Case Law Details
V.K. Aggarwal Vs Commissioner of Central Tax (CESTAT Delhi)
CESTAT Delhi held that when the demand of duty has been settled under SVLDR Scheme, the imposition of penalty would fail on simple ground that if the appellants had applied under the said scheme, they would have paid ‘nil’ duty.
Facts- On the basis of an information received from Directorate General of Central Excise Intelligence (DGCEI) that Shri Amit Gupta, Director of M/s. Progressive Alloys India Pvt. Ltd. along with associated registered dealer units viz. M/s. Forward Minerals, M/s. Unnati Alloys Pvt. Ltd., M/s. Metal Alloys Pvt. Ltd. and M/s. Brilliant Metals Pvt. Ltd. was passing in- admissible cenvat credit to various manufacturers of excisable goods without physical delivery of the goods. An investigation was carried out and it was observed that M/s. Moral Alloys had issued bogus invoices to the company without actual supply of the goods and on the ba-sis of the fake invoices, the company availed the cenvat credit amounting to Rs.5,93,906/-. Show cause notice dated 31.03.2017 proposing reversal of credit along with interest and penalty under the provisions of Cenvat Credit Rules (CCR), 2004 was issued. A penalty under Rule 15 (2) of CCR, 2004 read with Rule 26 of Cenvat Credit Rules, 2002 was proposed on all the Directors of the company.
The Company filed an application vide Form – SVLDRS-I, Sabka Vish-was (Legacy Dispute Resolution) Scheme, 2019 on 31.12.0219. The said application was accepted and a discharge certificate was issued on 8.7.2020 showing complete and final discharge of the duty liability. Consequently, the company was exonerated from all the charges leveled in the show cause notice.
The Adjudicating Authority vide Order dated 30.03.2022 noted the fact of issuance of discharge certificate under the SVLDR Scheme in favour of the company and observed that the matter cannot be adjudicated any further against the company, however, he proceeded to consider the show cause notice against the co-noticees and decided the issue against them imposing penalty.
The appellants challenged the order of the Adjudicating Authority in appeal and the Commissioner (Appeals) upheld the order-in- original by the impugned order. Hence, the present appeals are filed by the above two appellants before this Tribunal.
Conclusion- Held that when the demand of duty has been settled under SVLDR Scheme, the imposition of penalty would fail on simple ground that if the appellants had applied under the said scheme, they would have paid ‘nil’ duty, in view of the relief available to them under Section 124(1) (b) of the Finance Act.
The present appellant, who is a director of the main noticee failed to opt under the Scheme. However, without considering the directions given in the remand order and allowing cross examination, Commissioner has imposed penalties on the appellant, just for reason that the appellant did not settle the issue along with others under SVLDRS. Such approach of Commissioner cannot be justified. Even if the appellant has not approached under SVLDRS, Commissioner should have adjudicated as directed by Tribunal. No justification for imposition of penalty on reconsideration as per order of Tribunal is forthcoming.
FULL TEXT OF THE CESTAT DELHI ORDER
Two separate appeals have been filed by the appellants viz. V.K. Ag-garwal and J. K. Aggarwal against the Order-in-Appeal No.39-43/CE/DLH/2022 dated 07.12.2022, whereby the appeals were dismissed.
2. The brief facts are that the both the appellants are Directors of the Company, M/s. Indian Concast Pvt. Ltd., which is engaged in the manufacture of copper wire rods. On the basis of an information received from Directorate General of Central Excise Intelligence (DGCEI) that Shri Amit Gupta, Director of M/s. Progressive Alloys India Pvt. Ltd. along with associat-ed registered dealer units viz. M/s. Forward Minerals, M/s. Unnati Alloys Pvt. Ltd., M/s. Metal Alloys Pvt. Ltd. and M/s. Brilliant Metals Pvt. Ltd. was passing inadmissible cenvat credit to various manu-facturers of excisable goods without physical delivery of the goods. An investigation was carried out and it was observed that M/s. Moral Alloys had issued bogus invoices to the company without actu-al supply of the goods and on the basis of the fake invoices, the company availed the cenvat credit amounting to Rs.5,93,906/-. Show cause notice dated 31.03.2017 proposing reversal of credit along with interest and penalty under the provisions of Cenvat Credit Rules (CCR) ,2004 was issued. A penalty under Rule 15 (2) of CCR, 2004 read with Rule 26 of Cenvat Credit Rules, 2002 was pro-posed on all the Directors of the company.
