Excise Duty paid under protest adjustable against amount payable under SVLDRS 

Commissioner of Central Excise and service tax Vs Patanjali Ayurveda Ltd (Uttarakhand High Court)

The submission of Mr. Saharia, learned counsel for the appellant is that the judgment of the Punjab and Haryana High Court was not binding on this Court and it merely had persuasive value. He submits that a reading of the Sabka Vishwas Scheme, 2019 would show that the only amount which is liable to be adjusted is the amount deposited towards the Central Excise Duty and not the amount deposited towards the interest or penalty.

On the other hand, learned counsel for the respondent places heavy reliance on the judgment of the Punjab and Haryana High Court in Schlumberger (Supra). He also drawn our attention to a circular issued by the Central Board of Indirect Taxes and Customs dated 12.12.2019, in relation to the Sabka Vishwas Scheme, 2019, which, inter alia, states as follows:

“(ii) Section 124(2) provides for adjustment of any amount paid as pre-deposit at any stage of appellate proceedings or as deposit during enquiry, investigation or audit. However, an amount paid after issuance of show cause notice but before adjudication are not mentioned therein. Further, these amounts gets appropriated/adjusted at the time of adjudication. There may be situations where such deposits may have been made but could not be appropriated due to pendency of adjudication proceedings. With a view to facilitate the taxpayer, as well as to recognise and appropriate these deposits as revenue, it is clarified that such deposits can be deducted/adjusted when issuing the statement indicating the amount payable by the declarant.

(iii) Many a times, the deposits during enquiry, investigation or audit etc are made ‘under protest’. Such deposits need to be adjusted by the designated committee in order to determine the final amount payable by the declarant, once a declaration has been filed by the taxpayer. Section 130(2) provides that in case any pre-deposit or other deposit already exceeds the amount payable under the Scheme, the differential amount will not be refunded. Any person who files a declaration under the Scheme undertakes to comply with all the provisions of the Scheme. Therefore, there is no question of refund of any excess deposit in any case.”

In our view, the appellant department was not justified in estimating the duty payable by the respondent while ignoring the amount deposited by the respondent under protest. We also find merit in the submission of Mr. Priyadarshi Manish that the amount deposited has no specific colour since the amount was deposited under protest and even before the crystallisation of the liability of the respondent-assessee as Central Excise Duty or as interest. Pertinently, the show cause notice was issued some time after the petitioner had already deposited the amounts aforesaid under protest. The issues with regard to the liability of the respondent towards duty and interest were at large and the amounts were already deposited when the scheme came into force. The circular issued by the Central Board of Indirect Taxes and Customs relied upon by the respondent also clearly shows that the department was liable to adjust the entire amount deposited by the assessee under protest prior to the adjudication of the liability either towards Central Excise Duty or towards the interest.

FULL TEXT OF THE JUDGMENT/ORDER OF UTTARAKHAND HIGH COURT

The present special appeal is directed against the judgment dated 09.09.2022 rendered by the learned Single Judge in Writ Petition (M/S) No.964 of 2020 preferred by the respondent-Patanjali Ayurveda Ltd. By the impugned judgment the learned Single Judge allowed the writ petition.

2. The respondent had preferred the writ-petition to assail the Form SVLDRS No.3 L050320SV300423 dated 05.03.2020 issued by the respondent and also sought a direction to the respondent to issue fresh Form No.3 after adjusting the amount of Rs.3,19,69,680/-, already deposited by the respondent. The respondent also sought a direction to the appellant to refund the amount of Rs.3,19,69,680/-with interest at the rate of 18% per annum.

3. As the part of the Finance Act, 2019 the Parliament framed the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 which is contained in Chapter-V of the said Finance Act. The relevant scheme is discernible, in so for as it is relevant for our purpose from Sections 120 and 124. For the sake of convenience, we reproduce the aforesaid provisions of the Finance Act, 2019:-

“120. (1) This Scheme shall be called the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (hereafter in this Chapter referred to as the “Scheme”).

(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

(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 predeposit 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 predeposit 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.”

4. It appears that the respondent-assessee was required to deposit Central Excise Duty of Rs. 12,99,42,605/- and interest thereon amounting to Rs. 3,19,69,680/-. The respondent made the said deposits under protest on or about 18.01.2014. Subsequently, the appellant department issued a show cause notice on 28.03.2014 to the respondent-assessee raising a demand of Central Excise Duty amounting to Rs.56,00,00,135/- for the clearances made during the period October, 2009 to 04.09.2013. Apart from the aforesaid principal liability towards Central Excise Duty, the respondent was also required to show cause as to why it should not be subjected to interest and penalty. While the show cause notice was pending adjudication, the aforesaid scheme came into force and the respondent applied under the said scheme. The appellant department, in terms of Section 124 of the Finance Act issued Form SVLDRS-3 disclosing the estimated amount payable towards basic excise duty as 11,02,49,115/-. The respondent disputed the said estimate dated 05.03.2020. The respondent being aggrieved by the said estimate preferred the writ petition with the reliefs as taken note of hereinabove.

5. The case of the respondent-assessee was that the entire amount deposited by the assessee under protest, which included the amount towards Central Excise Duty and the interest computed thereon, was liable to be adjusted towards the tax liability payable under the scheme.

6. The stand of the appellant, on the other hand, was that the amount deposited by the respondent-assessee under the head of interest was not liable to be adjusted and only the amount deposited under the head of Central Excise Duty was liable to be adjusted.

