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2021 DIGILAW 1100 (ALL)

Unitech Machines Limited v. Union of India

2021-09-22

NAHEED ARA MOONIS, SAUMITRA DAYAL SINGH

body2021
JUDGMENT : 1. Heard Sri Dharmendra Kumar Rana alongwith Sri Tanmay Sadh, learned counsel for the petitioners; Sri Ashok Singh and B.K.S. Raghuvanshi, learned counsel for the revenue. 2. Present writ petition has been filed to challenge the computation/made on Form SVLDRS-3 dated 6.12.2019, issued for the periods September 2016 to February 2017 and, April 2017 to June 2017, by the Designated Committee under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (hereinafter referred to as the 'Scheme') and rejection of SVLDRS-1 dated 27.12.2019 both, for the periods September 2016 to February 2017 and, April 2017 to June 2017. Also, challenge has been raised to the communications dated 17.3.2020 and 7.4.2020 issued by the Assistant Commissioner, Central GST Division/respondent No. 6, seeking recovery of interest and penalty Rs. 74,36,934/-. 3. Further, mandamus has been sought to re-compute the amount payable under the Scheme as also for refund claimed. Insofar as challenge to the validity of Rule 8(3A) of the Central Excise Rules, 2002 is concerned, the same has not been pressed. 4. Present writ petition has been filed by M/s. Unitech Machines Ltd. petitioner No. 1 and M/s. UM Autocomp Pvt. Ltd. petitioner No. 2. It has been submitted, earlier, M/s. United Machines Ltd. had two manufacturing divisions, namely an auto division and an engineering division. It had incurred liabilities both under the Central Excise Act, 1944 and also towards Service Tax, under the Finance Act, 1994. 5. According to the petitioners, petitioner No. 1 filed its return under the Central Excise Act on Form ER-1 on time, for the period September 2016 to February 2017 and also for the period April 2017 to June 2017. Thus, total excise duty liability was admitted at Rs. 26,62,16,761/-. Of that, it discharged Central Excise duty liability to the extent of Rs. 16,68,84,918/-, by the due date. The balance Central Excise duty was discharged belatedly, during the period 23.11.2016 to 11.9.2018. 6. Similarly, petitioner No. 1 filed its return under the Finance Act, 1994 with respect to its Service Tax liability, for the period April 2016 to June 2017, on or before the due date. It admitted Service Tax liability, Rs. 1,98,34,281/-. That petitioner did not discharge any part of that liability within the due date and it discharged that liability after the due date, between the period 21.9.2018 to 13.6.2019. 7. It admitted Service Tax liability, Rs. 1,98,34,281/-. That petitioner did not discharge any part of that liability within the due date and it discharged that liability after the due date, between the period 21.9.2018 to 13.6.2019. 7. The reason for the delayed payment is stated to be financial distress suffered by petitioner No. 1. It is also on record that the auto division of petitioner No. 1 came to be transferred by way of slump sale, in favour of the petitioner No. 2, under the Business Transfer Agreement dated 14.3.2017. Thus, all assets and liability of the auto division are stated to have been transferred by petitioner No. 1, to petitioner No. 2. 8. It is a fact that no interest or penalty came to be adjudicated before introduction of the Scheme. Infact, no adjudication notice was issued in that regard. Upon issuance of the disputed SVLDRS-3 on 6.12.2019 and on rejection of the (second) SVLDRS-1 dated 27.12.2019, the present (two) petitions have been filed. Insofar as the Writ Petition No. 443 of 2020 is concerned, the same arises from Central Excise duty for the periods September 2016 to February 2017 and, April 2017 to June 2017, both for auto division and engineering divisions of petitioner No. 1. Similarly, Writ Petition No. 444 of 2020 pertains to Service Tax liability for the tax period April 2016 to June 2017. 