2021 (9) TMI 1232 - HC - Central Excise

Recovery of Interest and penalty - Rrejection of SVLDRS-1 - unquatified amount in arrears - no interest or penalty came to be adjudicated before introduction of the Scheme. Infact, no adjudication notice was issued in that regard - HELD THAT - Once a valid settlement is reached, then, by way of a consequence provided under Section 129(1)(a) of the Scheme no interest or penalty liability may exist. Consequently, for the purposes of Sections 121(1)(c), 123(e), 124(1)(c) and 125(1)(f) also, the amount in arrears would be referable only to duty liability outstanding and not to interest or penalty liability, where only that liability may exist. If no amount of the Central Excise duty or Service Tax was due on the date of filing the declaration on SVLDRS-1, the fact that interest or penalty alone may have been claimed on that date, may not give rise to an eligibility under the Scheme. Here, admittedly, the entire Central Excise duty demand stood satisfied on 11.09.2018 and the entire Service Tax demand stood satisfied on 13.06.2019. In the present case, though the petitioner no.1 had deposited the entire duty demand, however, on its own showing, there did not exist any adjudication order with respect to the same, let alone any demand of interest and/or penalty - this is also not a case under Section 123(c) of the Scheme, inasmuch as, the petitioner no.1 does not contend that the amount of penalty and interest had ever been quantified in writing, by any means. The procedure i.e. manner of filling up the statutory Form SVLDRS-1 or the explanations furnished cannot create any right to the relief claimed that otherwise does not exist under the Scheme. Even if there were any doubt in that regard, undisputedly according to the petitioners themselves, no show cause notice came to be issued to them before the cut off date 30 June 2019 to confirm, either any amount of interest or penalty. Those amounts were otherwise never quantified in writing either by any statutory authority or the petitioners. In view of the above reasons, the first submission advanced by learned counsel for the petitioners cannot be accepted. For the same reasons, no recoveries are possible to be made pursuant to any determination made under the Scheme Regarding recovery notices issued - HELD THAT - before any recovery of interest or penalty may be enforced against the petitioners it would have to be first adjudicated. Consequently, the communications dated 17.03.2020 and 07.04.2020 issued by respondent no.6 are found to be wanting in jurisdiction and wholly pre-mature. Any amount that may have been recovered pursuant to those communications may be refunded within a period of one month from today. Petition allowed in part.

Summary

Issues Involved:
1. Challenge to computation on Form SVLDRS-3 and rejection of SVLDRS-1.
2. Recovery of interest and penalty without adjudication.
3. Applicability of Section 142(1)(d) of the Customs Act, 1962 to the Central Excise Act, 1944.
4. Division of liabilities between petitioners based on Business Transfer Agreement.

Issue-wise Detailed Analysis:

1. Challenge to Computation on Form SVLDRS-3 and Rejection of SVLDRS-1:
The petitioners challenged the computation on Form SVLDRS-3 dated 06.12.2019 and the rejection of SVLDRS-1 dated 27.12.2019, arguing that the Designated Committee erred in their calculations under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. They asserted that despite delayed payments, they were eligible to file SVLDRS-1 as they were not ineligible under Section 125(1) of the Scheme. The petitioners contended that the Estimated Amount Payable should have been computed as zero. However, the court found that the entire Central Excise duty and Service Tax liabilities were discharged before the declarations were filed, and no show cause notice or adjudication of interest or penalty was issued by the cut-off date. Consequently, the declarations were not maintainable as there were no "tax dues" or "amount in arrears" on the date of filing.

2. Recovery of Interest and Penalty Without Adjudication:
The petitioners argued that no demand for interest or penalty could be enforced without adjudication under Section 11 of the Central Excise Act, 1944. The court agreed, stating that any recovery of interest or penalty must be preceded by proper adjudication. The communications dated 17.03.2020 and 07.04.2020 seeking recovery were found to be without jurisdiction and premature, as no adjudication had taken place.

3. Applicability of Section 142(1)(d) of the Customs Act, 1962:
The petitioners contended that Section 142(1)(d) of the Customs Act, 1962, was not applicable to the Central Excise Act, 1944. The court supported this view, noting that the provisions of Section 142(1)(d) were not borrowed or incorporated into the Central Excise Act. Therefore, the garnishee proceedings initiated against the petitioners were without jurisdiction. The court ordered the refund of any amounts recovered pursuant to the invalid communications.

4. Division of Liabilities Between Petitioners Based on Business Transfer Agreement:
The petitioners argued that liabilities should be split between them based on the Business Transfer Agreement dated 14.03.2017. The court did not record any conclusion on this issue, leaving it open for examination in appropriate proceedings. The court also allowed the revenue authorities to initiate valid adjudication proceedings for penalty and interest if the limitation period for such proceedings had not expired.

Conclusion:
The writ petition was partly allowed. The court set aside the communications dated 17.03.2020 and 07.04.2020, ordered the refund of any amounts recovered, and left open the possibility for future adjudication of penalty and interest. No costs were awarded.