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TMI Blog2020 (9) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... r any other appropriate writ, direction or order. directing the Respondents, their servants and agents to accept the declarations filed by the Petitioners, which are rejected vide orders submitted at Annexure"G" to the petition, and further directing the Respondents, their servants and agents to issue discharge certificates for all such declarations under Section 127(8) of the Finance Act, 2019; (C) Pending hearing and final disposal of the present petition, Your Lordships may be pleased to direct the Respondents herein to allow the Petitioners to deposit requisite amounts for each of the declarations, which are rejected vide orders submitted at Annexure-"G" to the petition and be further pleased to direct the Respondents, their servants and agents to accept such deposits under the Sabka Vishwas (Legacy Dispute Resolution) Scheme for discharge of tax dues under the Scheme: (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. Vishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal have been made by the adjudicating authority confirming demand of duty, ordering recovery of interest, imposing penalty and ordering confiscation of goods and imposing fine in lieu of confiscation, against which appeals are pending before the appellate forum, submitted requisite declarations under the Scheme. Separate notices were served upon the petitioners by the Designated Committee calling upon them to show cause as to why the declarations should not be treated as void as the Scheme permits waiver of duty, interest and penalty, but not fine in lieu of confiscation. 3. After hearing the petitioners, the Designated Committee has held that the cases involving confiscation and redemption fine have not been covered under the Scheme and, therefore, the declarations cannot be accepted and no relief can be granted to the petitioners under the Scheme. 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 regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal /cross appeals. Clause (b) of the section refers to cases where a show cause notice is pending, and the amount of duty stated to be payable in the notice is tax due. This qualifying condition is also satisfied in the present cases and the cutoff date of 30th June, 2019 is also not violated in the present cases. It was urged that since all qualifying conditions are satisfied and no exclusion of section 125 of the Finance Act is attracted, the declarations of the petitioners herein cannot be treated as void, and hence, ought not to have been rejected. 4.3 Next, it was submitted that section 129(1) of the Finance Act lays down under clause (a) that the declarant shall not be liable to pay any further duty, interest or penalty. It was submitted that since the declarations made by the petitioners are maintainable under the Scheme, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never be imposed by the criminal court under section 9 of the Act. It was contended that ordinarily, a criminal case cannot be waived once instituted in the competent court of law. Therefore, the Government has issued Circular No.1072/05/2019-CX dated 25th September, 2019 laying down at para 2(ii) that the procedure laid down in Circular No.1009/16/2015-CX dated 23.10.2015 should be followed for withdrawal of prosecution after issuance of discharge certificate, if prosecution has already been launched. Vide para 10.2 of the other Circular dated 23.10.2015, it is provided that the appropriate Commissioner shall give direction to file an application through the Public Prosecutor to allow withdrawal of the prosecution. It was submitted that the procedure laid down for withdrawal of prosecution shows that a criminal case is to 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be left out, which are clearly linked to the subject matter of the declaration. It was submitted that in view of the Ministry's clarification dated 20th December, 2019 for waiving linked liabilities, the waiver of redemption fine has to be read under section 129(1)(c) of the Finance Act. 4.9 Reference was made to para 3(b) of the letter dated 20th December, 2019, to submit that the Ministry's stand is that a show cause notice involving redemption fine is excluded if it was not adjudicated and the redemption fine quantified under the adjudication order was not paid by the declarant before lodging the declaration. It was submitted that getting a notice pending on 30th June, 2019 to be adjudicated and paying redemption fine imposed under the order-in-original is a virtually impossible exercise for 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 upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption Fine' denote different things. Section 9 of the Central Excise Act, 1944 provides for the offences and penalties under the Act. The penalties for the offences under the Act may extend to seven years of imprisonment and fine. Needless to say that once the person is granted immunity from prosecution, he also gets waiver from such 'fine'. However, redemption fine is levied in lieu of confiscation Section 34 of the Act, whereby the party can 'redeem' the confiscated goods. Under the Scheme, no immunity (Section 129) or relief (Section 124) has been granted for redemption fine. 3. A 'case' under the Scheme means 'a show cause notice, or one or more appeals arising out of such notice which is pending as on 30.06.2019' [Explanation to rule 3, SVLDRS Rules, 2019]. In the instant case, the 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] whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luntary disclosure,- (i) after being subjected to any enquiry or investigation or audit; or (ii) having filed a return under the indirect tax enactment, wherein he has indicated an amount of duty as payable, but has not paid it; (g) who have filed an application in the Settlement Commission for settlement of a case; (h) persons seeking to make declarations with respect to excisable goods set forth in the Fourth Schedule to the Central Excise Act, 1944. (2) A declaration under sub-section (1) shall be made in such electronic form as may be prescribed." 8. On a plain reading of clauses (a) to (h) of section 125 of the Finance Act, it is abundantly clear that persons whose cases involve confiscation and fine in lieu of confiscation 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 sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation from the purview of the Scheme. 