2025 (1) TMI 1033 - AT - Central Excise

Waiver of the penalty under Rule 26 of the Central Excise Rules 2002 - all other noticees on whom penalty was imposed have also settled their case under the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - failure of the appellants to file a declaration under the Sabka Vishwas Scheme constitutes a procedural flaw or not - HELD THAT - The issue that once the main noticees have filed the declaration under the scheme and have deposited the duty required to be paid under the Sabka Vishwas Scheme 2019 and Discharge Certificate has been issued by the department thereafter the co-notices are eligible to seek waiver of penalty under the scheme by filing a declaration has been considered in series of decisions by this Tribunal. Reliance placed on the latest decision dated 29.08.2024 in VK Aggarwal versus Commissioner of Central Tax CGST Central Excise New Delhi 2023 (9) TMI 178 - CESTAT NEW DELHI where it was held that without considering the directions given in the remand order and allowing cross examination Commissioner has imposed penalties on the appellant just for reason that the appellant did not settle the issue along with others under SVLDRS. Such approach of Commissioner cannot be justified. Even if the appellant has not approached under SVLDRS Commissioner should have adjudicated as directed by Tribunal. No justification for imposition of penalty on reconsideration as per order of Tribunal is forthcoming. The present case is squarely covered by the aforementioned decision as in the said case after the main noticee was issued the discharge certificate under the SVLDR Scheme 2019 towards the duty liability the co-noticee had not filed the declaration but was held to be entitled to the waiver of penalty as non-filing of the declaration was held to be merely a procedural flaw for which the appellant cannot be burdened with the liability of penalty more so since there was no loss to the revenue - Similarly the appellant herein have also not filed the declaration after the main noticees have been issued Discharge Certificate towards the duty liability but the fact remains that if the appellant had applied under the SVLDR Scheme they would have paid nil rate of duty in view of the relief available to them under section 124 (i) (b)of the Finance Act 1994. Conclusion - The procedural oversights such as the failure to file a declaration under the Sabka Vishwas Scheme should not result in penalties if the main noticees have settled their liabilities. The impugned order deserves to be set aside and consequently no penalty can be imposed on the appellant - Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the appellants are eligible for a waiver of the penalty under Rule 26 of the Central Excise Rules, 2002, after the main noticees have settled their duty liabilities under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
• Whether the failure of the appellants to file a declaration under the Sabka Vishwas Scheme constitutes a procedural flaw that should not result in the imposition of penalties.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility for Waiver of Penalty

• Relevant Legal Framework and Precedents: The legal framework involves Rule 26 of the Central Excise Rules, 2002, and the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The Tribunal referenced several precedents, including decisions in cases such as VK Aggarwal versus Commissioner of Central Tax and others, which discuss the implications of the main noticee settling under the scheme.
• Court's Interpretation and Reasoning: The Tribunal interpreted that the Sabka Vishwas Scheme aims to resolve legacy disputes and reduce litigation. The court reasoned that once the main noticees have settled their liabilities, co-noticees like the appellants should also benefit from the scheme's relief provisions.
• Key Evidence and Findings: The main noticees, including M/s Asha Food Products, settled their cases under the Sabka Vishwas Scheme, receiving a discharge certificate. The appellants did not file a declaration under the scheme, which was central to the Tribunal's consideration.
• Application of Law to Facts: The Tribunal applied the provisions of the Sabka Vishwas Scheme, noting that the appellants would have paid "nil" duty if they had applied under the scheme, thus indicating that the penalty imposition was unwarranted.
• Treatment of Competing Arguments: The Tribunal considered the argument that the appellants' failure to file a declaration should not result in penalties, as this was a procedural flaw with no revenue loss. It contrasted this with the respondent's position that penalties were justified.
• Conclusions: The Tribunal concluded that the appellants were entitled to a waiver of the penalty, as the imposition of such penalties would contradict the objectives of the Sabka Vishwas Scheme.

Issue 2: Procedural Flaw in Filing Declaration

• Relevant Legal Framework and Precedents: The Tribunal considered the procedural requirements under the Sabka Vishwas Scheme and related circulars. Precedents highlighted include decisions where non-filing of declarations was deemed a procedural flaw.
• Court's Interpretation and Reasoning: The Tribunal reasoned that the non-filing of a declaration by the appellants was a procedural oversight, not a substantive failure warranting penalties.
• Key Evidence and Findings: The appellants' failure to file the declaration was identified as a procedural issue, with the Tribunal noting that the main noticees' discharge certificates effectively settled the matter.
• Application of Law to Facts: The Tribunal applied the scheme's provisions, determining that the appellants' procedural oversight should not result in penalties, especially given the absence of revenue loss.
• Treatment of Competing Arguments: The Tribunal weighed the procedural nature of the appellants' oversight against the respondent's justification for penalties, ultimately siding with the appellants.
• Conclusions: The Tribunal concluded that the procedural flaw did not justify the imposition of penalties, aligning with the scheme's intent to resolve disputes and reduce litigation.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 has the potential to liquidate the huge outstanding litigation and free the taxpayers from the burden of litigation and investigation under the legacy taxes."
• Core Principles Established: The Tribunal established that procedural oversights, such as the failure to file a declaration under the Sabka Vishwas Scheme, should not result in penalties if the main noticees have settled their liabilities. The scheme's purpose is to resolve disputes and reduce litigation, not to penalize procedural errors.
• Final Determinations on Each Issue: The Tribunal set aside the penalties imposed on the appellants, concluding that they were entitled to relief under the Sabka Vishwas Scheme, despite the procedural oversight of not filing a declaration.