9. First, learned counsel for the petitioners submits, the Designated Committee has completely erred in making the computation on Form SVLDRS-3, by its order dated 6.12.2019. Here, reliance has been placed on the provisions of Section 121(c), 123(e), 124(1)(c) read with Section 124(2), Section 128 and Section 133 of the Scheme. Reliance has also been placed on the Explanation (b) appended to Rule 3 read with Rule 6(6) of the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019 (hereinafter referred to as the 'Rules'). Reliance has also been placed on Column 9.2 of the Form SVLDRS-1 (Part B) as also Columns 10, 11 and 12 thereof. Again, reference has been made on Column G of the Form SVLDRS-2 and the Columns 1, 2 and 3 of the Form SVLDRS-2A read with Column G of the Form SVLDRS-3. Heavy reliance has been placed on Circular No. 1073/06/2019.CX : dated 29.10.2019 issued by the CBIC Clause 2(iii) read with Circular No. 1072/05/2019.CX : dated 25.9.2019 Clause 2(iv)(b). Again, reference has been made on Column G of the Form SVLDRS-2 and the Columns 1, 2 and 3 of the Form SVLDRS-2A read with Column G of the Form SVLDRS-3. Heavy reliance has been placed on Circular No. 1073/06/2019.CX : dated 29.10.2019 issued by the CBIC Clause 2(iii) read with Circular No. 1072/05/2019.CX : dated 25.9.2019 Clause 2(iv)(b). Thus, it has been submitted, though the petitioner No. 1 had paid the amount of Central Excise duty and Service Tax yet, owing to delayed payments of that duty and tax, the petitioner No. 1 was eligible to make an application on Form SVLDRS-1 as it is not a person ineligible for making such application under any of the Clauses (a to h) of Section 125(1) of the Scheme. The Estimated Amount Payable should have been computed as 'zero'. In any case, the second declaration filed on Form SVLDRS-1, should have been entertained. 10. Second, it has been submitted, no demand of interest or penalty could be pressed against the petitioners without being preceded by any order of adjudication passed under Section 11 of the Central Excise Act, 1944. By means of paragraph No. 54 of the writ petition, it has been specifically stated that no such adjudication had taken place. That averment has not been denied by means of paragraph No. 32 of the counter-affidavit filed by the respondent. 11. Third, it has been submitted, in any case, the provisions of Section 142(1)(d) of the Customs Act, 1962 are not applicable with respect to any demand under the Central Excise Act, 1944. 12. Last, it has been submitted, in any case, in view of the Business Transfer Agreement dated 14.3.2017 entered into between the parties, interest or penalty liabilities, if any, would have to be split up between two petitioners with respect to the auto division and the engineering division. That exercise could only be done by carrying out proper adjudication. Insofar as that adjudication has not been done till date, the recovery of interest and penalty is wholly without jurisdiction or authority of law. 13. That exercise could only be done by carrying out proper adjudication. Insofar as that adjudication has not been done till date, the recovery of interest and penalty is wholly without jurisdiction or authority of law. 13. Responding to the above, learned counsel for the revenue has placed heavy reliance on the provisions of Section 121(c) read with Section 121(d) read with Section 123(e) read with Section 124(1)(c) and Section 125(1)(f) of the Scheme to submit - according to the own showing of the petitioners, no amount of Central Excise duty or Service Tax was due from petitioner No. 1, on the date of filing of either of the two declarations on Form SVLDRS-1. Therefore, the petitioners were neither eligible to make an application seeking settlement nor that application was otherwise maintainable for the purposes of computation of Estimated Amount Payable (EAP). 14. As to the other submissions advanced by learned counsel for the petitioners, learned counsel for the revenue has placed reliance on Rule 8(3A) of the Central Excise Rules, 2002 and Notification No. 68/63-CE dated 4.5.1963 to submit, no adjudication was required to be made as the default is admitted to the petitioners and the provisions of Section 142(1)(d) of the Customs Act, 1962, apply to the provisions of Central Excise Act. As to the Business Transfer Agreement, it has been submitted, the same may give rise to inter se dispute between the two petitioners with which the respondent authorities have no lis as the duty liability and, therefore, the interest and penalty liabilities arose only against petitioner No. 1, from whom recoveries are being sought. 15. Having heard learned counsel for the parties and having perused the record, Section 124 of the Scheme reads as under: "124. 