11. It may be further noted that in the communication dated 20th December, 2019 of the Board, the contents whereof have been reproduced hereinabove, it has been stated that when a person gets immunity from prosecution, he also gets waiver of such fine for the offences under section 9 of the Central Excise Act, 1944. Thus, it is not the case of the Board that the Scheme does not provide for waiver of fine, but only that it does not provide for waiver of redemption fine. Testing the explanation put forth by the Board in the context of the relevant statutory provisions, section 9 of the Central Excise Act, 1944 specifies the categories of offences and the punishment thereunder, which 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 therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of redemption fine, subject to the final outcome of the petition. Upon such declarations being submitted, the same shall be further processed by the Designated Committee, and shall not be turned down on the ground that the Scheme does not cover cases involving confiscation and redemption fine. 14. At this stage, Mr. Paresh Dave, learned advocate for the petitioners states that there are many persons similarly situated to the petitioners who have filed declarations which have been rejected by the Designated Committee but are not before the court and that if these persons come to the court, it would lead to multiplicity of proceedings before this court. It was, accordingly, urged that the benefit of the present 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer is shown at a lesser figure than that actually received by the assessee but the transferee is not a person directly or indirectly connected with the assessee or the object of under-statement of the consideration is unconnected with tax on capital gains. Such cases would not be within the reach of sub section (1) and the assessee, though dishonest, would escape the rigour of the provision enacted in that sub-section. Parliament therefore enacted sub-section (2) with a view to extending the coverage of the provision in sub-section (I) to other cases of under statement of consideration. This becomes clear if we have regard to the object and purpose of the introduction of sub- section (2) as 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 remed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred t o for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is in accord with the recent trend in juristic thought not only in Western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. In fact there are at least three 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 cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how what the section is dealing with. It cannot control the interpretation of the words of a section particularly when the language of the section is clear and unambiguous but, being part of the statute, it prima facie furnishes some clue as to the meaning and purpose of the section. Vide Bengal Immunty Company Limited v. State of Bihar(2) The marginal note to section 52. as it now stands, was originally a marginal note only to what is presently sub-section (I) and significantly enough, this marginal note remained unchanged even after the introduction of sub-section (2) suggesting clearly that it was meant by Parliament to apply to both sub-sections of section 52 and it must therefore be 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns arising on transfer of a capital asset with . reference to its fair market value as on the date of its : transfer, ignoring the amount of the consideration shown by the assessee, only if the following two conditions are satisfied: (a) the transferee is a person who is directly. or indirectly connected with assessee, and (b) the Income-tax officer has reason to believe that the transfer was effected with object of avoidance or reduction of the liability of assessee to tax of capital gains. In view of these conditions, this provision has a limited operation and does not apply to other cases where the tax liability on capital gains arising on transfer of capital 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 cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... graph 219 that "administrative construction (i. e. contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight; it is highly persuasive." The validity of this rule was also recognised in Baleshwar Bagarti v. Bhagirathi Dass(1) where Mookerjee, J. stated the rule in these terms: "It is a well-settled principle of interpretation that courts in construing a statute will give much weight to the interpretation 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- sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmining the tax liability of the shareholders to whom such loans or advances were given. This circular was clearly contrary to the plain language of section 2(6A)(e) and section 121(B), but even so this Court held that it was binding on the Revenue and since "past transactions which would normally have attracted the stringent provisions of section 12(1B) as it was introduced in 1955, were substantially granted exemption from the operation of the said provisions by making it clear to all the companies and their shareholders that if the past loans were genuinely refunded to the companies they would not be taken into account under section 12(1B)" sections 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, Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated 20.12.2019 in para-10 to 12 to form a prima-facie opinion that when the Board has issued FAQs, press notes and flyers stating that the scheme grants waiver of interest, fine and penalty, then the scheme would be relatable to redemption fine also, because there is no other fine which is contemplated under the Act coupled with the fact that Section 125 of the Finance Act, 2019 does not exclude the categories of cases involving confiscation / fine in lieu of confiscation. 9.1. We may once again do analysis of the scheme in detail, so as to arrive at a final conclusion as to whether the Scheme would be applicable to the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une, 2019, and if the amount of duty is- (i) rupees fifty lakhs or less, then, seventy percent of the tax dues; (ii) more than rupees fifty lakhs, then, fifty percent of the tax dues;" Declaration under Scheme 125.(1) All persons shall be eligible to make a declaration under this Scheme except the following, namely:- (a) who have filed an appeal before the appellate forum and such appeal has been heard finally on or before the 30th day of June, 2019." Issue of statement by designated committee 127.(1) Where the 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 certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actments. Clause (a) of sub-section 1 of Section 129 of the Scheme though provides that the declarant shall not be liable to pay any further duty, interest, or penalty, it does not expressly provide that the declarant shall not be liable to pay fine / redemption fine, and therefore, the controversy has arisen, as in the present proceedings, as to whether the Scheme is applicable to the cases involving confiscation / redemption fine or not. 9.9. 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 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 opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference 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 confiscation / redemption fine cannot be excluded under the Scheme, as such explanation by the Board provides legitimate aid in the constructions and interpretations of the provision of the Scheme. 12. In view of the foregoing reasons, the petition succeeds and is accordingly allowed. The declaration filed by the petitioners and other similarly situated persons are required to be considered by the designated committee without payment of redemption fine by the declarant. The impugned orders passed by the designated committee are therefore quashed and set aside. As observed by the Coordinate Bench of this court, the order passed in this petition would also apply to the similarly situated declarants who have not approached this Court, in order to reduce the multiplicity of proceedings. Accordingly, this order wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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