDR relief in respect of the impugned confiscation, redemption fine and penalties because they did not file the mandatory declaration under the Scheme for the specific demand now under challenge.

Issue 2 - Effect of settlement under SVLDR of one show cause notice on separate, non-overlapping show cause notices arising from the same search

Legal framework: Administrative-scheme relief operates according to its terms and the scope of declarations/settlements made; separate show cause notices constitute distinct proceedings unless overlap or identity of demand is demonstrated.

Precedent Treatment: The Tribunal considered authorities where Scheme relief was held to embrace confiscation/redemption fine when the declarant's filings and the matters settled corresponded to those aspects; however, the Tribunal distinguished those authorities where relief applied to the same demand or declarant-position.

Interpretation and reasoning: The Tribunal accepted the department's submission that the two show cause notices, though emanating from the same search, addressed separate factual issues: one related to goods alleged short/clandestinely removed and the other to goods found in excess without duty documents. The Tribunal reasoned that settlement under SVLDR of one demand does not ipso facto cover a distinct demand confirmed by a separate impugned order where no declaration was filed. The requirement of identity/overlap of demand and compliance with Scheme formalities is determinative. Consequently, the Tribunal refused to extend the benefit of a settlement in one proceeding to a separate and distinct proceeding absent statutory/contractual basis for such extension.

Ratio vs. Obiter: Ratio - Settlement under SVLDR for one show cause notice cannot be applied to a separate, non-overlapping show cause notice unless the declarant has properly filed for and obtained benefit for the specific demand; factual distinctness of demands precludes automatic cross-application. Obiter - Comments on potential applicability where demands are overlapping were made for contextual distinction.

Conclusion: The Tribunal held that settlement of a separate show cause notice under SVLDR does not entitle appellants to relief for a distinct show cause notice/impugned order concerning different alleged irregularities, especially where no declaration was filed for that specific demand.

Ancillary procedural determination - Need to decide merits where SVLDR benefit denied

Legal framework: If Scheme relief is not available, contested matters are to be adjudicated on merits in accordance with statutory provisions and available evidence.

Interpretation and reasoning: Having concluded that SVLDR relief cannot be extended to the impugned demand, the Tribunal directed that the matters be listed for final hearing on merits, signaling that substantive issues underlying confiscation, redemption and penalty claims remain open for adjudication.

Ratio vs. Obiter: Ratio - Denial of Scheme relief necessitates adjudication of the underlying demand on merits. Obiter - Administrative assurances alleged to have been given by departmental officers were noted in submissions but not adopted as determinative.

Conclusion: The matters will be adjudicated on merits at a future hearing; the Tribunal ordered listing for final hearing on specified date.

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