2025 (9) TMI 1158 - HC - Service Tax

SVLDR discharge certificate allowed: 'tax dues' include remanded SCNs and redemption fines; s.125(1)(a) and s.124(2) applied

REMCO INDUSTRIES INDIA Versus UNION OF INDIA AND ORS

HC allowed the petition and directed issuance of the discharge certificate under the SVLDR Scheme. The Court held that 'tax dues' include duty demands ... Seeking directions to issue the discharge certificate in respect of the payment made by the Petitioner in terms of Form SVLDR Scheme-III issued by Respondent No. 3 - whether redemption fine is to be considered as part of duty, penalty or the amount eventually payable and is hence, covered by the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (the SVLDR Scheme) or not? - HELD THAT:- A perusal of Section 123 (b) of the SVLDR Scheme would show that `tax dues’ in terms of the said provision would mean the duty payable in a show cause notice issued prior to 30th June 2019. In the present case, upon remand by CESTAT, the SCN was to be adjudicated afresh by the Adjudicating authority. Thus, the SCN had raised a demand which was pending and yet to be adjudicated - this Court is of the opinion that the Petitioners herein do not fall under the category of ineligible applicants, as stated under Section 125(1)(a) of the SVLDR Scheme. Thus, the declarations filed by the Petitioners under the Scheme shall not be deemed to be considered ineligible. Various amounts which are prescribed in the SVLDR Scheme are amounts relatable to the show cause notices, tax dues relatable to a show cause notice for late fee or penalty or relatable to amount in arrears. Different percentages have been fixed, which if paid in accordance with the Scheme, under Section 129, the discharge certificate is to be issued by the Department - Section 124(2) of the SVLDR Scheme makes it clear that if the tax payer has deposited any amounts as pre-deposit at the appellate stage, it would be deducted from the amount payable. However, the tax payer would not be entitled for any refund of such amount. A perusal of the provisions of the Central Excise Act, 1944 would show that whenever there is confiscation due to non-payment of excise duty, seizure of relevant material can be done under Section 12F and a fine would have to be paid by the tax payer for release of the goods which have been confiscated. Such a fine is called the redemption fine. Hence, the seizure and/or redemption fine is nothing but a consequence of non-payment of excise duty. The same cannot be considered as a separate category of penalty, insofar as the applicability of the SVLDR Scheme is concerned - Under the SVLDR Scheme, Section 124 provides that only the part of the excise duty has to be paid, depending upon the amount of tax due. Hence, the same can be either 40%, 50%, 60% or 70% of the tax dues and there is no requirement to pay either the balance tax alongwith the penalty or any interest. The redemption fine would be covered under duty and penalty and a separate mention of redemption fine was not required either under SVLDR Scheme-I or in terms of the clauses in the scheme itself - The scheme of the Central Excise Act, 1944 reveals that whenever there is non-payment of excise duty in respect of any goods, there can be various consequences. There can be seizure of goods and/or relevant material, a redemption fine can be imposed for release of goods. Such seizure or imposition of redemption fine, is nothing but a fine being paid due to non-payment of duty. Once the duty itself gets settled under the SVLDR Scheme, it would not be appropriate to interpret the Scheme in a manner that would be contrary to the intention thereof. This Court is of the opinion that when penalties and interest are being waived under the SVLDR Scheme but the redemption fine is not waived, as is being argued by the Respondents, such an interpretation would go contrary to the fundamental purpose and the raison d'être of the SVLDR Scheme itself. In the opinion of this Court, the purpose of the SVLDR Scheme is to give a finality to a particular dispute and not to keep the aspect relating to redemption fine pending. Seizure cases are also no exception to this. Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether 'redemption fine' (fine in lieu of confiscation under the Central Excise Act) falls within the ambit of 'duty, interest or penalty' or otherwise forms part of 'tax dues/amount payable' under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme), so as to be covered by waiver/immunity on payment of the scheme-prescribed amount. 2. Whether a bona fide attempt to pay the amount determined under the SVLDR Scheme on the last date, frustrated by a technical glitch in the online portal but reflected as paid subsequently, entitles the declarant to benefit of the Scheme (including issuance of discharge certificate) despite respondent contention of time-bar/non-payment. 3. Consequential issue: Whether, once the SVLDR Scheme liability is settled and payment accepted/treated as paid, the Department may proceed with de novo adjudication of a previously remanded show cause notice relating to the same period and matter. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Whether redemption fine is covered by SVLDR Scheme Legal framework: The SVLDR Scheme defines key terms: 'amount in arrears', 'amount of duty', 'tax dues' and prescribes relief in Section 124, issuance of statement by the designated committee and issuance of discharge certificate under Section 127/129. Section 129(1)(a) provides that upon discharge certificate the declarant 'shall not be liable to pay any further duty, interest, or penalty' for the matter/time period covered. Precedent treatment: Multiple High Court decisions (including Gujarat, Allahabad, Punjab & Haryana, Bombay and coordinate benches) have considered whether redemption fine is a 'penalty' or part of 'amount in arrears' and, in substance, have held that redemption fine is a species of penalty or forms part of the amount consequential to non-payment of duty and therefore falls within the ambit of the Scheme's waiver. These decisions were followed in the present judgment. Authorities rejecting one-day/technical delays on strict timeline grounds have been noted but distinguished on facts. Interpretation