Facts of the Case

IL&FS Engineering and Construction Company Limited, engaged in manufacturing Ready Mix Concrete (RMC) at Gurgaon, was searched by Central Excise officers in February 2016 on information of unpaid excise duty, during which it deposited over Rs. 4.71 crore, partly in cash and partly by utilising Cenvat Credit.

A show-cause notice dated 09.03.2017 demanded over Rs. 12 crore in excise duty; the department, on verification, allowed part of the petitioner's claimed Cenvat Credit but disallowed Rs. 41,08,123 as time-barred under the Cenvat Credit Rules, 2004.

During pendency of adjudication, the petitioner applied under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, but the Designated Committee (via Form SVLDRS-2 and later SVLDRS-3) refused to treat the amount paid through Cenvat Credit as eligible for deduction while computing the amount payable under the Scheme, relying on a CBIC circular that duty deposited via Cenvat Credit does not qualify for such adjustment.

The petitioner challenged these SVLDRS forms and the related 2017 letter, relying on the Court's own earlier rulings (M/s Hilton Hotel Management Services and Schlumberger Solutions) and a Bombay High Court ruling (Quant Broking), which had held that Section 124(2) of the Finance (No. 2) Act, 2019 required any amount paid during enquiry, investigation, or audit — including via Cenvat Credit — to be deducted while computing the payable amount under the Scheme. This is a pre-GST Central Excise dispute concerning RMC manufacture between 2012 and 2016.

Issues Involved

  1. Whether an amount paid by way of utilising Cenvat Credit during investigation could be treated as a deposit eligible for deduction under Section 124(2) of the Finance (No. 2) Act, 2019, while computing the amount payable under the Sabka Vishwas Scheme, 2019.
  2. Whether the Designated Committee could lawfully decline to give this benefit relying on a CBIC circular, when the department's own prior order (23.06.2017) had already allowed most of the disputed Cenvat Credit.

Petitioner's Arguments

  • Section 124(2) of the Finance (No. 2) Act, 2019 required that any amount paid by the declarant during enquiry, investigation, or audit be deducted from the amount payable under the Sabka Vishwas Scheme, and this was not restricted to appellate pre-deposits alone but covered deposits made through Cenvat Credit during investigation.
  • This position had already been settled by the same High Court in M/s Hilton Hotel Management Services Pvt. Ltd. v. Union of India, a decision that had attained finality since the department did not appeal it, and by Schlumberger Solutions and the Bombay High Court's ruling in Quant Broking.

Respondent's Arguments

  • The department relied on CBIC Circular No. 1071/4/2019-CX.8 dated 27.08.2019, which stated that amounts deposited through Cenvat Credit did not qualify for adjustment under the Scheme, and on the third proviso to Rule 4(1) of the Cenvat Credit Rules, 2004, arguing that the disputed credit had rightly been denied as time-barred (claimed beyond the one-year limit from the invoice date).

Court Order / Findings

  • The Court held that the Designated Committee's reliance on the CBIC circular to deny Cenvat Credit adjustment was incorrect and rejected the department's argument, since its own earlier rulings in Hilton Hotel and Schlumberger Solutions — the former having attained finality — had settled the position in the petitioner's favour, and no contrary judgment was cited by the department.
  • It set aside the impugned Form SVLDRS-2, Form SVLDRS-3, and the earlier letter dated 23.06.2017 disallowing part of the Cenvat Credit, and directed the respondent authority to consider all documents and records submitted by the petitioner, including proof of Cenvat Credit payment, and pass a fresh order in accordance with law after giving seven days' prior notice and a hearing.
  • The writ petition was allowed.

Important Clarification

This ruling concerns pre-GST Central Excise duty, the Cenvat Credit Rules, 2004, and the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, which was a one-time amnesty scheme for legacy Central Excise and Service Tax disputes — it has no bearing on GST law or GST input tax credit. The final Cenvat Credit figure and the petitioner's Scheme benefit will only be settled once the department passes its fresh order as directed.

Sections Involved

  • Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 – Section 124(2) of the Finance (No. 2) Act, 2019
  • Cenvat Credit Rules, 2004 – Rule 4 (third proviso, time limit for availing credit)
  • Central Excise Act, 1944 – Section 11A(4) and 11AA, and Central Excise Rules, 2002 Rule 25 read with Section 11AC

Decision – In Favour of

Decided in favour of the petitioner — the impugned SVLDRS forms and the 2017 letter disallowing part of the Cenvat Credit were set aside, with a fresh, reasoned decision to be passed by the department after hearing the petitioner.

Case Details

High Court of Punjab and Haryana at Chandigarh. CWP-15519-2020 (O&M) (IL&FS Engineering and Construction Company Limited and Others v. The Commissioner of Central Goods and Service Tax, Gurgaon-1 and Others). Neutral Citation No. 2023:PHHC:103973-DB. Coram: Hon'ble Ms. Justice Ritu Bahri and Hon'ble Mrs. Justice Manisha Batra. Date of decision: 07.08.2023.

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