7. The learned Single Judge has allowed the writ petition by placing reliance on the judgment of the Division Bench of the Punjab and Haryana High Court in Schlumberger Solutions Pvt. Ltd. Vs. Commissioner Central GST and Others, CWP-6845-2020 dated 30.11.2021, reported as 2021-TIOL-2238-HC-P&H-ST, wherein an identical issue was considered by the Division Bench and the Division Bench held that whatever amounts are deposited by the assessee including towards interest or penalty are liable to be adjusted against the Central Excise dues payable by the assessee under the scheme.

8. The learned Single Judge takes note of the fact that the appellant department had accepted the said judgment in the Division Bench and not preferred a Special Leave Petition before the Supreme Court against the said judgment. The Division Bench in Schlumberger (Supra) inter alia observed as follows:

“Admittedly, the petitioner has deposited amounts of Rs.2,29,61,536/- and further sum of Rs.1,16,51,272/- on account of interest and Rs.34,44,227/- as penalty, even prior to issuance of show cause notice. The question that arises for adjudication is as to whether the petitioner is entitled for credit of amount deposited under the head of interest and penalty while quantifying the amount payable under the scheme.

A bare reading of Section 124(2) reveals that the relief calculated under Section 124(1) is subject to the condition that any amount paid during the enquiry, investigation or audit has to be deducted when issuing the statement indicating the amount payable by the declarant. The bare provision talks of ‘any amount paid’, the same does not distinguish between the amounts paid under different heads. It clearly envisages two kinds of deductions firstly any pre-deposit made at any stage of appellate proceedings under the indirect tax enactment and secondly, any deposit made during enquiry, investigation or audit. Both these species of ‘pre-deposit’ need to be deducted while finalizing the computation.

Amount deposited by the petitioner falls in the second category. The provision only talks of amount irrespective of whether it has been paid as tax or interest or penalty. Thus, the view taken by the Designated Committee cannot be sustained. There is another side to the story. Had the petitioner remitted the entire amount paid by him towards tax, the respondents would have given credit of entire amount and his interest liability would have been waived off as well. The petitioner cannot be punished for depositing the amount under different heads once the provision mandates to discount the amount paid during the investigation dehors the head it has been deposited under.

The present petition is allowed. Resultantly: (i) the comments of Designated Committee informs SVLDRS-2 and SVLDRS-3 are quashed: (ii) Designated Committee is directed to re-consider the claim of the petitioner within two weeks from the receipt of certified copy of the order by adjusting amounts paid towards interest and penalty, in accordance with law and the petitioner is directed to make the payment within two weeks from the date Designated Committee issues SVLDRS-3”

9. The submission of Mr. Saharia, learned counsel for the appellant is that the judgment of the Punjab and Haryana High Court was not binding on this Court and it merely had persuasive value. He submits that a reading of the Sabka Vishwas Scheme, 2019 would show that the only amount which is liable to be adjusted is the amount deposited towards the Central Excise Duty and not the amount deposited towards the interest or penalty.

10. On the other hand, learned counsel for the respondent places heavy reliance on the judgment of the Punjab and Haryana High Court in Schlumberger (Supra). He also drawn our attention to a circular issued by the Central Board of Indirect Taxes and Customs dated 12.12.2019, in relation to the Sabka Vishwas Scheme, 2019, which, inter alia, states as follows:

“(ii) Section 124(2) provides for adjustment of any amount paid as pre-deposit at any stage of appellate proceedings or as deposit during enquiry, investigation or audit. However, an amount paid after issuance of show cause notice but before adjudication are not mentioned therein. Further, these amounts gets appropriated/adjusted at the time of adjudication. There may be situations where such deposits may have been made but could not be appropriated due to pendency of adjudication proceedings. With a view to facilitate the taxpayer, as well as to recognise and appropriate these deposits as revenue, it is clarified that such deposits can be deducted/adjusted when issuing the statement indicating the amount payable by the declarant.

(iii) Many a times, the deposits during enquiry, investigation or audit etc are made ‘under protest’. Such deposits need to be adjusted by the designated committee in order to determine the final amount payable by the declarant, once a declaration has been filed by the taxpayer. Section 130(2) provides that in case any pre-deposit or other deposit already exceeds the amount payable under the Scheme, the differential amount will not be refunded. Any person who files a declaration under the Scheme undertakes to comply with all the provisions of the Scheme. Therefore, there is no question of refund of any excess deposit in any case.”

11. We have heard Mr. Saharia, learned counsel for the appellant and Mr. Priyadarshi Manish, learned counsel for the respondent.

12. In our view, the impugned judgment does not call for interference. Undisputedly, the decision of the Punjab and Haryana High Court squarely covers the issue raised by the respondent in the writ petition in favour of the assessee. It is also not in dispute that the department has accepted the view of the Punjab and Haryana High Court and has not preferred to assail the said judgment before the Supreme Court. The appellant department cannot be seen to be adopting different yardstick in different cases.

13. In our view, the appellant department was not justified in estimating the duty payable by the respondent while ignoring the amount deposited by the respondent under protest. We also find merit in the submission of Mr. Priyadarshi Manish that the amount deposited has no specific colour since the amount was deposited under protest and even before the crystallisation of the liability of the respondent-assessee as Central Excise Duty or as interest. Pertinently, the show cause notice was issued some time after the petitioner had already deposited the amounts aforesaid under protest. The issues with regard to the liability of the respondent towards duty and interest were at large and the amounts were already deposited when the scheme came into force. The circular issued by the Central Board of Indirect Taxes and Customs relied upon by the respondent also clearly shows that the department was liable to adjust the entire amount deposited by the assessee under protest prior to the adjudication of the liability either towards Central Excise Duty or towards the interest.

14. We, therefore, do not find any merit in the present appeal and the same is dismissed.