15. Having heard learned counsel for the parties and having perused the record, Section 124 of the Scheme reads as under: "124. (1) Subject to the conditions specified in sub-section (2), the relief available to a declarant under this Scheme shall be calculated as follows:-- (a) 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,-- (i) rupees fifty lakhs or less, then, seventy per cent, of the tax dues; (ii) more than rupees fifty lakhs, then, fifty per cent, of the tax dues; (b) where the tax dues are relatable to a show-cause notice for late fee or penalty only, and the amount of duty in the said notice has been paid or is nil, then, the entire amount of late fee or penalty; (c) where the tax dues are relatable to an amount in arrears and,-- (i) the amount of duty is, rupees fifty lakhs or less, then, sixty per cent, of the tax dues; (ii) the amount of duty is more than rupees fifty lakhs, then, forty per cent of the tax dues; (iii) in a return under the indirect tax enactment, wherein the declarant has indicated an amount of duty as payable but not paid it and the duty amount indicated is,-- (A) rupees fifty lakhs or less, then, sixty per cent, of the tax dues; (B) amount indicated is more than rupees fifty lakhs, then, forty per cent, of the tax dues; (d) where the tax dues are linked to an enquiry, investigation or audit against the declarant and the amount quantified on or before the 30th day of June, 2019 is-- (i) rupees fifty lakhs or less, then, seventy per cent, of the tax dues; (ii) more than rupees fifty lakhs, then, fifty per cent, of the tax dues; (e) where the tax dues are payable on account of a voluntary disclosure by the declarant, then, no relief shall be available with respect to tax dues. (2) The relief calculated under sub-section (1) shall be subject to the condition that any amount paid as pre-deposit at any stage of appellate proceedings under the indirect tax enactment or as deposit during enquiry, investigation or audit, shall be deducted when issuing the statement indicating the amount payable by the declarant: Provided that if the amount of pre-deposit or deposit already paid by the declarant exceeds the amount payable by the declarant, as indicated in the statement issued by the Designated Committee, the declarant shall not be entitled to any refund." Relief may be available, under Section 124(1)(c), to a declarant with reference to and against whom "tax dues" are relatable to an "amount in arrears", at prescribed rates. 16. Then Section 123(e) of the Scheme reads: "123. For the purposes of the Scheme, "tax dues" means- (a) ..... (b) ..... (c) ...... (d) ..... (e) Where an amount in arrears relating to the declarant is due, the amount in arrears." Thus, the words "tax dues" mean "amount in arrears" that may be due. 17. The legislative intent becomes further clear from Sections 121(c) and 121(d) of the Scheme. They read as under: "121. In this Scheme, unless the context otherwise requires,- (a)..... (b) ..... (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 tax liability but not paid it; (d) "amount of duty" means the amount of central excise duty, the service tax and the cess payable under the indirect tax enactment;" 18. Thus, for the computation of relief under Section 124(c) of the Scheme, the phrase "amount in arrears" means the amount of Central Excise or Service Tax or Cess dues recoverable as arrears of duty under any indirect tax enactment (specified under Section 122 of the Scheme) that may be admittedly payable but may not have been paid upto that date. 19. The phrase "amount of duty" conveys a singular meaning under the Scheme. 19. The phrase "amount of duty" conveys a singular meaning under the Scheme. It is the amount of Central Excise duty or an amount of Service Tax or a Cess payable under any of the specified indirect tax enactments. No other amount whether by way of interest or penalty can ever be categorized as an amount of duty, especially as the entire scheme conveys that singular meaning. 20. No provision of the Scheme indicates an amount of duty would include interest or penalty in the definition of the words "amount in arrears". 21. 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 11.9.2018 and the entire Service Tax demand stood satisfied on 13.6.2019. 22. 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. 23. In view of the above, neither declaration filed by petitioner No. 1, on Form SVLDRS-1 was maintainable as those were filed only with respect to unknown and indeterminate interest and penalty liabilities. That hypothetical liability could not be described either as "taxi dues" or "amount of duty" or "amount in arrears", under the Scheme. 