Il And Fs Engineering And Construction Company LTD. And Ors vs. The Commissioner Of Central Goods And Service Tax And Ors

Facts

The petitioners, IL&FS Engineering and Construction Company Limited and others, challenged orders related to the denial of Cenvat Credit under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. Following a search in February 2016, the petitioner deposited Rs. 51,15,484/- in cash and Rs. 4,20,69,303/- from Cenvat Credit. A show cause notice was issued demanding Central Excise Duty of Rs. 12,03,92,389/-. The Assistant Commissioner allowed Cenvat Credit of Rs. 2,72,01,675/- but disallowed Rs. 41,08,123/- on the ground that the credit was taken beyond one year from the invoice date. The petitioners applied under the Sabka Vishwas Scheme, but the Designated Committee rejected their claim to deduct the Cenvat Credit paid, issuing SVLDRS-2 and SVLDRS-3. The petitioners sought quashing of these orders and adjustment of the Cenvat Credit paid.

Held

The Court held that the petitioners' argument, supported by judgments from this Court and the Bombay High Court, that any amount paid during enquiry/investigation or audit must be deducted while issuing the statement of payable amount under Section 124(2) of the Finance (No.2) Act, 2019, is correct. This includes deposits made during enquiry/investigation, not just pre-deposits in appellate proceedings. The Court rejected the respondents' contention that the Designated Committee lacked adjudication powers and that Cenvat Credit deposits were not deductible. The Court found that the denial of Cenvat Credit benefit on the ground of the one-year limitation period was incorrect under the Sabka Vishwas Scheme, as any amount deposited during enquiry is to be adjusted. Consequently, the impugned SVLDRS-2, SVLDRS-3, and the letter dated 23.06.2017 were set aside. The Court directed the respondent to reconsider all documents, including proof of Cenvat Credit payment, and pass a fresh order after providing an opportunity of hearing.

Key Issues

1. Whether the amount paid by the petitioners through Cenvat Credit during the investigation should be deducted while calculating the final amount payable under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, as per Section 124(2) of the Finance (No.2) Act, 2019? The petitioners argued that Section 124(2) mandates the deduction of any amount paid during enquiry, investigation, or audit, including amounts paid via Cenvat Credit, citing judgments like M/s Hilton Hotel Management Services Pvt. Ltd. vs. Union of India and Schlumberger Solutions Private Limited vs. Commissioner, Central GST. The respondents contended that the Designated Committee cannot assume adjudication powers and decide on the admissibility of Cenvat Credit, and that deposits made through Cenvat Credit do not qualify for adjustment under the Scheme, relying on the time-barring provision of the Cenvat Credit Rules, 2004 (specifically the third proviso to Rule 4).