Redemption Fine Under Central Excise Law Does Not Bar Sabka Vishwas Scheme Relief: Rajasthan High Court

The Rajasthan High Court has held that taxpayers whose goods were confiscated under the Central Excise law and who were directed to pay a redemption fine in lieu of confiscation are not excluded from the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

It ruled that they cannot be treated as ineligible to file declarations under the Scheme merely because they were liable to pay a redemption fine.

A division bench of Justice Arun Monga and Justice Maneesh Sharma passed the ruling while allowing a writ petition filed by Premier Bars Private Limited, a company engaged in the manufacture of reinforcement steel and registered under the Central Excise Act, 1944.

The Assistant Commissioner (Audit), CGST, had ordered confiscation of the petitioner's 291.218 MT of MS ingots valued at about ₹78.6 lakh. The authority gave the company the option to redeem the goods on payment of a redemption fine of ₹10 lakh and also imposed a penalty of ₹3 lakh.

The petitioner challenged the order before the Commissioner (Appeals), but the appeal was dismissed. It thereafter filed a second appeal before the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT).

While the appeal was pending, the central government introduced the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

Invoking the same, the petitioner sought to have his arrears settled.

The designated committee, however, denied his declaration on grounds that the redempotion fine was not included in the scheme. Aggrieved by the same, he approached the high court.

After considering the rival submissions, the court examined Section 125 of the Finance (No. 2) Act, 2019, which specifies the categories of persons who are ineligible to file declarations under the Scheme.

It held that the provision does not explicitly exclude cases involving confiscation of goods or redemption fine.

The bench observed that taxpayers who are required to pay a redemption fine in lieu of confiscation of goods cannot, on that ground alone, be treated as ineligible to file a declaration under the Scheme.

The Court also relied on the Gujarat High Court's decision in Synpol Products Pvt. Ltd. v. Union of India, which dealt with the same issue. Agreeing with that view, the bench observed:

"We find ourselves in complete agreement with the view taken by the Gujarat High Court. The levy of a redemption fine in lieu of confiscation of goods forms part of the amount of duty which is recoverable under the indirect tax enactment, and the same cannot be segregated from the demand of duty for the purposes of the SVLDR Scheme, 2019."

It added, "The submissions advanced on behalf of the respondents as well as the interpretation sought to be placed on the basis of the letter dated 20.12.2019, so as to exclude a redemption fine from the ambit of the Scheme, are contrary to the provisions of the Finance (No. 2) Act, 2019, therefore, do not merit acceptance."

Accordingly, the court set aside the order rejecting the petitioner's declaration. It directed the department to treat the declaration as eligible and consider it on merits in accordance with the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019