FACTS OF THE CASE (Professional Language)

  1. The petitioners — Lokesh Pathak, M.P. Pathak through LRs, and Art N Glass India Pvt. Ltd. — challenged actions of the Designated Committee, SVLDRS, Central GST, Delhi West for refusing to issue discharge certificates under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme) in respect of show cause notices issued prior to 30th June 2019.
  2. Searches were conducted by DGCEI in November 2004 at the petitioner entities resulting in seizures of goods and cash. Show cause notices were issued on 28th April 2005 demanding duty, interest, and penalties, and proposing confiscation of goods and imposition of redemption fine for release of confiscated goods.
  3. The original adjudicating authority confirmed duty liability, confiscated goods and cash, and imposed penalties, including redemption fines under Section 34 of the Central Excise Act, 1944. Appeals were filed before CESTAT, which remitted matters back for fresh adjudication without deciding on merits.
  4. The petitioners applied under the SVLDR Scheme in December 2019, declaring tax dues. The Designated Committee treated matters involving seizure and redemption fine as not covered under the SVLDR Scheme. Aggrieved, the petitioners approached this Court.

ISSUES INVOLVED

  1. Whether matters involving seizure of goods and redemption fine consequent to seizure/ confiscation can be covered under the SVLDR Scheme, 2019.
  2. Whether redemption fine constitutes duty, interest, or penalty under the Scheme and thus whether such amount is eligible for relief/discharge certificate under Section 129 of the Scheme.
  3. Whether the petitioners were ineligible for the SVLDR Scheme benefits by reason of having appeals decided before 30th June 2019 (Section 125(1)(a) of the Scheme). 

PETITIONER’S ARGUMENTS

  1. The petitioners submitted that seizure cases, including those involving redemption fine, were eligible for coverage under the SVLDR Scheme given that the original show cause notices were issued prior to 30th June 2019 and adjudication was pending due to remand by CESTAT.
  2. Petitioners argued that redemption fine is not a separate category of penalty but flows from confiscation as a consequence of non‑payment of duty, and therefore must be considered within the ambit of “amount payable” under Section 121, 123 and Section 124 of the Scheme.
  3. It was contended that the remand by CESTAT meant that no final adjudication was concluded and therefore the petitioners did not fall under the exclusion criteria of Section 125(1)(a) of the SVLDR Scheme. 

RESPONDENT’S ARGUMENTS

  1. The Department contended that petitioners were ineligible for the Scheme’s benefits because appeals had been filed and heard before 30th June 2019 under Section 125(1)(a) of the SVLDR Scheme.
  2. The Designated Committee maintained that seizure matters and redemption fines were excluded from Scheme coverage since they were not expressly listed as eligible tax dues and such fines cannot be considered part of duty/penalty for SVLDR relief.

COURT FINDINGS AND ORDERS

  1. The Court held that the remand by CESTAT did not amount to a final decision on merits; thus, the petitioners were not ineligible under Section 125(1)(a) of the SVLDR Scheme.
  2. The Court clarified that what constitutes tax dues and amounts payable under the Scheme must include duty and penalty connected to the original show cause notice, and the Scheme benefits were available for disputes pending as of 30th June 2019.
  3. The Court further opined that redemption fine is consequential to confiscation and flows from non‑payment of duty; therefore it cannot be excluded from the definition of penalty and should be considered part of the amount payable under the Scheme.
  4. Reliance was placed on High Court precedents (e.g. Allahabad High Court in M/s Jay Shree Industries regarding classification of redemption fine as penalty) and similar rulings that redemption fine is within the scope of penalty under indirect tax law.
  5. In view of the above, the Court allowed the petitions, directing the authorities to consider petitioners’ applications under the SVLDR Scheme and issue discharge certificates in accordance with law.

IMPORTANT CLARIFICATIONS

  • Redemption fine imposed in lieu of confiscation is not separate from penalty and must be treated as part of tax dues under the SVLDR Scheme.
  • An appeal merely remanded by the appellate tribunal (CESTAT) does not constitute a decision on merits for the purposes of exclusion under Section 125(1)(a).
  • Discharge certificates under the SVLDR Scheme are required to be issued when amounts payable are duly paid under Section 129 of the Scheme. 

SECTIONS INVOLVED

  • Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019: Sections 121, 123, 124, 125, 129.
  • Central Excise Act, 1944: Sections 34 (redemption fine), Section 12F (search & seizure).

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/75408092025CW106222024_133516.pdf

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