3. The Company filed an application vide Form – SVLDRS-I, Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 on 31.12.0219. The said application was ac-cepted and a discharge certificate was issued on 8.7.2020 showing complete and final discharge of the duty liability. Consequently, the company was exonerated from all the charges leveled in the show cause notice.
4. The Adjudicating Authority vide Order dated 30.03.2022 noted the fact of issuance of discharge certificate under the SVLDR Scheme in favour of the company and ob-served that the matter cannot be adjudicated any further against the company, however, he pro-ceeded to consider the show cause notice against the co-noticees and decided the issue against them imposing penalty as under:-
“i) I impose penalty amounting to Rs.1,50,000/- (Rupees One Lakh Fifty Thousand only) under Rule 15(2) of Cenvat Credit Rules, 2004 read with Rule 26 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 upon Shri Rohit Agarwal, Director of M/s. Indian Concast Pvt. Ltd., B-41, Jhilmil Industrial Area, Shahadra, Del-hi-95.
ii) I impose penalty amounting toRs.1,50,000/-(Rupees One Lakh Fifty Thousand only) under Rule 15 (2) of Cenvat Credit Rules, 2004 read with Rule 26 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 up-on Shri J.K. Agarwal, Director of M/s. Indian Concast Pvt. Ltd., B-41, Jhilmil Industrial Area, Sha-hadra, Delhi-110095.
iii) I impose penalty amounting to Rs.1,50,000 (Rupees One lakh fifty thousand only) under Rule 15(2) of Cenvat Credit Rules, 2004 read with Rule 26 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise act, 1944 upon Shri V.K. Agarwal, Director of M/s. Indian Concast Pvt. Ltd., B-41, Jhilmil Industrial Area, Shahadra, Delhi-95.
iii) I impose penalty amounting to Rs.1,50,000 (Rupees One lakh fifty thousand only) under Rule 15(2) of Cenvat Credit Rules, 2004 read with Rule 26 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 upon Shri Mohit Agarwal, Director of M/s. Indian Concast Pvt. Ltd., B-41, Jhilmil Industrial Area, Shahadra, Delhi-95.
iv) I impose penalty amounting to Rs.5,93,906/-(Rupees Five lakh ninety three thousand nine hundred six only) under Rule 15(2) of Cenvat Credit Rules, 2004 read with Rule 26 of the Central Excise Rules, 2002 read with Section 11AC of the Cen-tral Excise Act, 1944 upon M/s. Moral Alloys Pvt.Ltd., New Delhi, registered dealer, 205, Ajeet Bha-wan, 4697/6, Ansari Road, Daryaganj Road, Delhi.
v) I impose penalty amounting to Rs.4,00,000/-(Rupees Four lakh only) under Rule 26 of the Central Excise Rules, 2002 upon Shri Amit Gupta, C-30, 1st Floor, Prithvi Raj Road, Adarsh Nagar, Delhi-110 033.”
5. Being aggrieved, the appellants challenged the order of the Adjudi-cating Authority in appeal and the Commissioner (Appeals) upheld the order-in-original by the im-pugned order. Hence, the present appeals are filed by the above two appellants before this Tribunal.
6. We have heard learned Counsel for the appellant and also the Revenue and have perused the case records.
7. The short question raised in the appeal relates to the continuance of the adjudicating proceedings against the co-noticees (Directors) when the subject matter of the show cause notice has been settled by the main noticee viz. the Company under SVLDR Scheme.
8. Learned Counsel for the appellant referred to the provisions of Section 124 (1) of the Finance (No.2) Act, 2019, which reads as under:-
“124 (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,d 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.”
