Facts of the Case

Late Mr. M.P. Pathak, through his legal representative, filed a writ petition as part of a batch of connected matters arising from searches conducted by the Directorate General of Central Excise Intelligence in November 2004. Searches were carried out at the premises of Design Glass Works, a proprietary concern of Late Mr. M.P. Pathak, resulting in seizure of goods valued at ₹19,42,800, and at other related entities and residences.

A Show Cause Notice dated 28.04.2005 was issued proposing demand of central excise duty, confiscation of seized goods, confiscation of cash, imposition of penalties, and levy of redemption fine. The Show Cause Notice culminated in an Order-in-Original dated 30.03.2007, confirming duty demand, imposing penalties, ordering confiscation of goods and cash, and granting an option to redeem confiscated goods on payment of redemption fine.

Appeals filed before CESTAT were disposed of by a Final Order dated 09.11.2016, whereby the matter was remanded for de novo adjudication without any findings on merits. During pendency of adjudication, the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 was introduced, and declarations were filed under the Scheme seeking settlement of the Show Cause Notice.

Issues Involved

Whether cases involving seizure of goods and levy of redemption fine are eligible for settlement under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, whether redemption fine is distinct from duty or penalty for the purpose of the Scheme, and whether the Designated Committee was justified in refusing to issue discharge certificates.

Petitioner’s Arguments

The petitioner contended that the appeal before CESTAT had resulted only in a remand and therefore the matter had not been finally decided prior to 30.06.2019, making the declaration eligible under the Scheme. It was argued that redemption fine is in the nature of penalty and once tax dues are settled under Section 124 of the Scheme, redemption fine also stands waived. Reliance was placed on CBIC flyers, FAQs, and judgments of multiple High Courts holding that redemption fine is covered under the Scheme.

Respondent’s Arguments

The Department contended that cases involving seizure and redemption fine were not covered under the Scheme and that the petitioner was ineligible under Section 125(1)(a) of the Scheme as the appeal had been decided by CESTAT prior to 30.06.2019. It was argued that redemption fine is not expressly mentioned in the statutory provisions granting waiver.

Court Order / Findings

The Delhi High Court examined the provisions of the Sabka Vishwas Scheme, including Sections 121, 123, 124, 125 and 129, and held that a remand order by CESTAT does not amount to final adjudication on merits. Accordingly, the Show Cause Notice continued to remain pending and qualified as “tax dues” under the Scheme.

On the substantive issue, the Court held that redemption fine is a consequence of non-payment of duty and is in the nature of penalty. The Court relied upon authoritative precedents including Synpol Products Pvt. Ltd. (Gujarat High Court), Jay Shree Industries (Allahabad High Court), Espee Electrotech LLP (Bombay High Court), and CBIC explanatory flyers stating that the Scheme grants total waiver of interest, penalty and fine.

The Court held that excluding redemption fine from the benefit of the Scheme would defeat its purpose of providing finality to legacy disputes and would be contrary to the representations made by the Government.

Important Clarification

The High Court clarified that seizure cases are not excluded from the Sabka Vishwas Scheme and that redemption fine cannot be treated separately once the underlying duty demand is settled. Upon payment of the amount determined under Section 124, the declarant is entitled to a discharge certificate under Section 129, granting immunity from further duty, interest, penalty and redemption fine.

Final Outcome

The writ petition filed by M.P. Pathak (Deceased) through Legal Representative was allowed. The Delhi High Court directed the Designated Committee, SVLDRS, Central GST, Delhi West to issue a discharge certificate in respect of the Show Cause Notice dated 28.04.2005, without insisting on payment of redemption fine, within two months. All pending applications were disposed of accordingly.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/75408092025CW106222024_133516.pdf


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