In a recent ruling, the Bombay High Court ruled that the benefit of the Sabka Vishwas ( Legacy Dispute Resolution ) Scheme, 2019, extends to redemption fines once an application under the scheme is accepted.
Juice Electricals Pvt. Ltd. the petitioner is engaged in manufacturing electrical components like switches, regulators, and sockets. A search was conducted at the company’s premises in 2017, resulting in the seizure of goods worth Rs. 10,06,82,932.
The department issued a show cause notice ( SCN ) in March 2017 under Rule 25 of the Central Excise Rules, 2002, seeking confiscation of goods and imposition of penalties. A second SCN was issued in May 2019 demanding Central Excise Duty for the period April 2015 to 2017-18.
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The Sabka Vishwas ( Legacy Dispute Resolution ) Scheme, 2019, was introduced to resolve pending disputes. The petitioner filed declarations under the scheme to resolve disputes related to the two SCNs.
The declaration related to the May 2019 SCN was accepted and a discharge certificate was issued. The declaration related to the March 2017 SCN was initially processed and then rejected because redemption fines are not covered under the Sabka Vishwas Scheme.
The petitioner challenged the rejection of the declaration before the Bombay High Court arguing that redemption fines are akin to penalties and should be covered under the scheme citing previous judgments supporting this interpretation.
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The respondents argued that redemption fines should be included in the duty payable under the scheme and justified the rejection of the declaration.
The bench comprising Justice M. S. Sonak and Justice Jitendra Jain observed that redemption fines are akin to penalties and clarified that immunity under the scheme extends to such fines.
The court explained that once the petitioner’s application under the scheme is accepted for payment of excise duty, the declarant becomes immune from the imposition of any redemption fines.
The court referred to a detailed judgment of the Bombay High Court in the case of M/s. Esbee Electrotech LLP vs. Union of India, which held that the scheme extends to redemption fines as they are considered penalties.
The court directed the appropriate officer to issue the final certificate under Section 127 of the Scheme within four weeks.
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