Santrogen Textiles Mills Limited vs. Union Of INDIA

Facts

Santrogen Textiles Mills Limited, a 100% Export Oriented Unit, challenged a communication dated 08.01.2020 rejecting its application under the Sabka Viswas (Legacy Dispute Resolution) Scheme, 2019. The rejection was based on the ground that the demand against the petitioner also arose under the Customs Act, 1962, which is not covered by the Scheme. The petitioner had faced a show cause notice in 2003, leading to an Order-in-Original in 2005 confirming demands for Central Excise Duty and Customs Duty. This was set aside by CESTAT, but the High Court dismissed the revenue's appeal. The Supreme Court, in 2016, remanded the proceedings to CESTAT for quantification of the demand. While this was pending, the petitioner filed a declaration under the SVLDR Scheme, which was rejected. The petitioner argued that no opportunity of hearing was granted before the rejection.

Held

The Court held that the rejection of the petitioner's SVLDR Scheme declaration by the impugned communications dated 24.12.2019 and 08.01.2020 violated the principles of natural justice because the petitioner was not granted an opportunity of hearing. The Court reasoned that while the designated authority has discretion in deciding eligibility, an opportunity of personal hearing is desirable, especially when orders are passed straightway without affording such an opportunity, as sought by the petitioner twice. Consequently, the Court set aside both rejection orders and directed the designated committee to decide the petitioner's declaration afresh. The Court also noted that it would not opine on the merits of whether the SVLDR Scheme is applicable in cases involving customs duty or the open-ended nature of the Supreme Court's remand order, but emphasized that the authority should provide a hearing and complete the exercise expeditiously. The Court further directed that any outstanding payments, if due, should be accepted despite the expiry of time limits.

Key Issues

1. Whether the communication dated 08.01.2020 rejecting the petitioner's SVLDR Scheme declaration is legal and valid, particularly concerning the inclusion of customs duty in the demand, and whether the petitioner was afforded an adequate opportunity of hearing, as per the principles of natural justice? (Section 122, 123, 125 of Finance Act (No. 2), 2019). The petitioner contended that the rejection was ex-facie in violation of natural justice as no hearing was granted, and argued that the pending demand primarily related to excise duty, despite the initial show cause notice mentioning customs duty. The petitioner sought acceptance of its declaration and issuance of Form SVLDRS-3. The revenue, Union of India, did not file an affidavit-in-reply, indicating no specific arguments were recorded for the revenue on this point.