9. Learned Counsel for the appellant has then referred to the reply of the CBIC to the Frequently Asked Questions (FAQ) in so far as the liability of the co-noticees was con-cerned, which is as under :-
“Q 23. What is the coverage of SCNs under the Scheme with respect to main notice vis-à-vis co-noticee particularly when the tax amount has al-ready been paid by the main notice outside the Scheme?
Ans. In case of a SCN issued to an assessee demanding duty/tax and also proposing penal action against him as well as separate penal action against the conoticee/s, specified therein, if the main notice has settled the tax dues the co-noticee/s can opt for the Scheme for the waiver of penalty. For instance, the main notice has settled the matter before the Settlement Commission and paid the dues and the conoticee/s were not a party to the proceedings. In such a case, the conoticee/s can file a declaration under the Scheme. Similarly, in a case of arrears, where the main notice has paid the duty, the conoticee/s can file a declaration under the Scheme.”
10. The learned Counsel for the appellant has pointed out to the provisions to the Circular No.1071/4/2019-CX.8 dated 27.08.2019. The relevant para thereof is quoted below:-
“Section 124(1) (b) provides that 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 will be waived. This section, inter alia, covers cases of penal action against conoticees. In case of a show cause notice demanding duty/tax from the main tax payer and proposing penal action against conoticees, it is clarified that the conoticees can not avail the benefits of the scheme till such time the duty demand is not settled. Once, the main noticee discharges the duty demand, the co-noticees can apply under this Scheme. This will also cover cases where the main notice has settled the matter before the Settlement Commission and paid the dues and in which co-noticees were not a party to the proceed-ings before the Settlement Commission.”
11. It appears that in terms of the aforesaid circular as well as the FAQ referred above, the co-noticee has a responsibility to opt or apply for the scheme, once the main no-tice has been issued the discharge certificate of the duty liability, which in the present case, the ap-pellant has failed to do so. I am of the opinion that this is only a procedural flow, for which the appel-lant cannot be burdened with the liability of penalty, in asmuch as, there is no loss to the Revenue. The amount proposed in the show cause notice stands settled with the issuance of the discharge certificate issued in favour of the main noticee. The interpretation placed is based on the provisions of the Circular, which explains that the scheme is a bold endeavor to unload the baggage relating to the legacy taxes viz. central excise and service tax that have been subsumed under GST and allow business to make a new beginning and focus on new GST, therefore, it is incumbent on all the officers and staff of CBIC to be partner with the trade and industry to make the scheme a grand success. The closing paragraph of the Circular also says as under:-
“12. The Sabka Vishwas (Legacy Dispute Resolu-tion) Scheme, 2019 has the potential to liquidate the huge outstanding litigation and free the tax-payers from the burden of litigation and investigation under the legacy taxes. The administrative ma-chinery of the Government will also be able to fully focus on helping the tax payers in the smooth implementation of GST. Thus, the importance of making this Scheme a grand success cannot be overstated. The Principal Chief Commissioners/Principal Directors General/Chief Commission-ers/Directors General and all officers and staff are instructed to familiarize themselves with the Scheme and actively ensure its smooth implementation. “
12. Thus, keeping in view the avowed object with which the scheme has been introduced and the intention of the Government to make it a grand success, it is necessary that the relief sought by the appellant deserves to be allowed and penalty imposed on them needs to be set aside. The Circular issued by the department is binding on them.
13. In support of his submissions, the learned counsel for the appel-lant has referred to a series of orders passed by this Tribunal on the subject of the liability of the co-noticee when the main noticee has already discharged the liability in issue, which are as follows:-
“1. M/s. Siemens Ltd. (formerly known as M/s. Morgan Construction Co. Pvt. Ltd. ), Mr. Sunil Chellani Vs. Commissioner of Central Excise, Mumbai-III cited as 2023 (5) TMI 377 – CESTAT-Mumbai dated 06.03.2023.
2. Shri B.V. Kshatriya Vs. Commissioner of GST & CE, Nashik cited as 2023 (5) TMI 858 – CESTAT Mumbai dated 11.01.2023.
3. Mr. Dinesh Kanoria Vs. Commissioner of Central Excise, