TMI Blog2020 (9) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... introduced by Chapter-V of the Finance Act, 2019 comprising of Sections 120 to 135, flyers issued by the Central Board of Indirect Taxes and Customs and press note dated 22.08.2019 issued by the Ministry of Finance, Government of India, the intent and purpose of the Scheme appears to reduce litigation by giving a window to the taxpayers to pay the tax and end the litigation. The object of the Scheme was to provide one time measure for putting an end to past disputes of central excise and service tax and to provide the opportunity of voluntary disclosure to non complying taxpayers. Section 121(c) of the Scheme defines the amount in arrears which means the amount of duty which is recoverable as arrears of duty under the indirect tax enactment, on account of adjudication by the competent authority or on account of admitted tax liability but not paid. Section 121 (h) of the Scheme provides that declarant means a person who is eligible to make a declaration and files such declaration under Section 125. Though, there is no express provision in the Scheme with regard to providing immunity from payment of fine, the respondent authorities have specifically stated in FAQs, press notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Board in the communication dated 20.12.2019 in order to consider the declaration made by the declarant, the payment of redemption fine is prerequisite, is not tenable in law, because as per Section 125 of the Scheme a declarant cannot be made ineligible to file a declaration for non-payment of redemption fine. Moreover, the declarant is required to include redemption fine as part of the duty demanded, so as to calculate the amount in arrears as per Section 121 (c) of the Scheme. The Supreme Court in the case of KP VARGHESE VERSUS INCOME-TAX OFFICER, ERNAKULAM, AND ANOTHER [ 1981 (9) TMI 1 - SUPREME COURT ] has laid down that the Rule of construction by reference to the principle of contemporanea exposition est optima et fortissima in lege which is a well established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous. Therefore, when the Central Board of Indirect Taxes has issued FAQs, press notes and flyers by way of explaining the scheme providing waiver of interest, penalty and fine and immunity from prosecution, then case involving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (D) An ex-parte ad-interim relief in terms of para 18(C) above may kindly be granted. (E) Any other further relief that may be deemed fit in the facts and circumstances of the case may also please be granted. 2. This Court (Coram: Hon ble Ms. Justice Harsha Devani and Hon ble Ms. Justice Sangeeta K. Vishen) passed the following order on 19.12.2019, after issuing the notice to the respondents vide an order dated 16.12.2019: 1. The question involved in this case is as to, whether the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 would also be applicable to cases involving confiscation and redemption fine? 2. While clause (a) of sub-section (1) of section 129 of the scheme provides that the declarant shall not be liable to pay any further duty, interest or penalty with respect to the matter and time period covered in the declaration, and is silent about fine; the Central Board of Indirect Taxes and Customs has issued flyers and press notes stating that the benefits under the scheme are total waiver of interest, penalty and fine. The letters inviting the assessees to take the benefits of the scheme also state that the benefits under the scheme include total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme. 4. Mr. Paresh Dave, learned advocate for the petitioners submitted that the dispute involved in this case is, whether or not, waiver from payment of redemption fine is allowed under the Scheme. It was submitted that the Designated Committee has rejected the declarations made by the petitioners on the ground that no relief as regards confiscation and redemption fine has been allowed under the Scheme, and, therefore, the entire matter covered under the declarations cannot be accepted. It was submitted that the petitioners submission has been that waiver of redemption fine is also allowed, and various FAQs, press releases and flyers published by the Government are relied upon in support of this submission. It was submitted that in the affidavit-in-reply by the Principal Commissioner, the stand adopted is that the Government has not granted any relief or immunity from confiscation and/or redemption fine under section 129 of the Finance Act, 2019 and that such relief or immunity is not covered under the Scheme. However, now by the letter dated 20th December, 2019 issued by the Ministry of Finance, a new case has been made out that waiver of fine was allowed under the Scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, this relief can certainly be granted to them. It was contended that under clause (b) of the section, immunity from prosecution is allowed. Such relief can also be granted to the petitioners because their declarations are maintainable under the Scheme. It was submitted that under section 129(1) and also clause (c) thereof, the discharge certificate is conclusive as to the matter and time period stated in the declaration, and no matter and time period covered by such declaration shall be reopened in any other proceeding. It was submitted that a declaration in Form SVLDRS 1 is for the matter , that is to say, the adjudication order, the appeal and the tax dues in the nature of duty and penalty. Once such matter covered under the declaration is concluded and a discharge certificate for such declaration is issued under section 127(8) of the Finance Act, then such matter cannot be reopened in any other proceeding, because it is a complete conclusion of such matter on payment of amount in accordance with section 124 of the Finance Act. It was contended that the relief admissible to a declarant who qualifies under the Scheme is complete discharge and conclusion of the matter c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be withdrawn before its conclusion, that is, before it results in sentence of imprisonment or fine. It was submitted that the letter now issued on 20th December, 2019, is for waiver from fine under section 9 of the Act, but there is no question of waiver of such fine, which is not even ordered by the criminal court. It was contended that the excise authorities cannot waive fine if imposed by a competent criminal court and, therefore, the immunity from prosecution can be allowed under the Scheme only when no prosecution is instituted, or the prosecution already instituted is pending. In either case, there is no question of waiver of fine under the Scheme, and, therefore, waiver of fine allowed under the Scheme can only be waiver of redemption fine. 4.7 It was submitted that if fine is imposed by the criminal court under section 9 of the Act, then such fine can never be waived under the Scheme because such cases stand excluded by virtue of section 125(1)(b) of the Finance Act. It was submitted that under the central excise law, the only fine is redemption fine and fine under section 9 of the Act is not under the central excise law. Therefore, when the respondents have now a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a declarant; and when section 123(b) specifically provides that a show cause notice received on or before the 30th June, 2019 can also be settled under the Scheme because the duty stated to be payable in such notice was tax dues , such cases cannot be excluded from the Scheme only because such show cause notice may involve a possible liability of confiscation and redemption fine upon its adjudication. It was submitted that in case of a pending show cause notice also, the declarant can file a declaration under the Scheme and discharge its liabilities by paying 30%, or 50%, as the case may be, of the tax dues, that is, the amount of duty stated to be payable in such notice. In case of pending show cause notices, waiver of fine is allowed as regards possible confiscation, and therefore, waiver of fine can only be that of redemption fine. 4.10 Lastly, it was submitted that the stand of the respondents that waiver of fine imposable by the criminal court under section 9 of the Central Excise Act is allowed under the Scheme and not waiver of redemption fine, is ex- facie illegal and unjustified, and not borne out from the provisions of the Scheme. Therefore, the declarations involvi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e SCNs also involve imposition of redemption fine. There are two scenarios that can emerge; (a) The SCN involving redemption fine has been adjudicated. In this case, redemption fine has been imposed and quantified. (b) The SCN involving redemption fine is yet to be adjudicated. In other words, the redemption fine has not been imposed or quantified. The discharge certificate [Section 129] which is issued at the end of the proceedings under the Scheme is a full and final closure of the matter and time period stated therein. Therefore, the discharge certificate in such cases can only be issued after settlement of redemption fine. In scenario (a) above, it would be mean payment of redemption fine. In scenario (b) above, it would mean adjudication of show cause notice for imposition of redemption fine and payment thereof. 5.2 It was submitted that, therefore, in cases involving imposition of redemption fine, the concerned persons are required to pay redemption fine and then avail the benefit of the Scheme and in case where a show cause notice has been issued involving redemption fine, the show cause notice would be required to be adjudicated and after payment of red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfiscation are not placed in the categories of persons who are not eligible to make declarations under the Scheme. Thus, persons who have been ordered to pay fine in lieu of confiscation or to whom show cause notices proposing confiscation of goods have been issued, have not been declared to be ineligible to make a declaration under the Scheme. 9. Sub-section (1) section 129 of the Finance Act provides that every discharge certificate issued under section 126 thereof with respect to the amount payable under the Scheme shall be conclusive as to the matter and time period stated therein and (a) the declarant shall not be liable to pay any further duty, interest, or penalty with respect to the matter and time period covered in the declaration; (b) the declarant shall not be liable to be prosecuted under the indirect tax enactment with respect to the matter and time period covered in the declaration; and (c) no matter and time period covered by such declaration shall be reopened in any other proceeding under the indirect tax enactment. Thus, while clause (a) of subsection (1) of section 129 of the Finance Act provides that the declarant shall not be liable to pay further duty, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be punishable with imprisonment and fine or imprisonment or fine. Thus, the question of imposing fine arises only upon conviction for an offence specified in section 9 of the Central Excise Act. However, clause (b) of section 125 of the Finance Act, clearly excludes persons who have been convicted for any offence punishable under any provision of the indirect tax enactment for the matter for which he intends to file declaration. As a necessary corollary therefore, it follows that the legislature would not have contemplated waiver of fine under section 9 of the Central Excise Act, 1944. The only other fine envisaged under the Central Excise Act, 1944 is fine in lieu of confiscation/redemption fine. Under the circumstances, when the Board has issued FAQs, press notes and flyers stating that the Scheme grants waiver of interest, penalty and fine, it appears that the same would be relatable to redemption fine, inasmuch as, it is the only other fine contemplated under the Act. Besides, as noticed earlier, persons whose cases involve confiscation/ fine in lieu of confiscation are not placed in the categories of persons enumerated in section 125 of the Finance Act, who are not eligib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order also be granted to the persons who have not approached this court. 15. Considering the fact that it is the case of the respondents in their affidavit-in-reply that out of approximately 450 applications received by the said Commissionerate, 22 applications, that is, five percent, pertain to confiscation and redemption fine; it appears that approximately five per cent of the declarants have matters involving confiscation and redemption fine. Having regard to the fact that if all similarly situated declarants were to approach this court, the same would needlessly lead to multiplicity of proceedings, the court is of the view that the benefit of this order may be granted to even those declarants who have not approached this court, subject to the declarants filing an undertaking before the Designated Committee that in case the outcome of the present petition is against the petitioners, they would pay the redemption fine, failing which, the discharge certificate shall be revoked. 4. The learned advocate for the petitioners Mr. Paresh M. Dave submitted that the issue arising in this petition is with regard to the rejection of the declaration made by the petitioners by the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appearing from travaux preparatoire relating to the enactment of that provision. It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon's case(1) was decided that ... for the sure and true interpretation of all statutes in general-four things are to be discerned and considered: (1) What was the common law before the making of the Act, (2) What was the mischief and defect for which the common law did not provide, (3) What remedy the Parliament hath resolved and appointed to cure the disease of the Commonwealth, and (4) The true reason of the remedy, and then the office of all the Judges is always to make such construction as shall suppress the mischief, and advance the remedy . In in re Mayfair Property Company(2) Lindley. M.R. in 1898 found the rule as necessary now as it was when Lord Coke reported Heydon's case . The rule was reaffirmed by Earl of Halsbury in Eastman Photographic Material Company v. Comptroller General of Patents, Designs and Trade Marks(3) in the following words. My Lords, it appears to me that to construe the Statute in question, it is not only legitimate but highly convenient to refer both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree decisions of this Court, one in Loka Shikshana Trust v. Commissioner of Income-Tax(1) the other in Indian Chamber of Commerce v. Commissioner of Income-tax(2) and the third in Additional Commissioner of Income-tax v. Surat Art Silk Cloth Manufacturers Association(3) where the speech made by the Finance Minister while introducing the exclusionary clause in section 2 clause (15) of the Act was relied upon by the Court for the purpose of ascertaining what was the reason for introducing that clause. The speech made by the Finance Minister while moving the amendment introducing sub- section (2) clearly states what were the circumstances in which sub- section (2) came to be passed, what was the mischief for which section 52 as it then stood did not provide and which was sought to be remedied by the enactment of sub-section (2) and why the enactment of sub-section (2) was found necessary. It is apparent from the speech of the Finance Minister that sub- section(2) was enacted for the purpose of reaching those cases where there was under- statement of consideration in respect of the transfer or to put it differently, the actual consideration received for the transfer was 'considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken as indicating that, like sub- section (1), sub-section (2) is also intended to deal with cases where there is under-statement of the consideration in respect of the transfer. 10. But apart from these considerations, the placement of subsection (2) in section 52 does indicate in some small measure that Parliament intended that sub-section to apply only to cases where the consideration in respect of the transfer is under-stated by the assessee. It is not altogether without significance that the provision in sub- section (2) was enacted by Parliament not as a separate section, but as part of section 52 which, as it originally stood, dealt only with cases of under- statement of consideration. If Parliament intended sub-section (2) to cover all cases where the condition of 15% difference is satisfied, irrespective of whether there is understatement of consideration or not, it is reasonable to assume that Parliament would have enacted that provision as a separate section and not pitch-forked it into section 52 with a total stranger under an inappropriate marginal note. Moreover there is inherent evidence in sub-section (2), which suggests that the thrust of that sub-section i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l A assets between parties not connected with each other, is sought to be avoided or reduced by an under-statement of the consideration paid for the transfer of the asset The circular also drew the attention of Income-tax Authorities to the assurance given by the Finance Minister in his speech that sub- B section (2) was not aimed at perfectly honest and bonafide transactions where the consideration in respect of the transfer was correctly disclosed or declared by the assessee, but was intended to deal only with cases where the consideration for the transfer was under-stated by the assessee and was shown at a lesser figure than that actually received by him. It appears that despite this circular, the Income-tax Authorities in several cases levied tax by invoking the provision in sub- section (2) even in cases where the transaction was perfectly, honest and bonafide and there was no under- statement of the consideration. This was quite contrary to the instructions issued in the circular which was binding on the Tax Department and the Central Board of Direct Taxes was, therefore, constrained to issue another circular on 14th January, 194 whereby the Central Board, after reiter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it. and this statement of the rule was quoted with approval by this Court in Deshbandhu Guptu Co. v. Delhi Stock Exchange Association Ltd.(2) It is clear from these two circulars that the Central Board of Direct Taxes, which is the highest authority entrusted with the execution of the provisions of the Act, understood sub section (2) as limited to cases where the consideration for the transfer has been under- stated by the assessee and this must be regarded as a strong circumstance supporting the construction which we are placing on that sub- section. 12. But the construction which is commending itself to us does not rest merely on the principle of contemporanea expositio. The two circulars of the Central Board of Direct Taxes to which we have just referred are legally binding on the Revenue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of subsection (2) and they depart or deviate from such construction. It is now well-settled as a result of two decisions of this Court, one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 2(6A) (e) and 12(1B) did not suffer from the vice of unconstitutionality. This decision was followed in Ellerman Lines case (supra) where referring to another circular issued by the Central Board of Revenue under section 5(8) of the Indian Income Tax Act 1922 on which reliance was placed on behalf of the assessee, this Court observed: Now, coming to the question as to the effect of instructions issued under section 5(8) of the Act, this J Court observed in Navnit Lal C. Jhaveri v. R. K. Shah Appellate Assistant Commissioner, Bombay. It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under section 5(8) of the Act. This circular pointed out to all the officers that it was likely that some of the companies might have advanced loans to their shareholders as a result of genuine trans actions of loans, and the idea was not to affect such transactions and not to bring them within the mischief of the new provision. The directions given in that circular clearly deviated from the provisions of the Act, yet this Court held that circular was binding on the Income-tax office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cases involving confiscation and redemption fine or not. 9.2. The Scheme was introduced by Chapter-V of the Finance Act, 2019 comprising of Sections 120 to 135. Relevant provisions of the Scheme are as under: Definitions Section 121. In this Scheme, unless the context otherwise requires,- (a) xxxx (b) xxxx (c) amount in arrears means the amount of duty which is recoverable as arrears of duty under the indirect tax enactment, on account of (i) no appeal having been filed by the declarant against an order or an order in appeal before expiry of the period of time for filing appeal; or (ii) an order in appeal relating to the declarant attaining finality; or (iii) the declarant having filed a return under the indirect tax enactment on or before the 30th day of June, 2019, wherein