Lokesh Pathak vs. Designated Committee, Svldrs, Central GST, Delhi West

Facts

The petitioners, including Lokesh Pathak, M P Pathak (deceased through LR), and Art N Glass India Pvt. Ltd., filed writ petitions seeking directions to the Designated Committee, CGST, to issue discharge certificates under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme). These petitions stemmed from a Show Cause Notice (SCN) dated April 28, 2005, issued after searches by the Directorate General of Central Excise Intelligence. The SCN proposed demands for Central Excise Duty, interest, penalties, and confiscation of seized goods and cash. An Order in Original dated March 30, 2007, confirmed a duty demand of Rs. 45,32,926/-, imposed penalties, and ordered confiscation of goods with an option to redeem them on payment of redemption fines (Rs. 2.5 Lakhs and Rs. 5 Lakhs). Appeals to CESTAT resulted in a remand for de-novo adjudication due to legal infirmities. During the pendency of adjudication, the SVLDR Scheme was introduced, and the petitioners applied for resolution, declaring their tax dues.

Held

The Court held that redemption fine is covered under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The reasoning was based on the interpretation of the Scheme's intent to provide finality to legacy disputes. The Court found that redemption fine is intrinsically linked to the non-payment of duty and is essentially a payment akin to a penalty for such non-compliance. The Court placed significant weight on the clarifications issued by the CBIC through flyers and FAQs, which indicated that redemption fines are covered under the Scheme. The Court also relied on the overwhelming consensus from various High Courts that redemption fines should be waived once a taxpayer avails the benefits of the SVLDR Scheme and pays the stipulated amount. The Court rejected the argument that redemption fine is not explicitly mentioned in the Scheme, stating that such an interpretation would contradict the Scheme's fundamental purpose. The Court directed the Department to issue discharge certificates to the petitioners within two months.

Key Issues

1. Whether redemption fine, as imposed under Section 34 of the Central Excise Act, 1944, is covered under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, for the purpose of waiver or discharge under the Scheme? Petitioner's arguments: The petitioners contended that redemption fine is an integral part of the duty and penalty regime and should be covered by the SVLDR Scheme, which aims to resolve legacy disputes. They relied on various High Court judgments, including those from Gujarat and Allahabad, and the CBIC's own flyers and FAQs, which indicated that redemption fines are covered. They argued that the Scheme's purpose is to provide finality and that excluding redemption fines would defeat this objective. Respondent's arguments: The respondent (Designated Committee) did not appear. However, the judgment notes reliance by the respondent on a decision from the Jharkhand High Court in Manpreet Engineering and Construction Company, which held that schemes should be strictly interpreted and no additional language should be added, and that leniency cannot be granted. The respondent's basis for rejection was that waiver of redemption fine is not explicitly mentioned in the Scheme.