24. Though the petitioners admit that the entire duty demand of Central Excise duty and Service Tax liability stood discharged before filing of the declaration of SVLDRS-1 and before the Scheme being enforced, yet, the petitioner No. 1 was not ineligible to make an application under Section 125(1)(f)(ii) of the Scheme. 24. Though the petitioners admit that the entire duty demand of Central Excise duty and Service Tax liability stood discharged before filing of the declaration of SVLDRS-1 and before the Scheme being enforced, yet, the petitioner No. 1 was not ineligible to make an application under Section 125(1)(f)(ii) of the Scheme. Still, no relief may be granted thereon as there were no "tax dues" relatable to an "amount of arrears" due against petitioner No. 1 on the date of filing the declaration. The definition of the phrase "amount of duty" under Section 121(d) clearly prohibits any other construction to be made in favour of the petitioners. 25. In face of such statutory intent, the Circulars referred to by learned counsel for the petitioners are also of no avail, inasmuch as paragraph No. 2(iii) of the Circular dated 29 October, 2019 reads as below: "2(iii) A doubt has also been expressed whether a party who has filed an ST-3 return and has also paid the dues in FULL before filing the application but still wants to avail the benefits of the scheme for interest on the late paid dues is eligible. In this regard, attention is invited to illustrations (a) and (b) under Para 2(iv) of Circular No. 1072/05/2019-CX : dated 25.9.2019, given in the context of arrears of confirmed demand. It is clarified that these also cover the cases of arrears of tax liability admitted under returns filed on or before 30.6.2019." 26. Further paragraph No. 2(iv) of the Circular dated 25.9.2019 reads as below: "2(iv) Section 121(c) defines an amount in arrears as the amount of duty which is recoverable as arrears of duty. Further, Section 123 defines 'tax dues' in respect of arrears as the amount which is due in arrears. In other words, tax dues is the amount of duty which is outstanding against the declarant. This is the net amount after deducting the dues that he has already paid. Such payment may be in the form of pre-deposits appropriated or paid subsequently by the tax payer voluntarily against the outstanding amount. It is clarified that the relief available under Section 124(1)(c) will be applied to the net outstanding amount so arrived at. It may be noted that in respect of all other categories, any money paid before its appropriation is in the nature of a deposit only. It is clarified that the relief available under Section 124(1)(c) will be applied to the net outstanding amount so arrived at. It may be noted that in respect of all other categories, any money paid before its appropriation is in the nature of a deposit only. Hence, in respect of declarations made under these other categories, the relief will be applied to the outstanding amount and, only thereafter the pre-deposits/deposits [Section 124(2)] shall be adjusted. The same is illustrated as follows: (a) Tax paper has outstanding arrears of confirmed duty demand of Rs. 1 crore and he has already paid Rs. 60 lakhs. So, the amount of tax dues is Rs. 40 lakhs. After applying applicable relief @ 60%, the amount payable under the Scheme is Rs. 16 lakhs. (b) Taxpayer has outstanding arrears of confirmed duty demand of Rs. 1 crore apart from Rs. 20 lakh penalty and interest as applicable. He has already paid Rs. 1 cr. towards duty. So, the amount of tax dues is zero, and the amount payable under the Scheme is zero." 27. The Circulars are not pieces of legislation but only binding directions issued to executive authorities, by virtue of Section 133 of the Scheme. Their applicability would stay confined within the legislative limits set by the Scheme and, their own language. Thus, de hors the above referred Circulars, if a declarant had no "tax dues" outstanding and there was no amount of interest or penalty demanded from him, on the date of filing the declaration, on Form SVLDRS-1, neither it could be effectively processed nor any relief granted thereon, by virtue of the language of the provisions noted above. 