he has admitted a tax liability but not paid it; (h) declarant means a person who is eligible to make a declaration and files such declaration under Section 125. (n) indirect tax enactment means the enactments specified in Section 122; Application of Scheme to indirect tax enactments Section 122- This Scheme shall be applicable to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount estimated to be payable by the declarant, as estimated by the designated committee, equals the amount declared by the declarant, then, the designated committee shall issue in electronic form, a statement, indicating the amount payable by the declarant, within a period of sixty days from the date of receipt of the said declaration. (8) On payment of the amount indicated in the statement of the designated committee and production of proof of withdrawal of appeal, wherever applicable, the designated committee shall issue a discharge certificate in electronic form, within thirty days of the said payment and production of proof. Issue of discharge certificate to be conclusive of matter and time period. 129 (1) Every discharge certificate issued under section 126 with respect to the amount payable under this Scheme shall be conclusive as to the matter and time period stated therein, and- (a) the declarant shall not be liable to pay any further duty, interest, or penalty with respect to the matter and time period covered in the declaration; (b) the declarant shall not be liable to be prosecuted under the indirect tax enactment with respect to the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indirect tax enactment, on account of adjudication by the competent authority or on account of admitted tax liability but not paid. Section 121 (h) of the Scheme provides that declarant means a person who is eligible to make a declaration and files such declaration under Section 125. 9.6. Section 121(i) of the Scheme provides that declaration means the declaration filed under Section 125. Section 122 of the Scheme provides the list of all indirect tax enactments to which the Scheme applies, whereas, Section 123 provides as to what would comprise of tax dues. More particularly, Section 123(b) provides that, where a show cause notice under any of the indirect tax enactment has been received by the declarant on or before the 30th day of June, 2019, then, the amount of duty stated to be payable by the declarant in the said notice would be tax dues. Section 124 provides for relief available under the Scheme with regard to payment of tax dues to the effect that where the tax dues are relatable to a show cause notice or one or more appeals arising out of such notice which is pending as on the 30th day of June, 2019, and if the amount of duty is rupees fifty lakhs or less, then, se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no express provision in the Scheme with regard to providing immunity from payment of fine, the respondent authorities have specifically stated in FAQs, press notes and flyers that the Scheme provides for full waiver of interest, fine and penalty. In the facts of the case, there in no other fine which is envisaged under the indirect tax enactment. At this juncture, the contention raised on behalf of the respondents that the fine would mean the fine to be levied by the competent Court under Section 9 of the Central Excise Act and not fine as referred to be the redemption fine under Section 34 of the Act cannot be accepted considering overall intent and object of the Scheme, and we therefore, concur with the prima-facie opinion of the Coordinate Bench expressed in para-10 of the order dated 24.12.2019 which reads thus: 10. Thus, in terms of the FAQs, press notes and flyers issued by the Board, the Scheme provides substantial relief in the tax dues for all categories of cases as well as full waiver of interest, fine and penalty. Thus, having regard to the fact that: (i) section 125 of the Finance Act says that all persons shall be eligible to make declaration under the Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stating that the Scheme grants waiver of interest, penalty and fine, it appears that the same would be relatable to redemption fine, inasmuch as, it is the only other fine contemplated under the Act. Besides, as noticed earlier, persons whose cases involve confiscation/ fine in lieu of confiscation are not placed in the categories of persons enumerated in section 125 of the Finance Act, who are not eligible to file declarations thereunder. 12. By the communication dated 20th December, 2019, the Board has stated that in case where redemption fine has been imposed and quantified, the discharge certificate can be issued only after settlement of redemption fine, namely payment of redemption fine. Therefore, it is not the case of the Board that declarations involving redemption fine cannot be accepted. This court, however, is prima facie of the view that the stand of the Board that in case where redemption fine is imposed and quantified, discharge certificate can only be issued after settlement of redemption fine, is not in consonance with the Scheme which contemplates putting an end to the matter. 10. In view of the above facts and situation, when the respondents had issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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