and reasoning: The Court analyses statutory language of SVLDR Scheme and the Central Excise Act (Sections 12F, 34). It reasons that redemption fine is imposed as an alternative to confiscation and is a consequence of non-payment of excise duty; thus it is not a separate species that can be carved out of the scheme's relief. The Court relies on (a) the statutory scheme of Central Excise which links confiscation/redemption fine to non-payment, (b) SVLDR Scheme definitions which target legacy tax dues arising from show cause notices, and (c) contemporaneous administrative material (CBIC flyers/FAQs) stating 'total waiver of interest, penalty and fine' and promising immunity. The Court holds that excluding redemption fine from waiver would defeat the Scheme's purpose of finality and dispute resolution. The reasoning emphasises that where the legislature or administering authority has not expressly excluded redemption fine, the plain language and object of the Scheme support inclusion. Ratio vs. Obiter: Ratio - Redemption fine, being a payment in lieu of confiscation under the Central Excise Act, is a form of penalty/part of tax dues consequent to non-payment of duty and is covered by the waiver and immunity provisions of the SVLDR Scheme upon compliance with payment obligations under the Scheme. Obiter - Observations on policy considerations about taxpayers' reliance on CBIC FAQs and publicity material, and comparative discussion of divergent High Court decisions. Conclusions: The Court concludes that redemption fine is covered by the SVLDR Scheme's waiver; discharge certificate must be issued upon payment as determined by the designated committee; seizure/confiscation matters are within the Scheme and cannot be kept pending by insisting on a separate redemption fine payment beyond the Scheme settlement. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Payment attempt frustrated by technical glitch - entitlement to benefit Legal framework: SVLDR Scheme prescribes timelines for payment (last date referenced by CBIC/notifications) and Section 127(8) contemplates issuance of discharge certificate on payment and proof of withdrawal of appeal. The Court also applies principles of fairness where impossibility or external impediment prevents compliance. Precedent treatment: Decisions acknowledging extraordinary circumstances (e.g., moratorium under IBC or pandemic-related obstacles) and permitting remedial relief where payment could not be made despite bona fide attempts were relied upon by the petitioner; other authorities insisted on strict adherence to scheme timelines. The Court applies precedents that permit relief where non-compliance was due to factors outside the declarant's control and where payment was thereafter accepted/recorded. Interpretation and reasoning: The Court reviews the factual matrix: the declarant attempted payment on the last operative date; portal errors (HTTP 404, ICEGATE problems), helpdesk communications acknowledging ticket and delay, and later system records showing the amount as 'PAID' in Track Challan Status and taxpayer summary. The Court reasons that where a taxpayer makes bona fide, demonstrable efforts and the failure is caused by departmental or technical glitches, it is inequitable to deny Scheme benefits - particularly where the Scheme's object is dispute resolution and finality. The Court distinguishes cases upholding strict timelines on facts where no such external impediment was established. Ratio vs. Obiter: Ratio - A bona fide attempt to pay on the last date which is frustrated by a technical glitch, with subsequent administrative acceptance/recording of payment, entitles the declarant to SVLDR benefits; the Department cannot deny the benefit where payment is effectively accepted and reflected. Obiter - Comments on helpdesk responses and expectations from CBIC communications. Conclusions: The Court finds the petitioner made bona fide attempts; the payment is reflected as paid; therefore the petitioner is entitled to benefit of the Scheme and issuance of the discharge certificate. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Whether de novo adjudication may proceed after settlement under SVLDR Scheme Legal framework: Section 129(1) makes a discharge certificate conclusive as to the matters/time period covered: declarant shall not be liable to pay any further duty, interest or penalty and shall have immunity from prosecution; subsection (2) preserves Department's ability to proceed for subsequent periods or different matters but not to reopen the same matter/time period. Precedent treatment: Courts interpreting Section 129 have held that discharge certificates provide finality for the specified matter/time period and preclude re-adjudication on the same dispute once Scheme obligations are complied with. Interpretation and reasoning: Given the Court's conclusions on Issues 1 and 2 (redemption fine included; payment accepted), the Scheme payment settles the demand. Consequently, de novo adjudication of the remanded SCN relating to the same matter/time period would be inconsistent with the conclusive effect of a discharge certificate under Section 129(1). The Court therefore holds that the Department must not proceed with de novo adjudication and personal hearing notices are set aside. Ratio vs. Obiter: Ratio - Once Scheme payment is made and discharge certificate issued, the Department cannot proceed with de novo adjudication of the same matter/time period covered by the Scheme. Obiter - None significant beyond statement of statutory effect. Conclusions: The Department shall not proceed with de novo adjudication; issue discharge certificate within stipulated period; personal hearing notices set aside. OVERALL CONCLUSION The Court holds that redemption fine is encompassed within the SVLDR Scheme's waiver/immunity provisions (as a type of penalty/part of tax dues arising from non-payment of duty); a bona fide attempt to pay on the last day frustrated by technical portal failures but evidenced by subsequent system acceptance entitles the declarant to Scheme benefits; and once settled under the Scheme, the matter cannot be reopened by de novo adjudication for the same period and subject matter - accordingly the discharge certificate must be issued.