28. Administrative Circulars cannot overreach or circumvent the statute or defeat the plain letter of law. In the present case, the Circulars clearly do not convey such intent of the CBIC. "Tax dues" relatable to "amount in arrears" may arise under Section 124(1)(c) both, in view of an adjudication or other order passed that may not have been satisfied on the date of filing of the declaration and also, by way of admitted liability under a return filed or other admission made by a declarant. "Tax dues" relatable to "amount in arrears" may arise under Section 124(1)(c) both, in view of an adjudication or other order passed that may not have been satisfied on the date of filing of the declaration and also, by way of admitted liability under a return filed or other admission made by a declarant. Clause 2(iv)(b) of the Circular dated 25 September, 2019 alludes to the first type of case noted above only i.e. where there may be outstanding arrears of 'confirmed duty' demand as also 'penalty and interest demands' on the date of the declaration being filed. Therefore, the Circular dated 25.9.2019 would remain confined (in applicability) only to cases where an adjudication order may have been passed, and to no other case. 29. 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. 30. 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. 31. 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. 32. Insofar as the other contention has been raised, the same appears to be wholly well founded, inasmuch as Rule 8(4) of the Central Excise Rules, 2002 reads as under: "8(4). The provisions of Section 11 of the Act shall be applicable for recovery of the duty as assessed under rule 6 and the penalty under sub-rule 3(A) in the same manner as they are applicable for recovery of any duty or other sums payable to the Central Government." Therefore, before any recovery of interest or penalty may be enforced against the petitioners it would have to be first adjudicated. Consequently, the communications dated 17.3.2020 and 7.4.2020 issued by respondent No. 6 are found to be wanting in jurisdiction and wholly pre-mature. 33. Consequently, the communications dated 17.3.2020 and 7.4.2020 issued by respondent No. 6 are found to be wanting in jurisdiction and wholly pre-mature. 33. Also, Clause 1 of the Notification No. 68/63-CE dated 4.5.1963, reads as under: "(1) In supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) Central Excise No. 69/59 (G.S.R. No. 822 of 1959), dated the 18th July, 1959, the Central Government hereby declares that the provisions of sub-section (1) Of Section 105, Section 110, Section 115 [excluding clauses (a) and (e) of sub-section (1)] clause (a) of Section 118, Sections 119, 120, 121 and 124, clause (b) and sub-clause (ii) of clause (c) of sub-section (1) of Section 142 and 150 of the Customs Act, 1962, (52 of 1962), relating to matters specified therein, shall be applicable in regard to like matters in respect of the duties imposed by Section 3 of the first mentioned Act, subject to the following modifications and alterations which the Central Government considers necessary and desirable to adapt those provisions to the circumstances, namely:" 34. Thus, the provision of Section 142(1)(d) of the Customs Act, 1962 had not been borrowed either by reference or by incorporation or otherwise made applicable to the provisions of Central Excise Act, 1944. Thus, the garnishee proceeding instituted against the petitioners with respect to duty liability under the Central Excise Act is wholly without jurisdiction. For the above reasons, the communications dated 17.3.2020 and 7.4.2020 issued by respondent No. 6 are set aside. Any amount that may have been recovered pursuant to those communications may be refunded within a period of one month from today. 35. As to the submission of learned counsel for the petitioners based on the Business Transfer Agreement dated 14.3.2017, we do not record any conclusion in that regard and that issue may remain to be examined in appropriate proceedings, at the appropriate stage. We further leave it open to the revenue authorities to initiate a valid adjudication proceeding with respect to penalty and interest, if the limitation to institute such proceeding otherwise survives today. We make clear, we have not granted any extension of limitation that may have otherwise expired. 36. Thus, the writ petition stands partly allowed. No order as to costs.