M/S Khanna Paper Mills LTD. vs. Union Of INDIA And Anr

Facts

The petitioner, M/s Khanna Paper Mills Ltd., is challenging an order dated 11.04.2017 by the Designated Committee, which dismissed their application under the Sabka Viswas (Legacy Dispute Resolution) Scheme, 2019. The petitioner, previously registered under the Central Excise Act, 1944, experienced a fire on 12.06.2012, destroying a significant quantity of Work in Progress (WIP) material. They applied for remission of duty under Rule 21 of the Central Excise Rules, which was rejected on 14.11.2018. Crucially, before this rejection, the petitioner reversed CENVAT credit of Rs.1,15,35,632/- on account of the pending remission application, informing the Assistant Commissioner via a letter dated 06.01.2018. The respondents, in their written statement, did not dispute these facts regarding the CENVAT credit reversal.

Held

The Court held that the Designated Committee had erred in dismissing the petitioner's application under the Sabka Viswas (Legacy Dispute Resolution) Scheme, 2019. The primary reason for this finding was that the Committee failed to consider the crucial fact that the petitioner had reversed the CENVAT credit of Rs.1,15,35,632/- and had duly informed the authorities about this reversal via a letter dated 06.01.2018. This reversal was made in anticipation of and in connection with the remission of duty application. The Court noted that the respondents did not dispute this fact in their written statement, and even the order rejecting the remission application acknowledged the reversal, albeit with a caveat about the details provided. The Court found that there was a miscommunication and lack of proper consideration of this fact by the Designated Committee. Therefore, the impugned order of the Designated Committee dated 11.04.2017 was set aside. The matter was remanded back to the Designated Committee for a fresh consideration, taking into account the reversal of CENVAT credit as evidenced by the letter dated 06.01.2018, and providing the petitioner an opportunity of hearing to produce original documents.

Key Issues

1. Whether the Designated Committee erred in dismissing the petitioner's application under the Sabka Viswas (Legacy Dispute Resolution) Scheme, 2019, by failing to consider the reversal of CENVAT credit made by the petitioner prior to the rejection of their remission application, as required by the Scheme and relevant circulars? Petitioner's contentions: The petitioner argued that they had reversed the CENVAT credit of Rs.1,15,35,632/- and informed the authorities vide letter dated 06.01.2018, which was prior to the rejection of their remission application. They contended that this reversal was evident from RG-23 records and that the respondents were aware of this fact, as it was not disputed in their written statement. They further argued that the Designated Committee failed to consider this crucial aspect when rejecting their application under the Scheme, leading to a miscommunication and lack of knowledge on the part of the authorities. Respondents' contentions: The respondents did not dispute the factual averments made by the petitioner regarding the reversal of CENVAT credit and the communication thereof. However, their written statement did not explicitly address the legal arguments presented by the petitioner concerning the consideration of this reversal by the Designated Committee.