Jaipur: In a significant judgment interpreting the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS), the Rajasthan High Court has held that a taxpayer cannot be denied the benefit of the Scheme merely because the declaration includes a redemption fine imposed instead of confiscation of goods. The Court ruled that the redemption fine is not excluded under the Scheme and must be considered while determining eligibility.
The Division Bench of Justice Arun Monga and Justice Maneesh Sharma passed the judgment while allowing a writ petition filed by M/s Premier Bars Private Limited, whose declaration under the SVLDR Scheme had been rejected by the Designated Committee.
The dispute arose after the Excise Department confiscated the petitioner’s goods, imposed a redemption fine and penalty, and upheld the demand in appeal. During the pendency of its appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), the petitioner opted to settle the dispute under the Sabka Vishwas Scheme by filing a declaration in Form SVLDR-1. However, the Designated Committee rejected the declaration on the ground that redemption fine was not covered under the Scheme, rendering the petitioner ineligible.
Before the High Court, the petitioner stated that the rejection was contrary to Section 125 of the Finance (No. 2) Act, 2019, which specifies the categories of persons who are ineligible to avail the Scheme. It was contended that the provision nowhere excludes cases involving confiscation of goods or redemption fine.
The petitioner further submitted that the objective of the Scheme was to provide a one-time opportunity to settle legacy disputes and relied upon the Gujarat High Court’s decision in Synpol Products Pvt. Ltd. v. Union of India, where taxpayers facing redemption fine had been held entitled to the benefits of the Scheme.
The Revenue, on the other hand, defended the rejection by relying on a CBIC communication dated 20 December 2019, contending that the expression “fine” under the Scheme referred only to fines imposed under Section 9 of the Central Excise Act and did not include redemption fine imposed in lieu of confiscation of goods.
Accepting the petitioner’s contentions, the High Court observed that Section 125 of the Finance Act exhaustively enumerates the categories of persons who are ineligible to make a declaration under the Scheme, and cases involving confiscation of goods or redemption fine do not figure among those exclusions.
Consequently, the Court also held that a taxpayer cannot be declared ineligible solely because the declaration includes a redemption fine.
The Court further agreed with the reasoning adopted by the Gujarat High Court in Synpol Products Pvt. Ltd., noting that the primary object of the Sabka Vishwas Scheme was to reduce pending litigation by providing taxpayers a one-time opportunity to settle disputes relating to Central Excise and Service Tax. It also noted that the Supreme Court had dismissed the Special Leave Petition filed against the Gujarat High Court’s decision, thereby lending further support to that interpretation.
Rejecting the Revenue’s reliance on the CBIC clarification, the Court held that an executive communication cannot curtail the scope of a statutory scheme or introduce an exclusion not contemplated by Parliament. It observed that the redemption fine imposed instead of confiscation forms part of the recoverable amount under the indirect tax enactments and cannot be separated from the duty demand while considering eligibility under the Scheme.
Accordingly, the High Court set aside the Designated Committee’s order rejecting the petitioner’s declaration and directed the Department to treat the declaration filed by the petitioner as eligible. It further directed the authorities to consider the declaration afresh on its own merits in accordance with the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, and the rules framed thereunder.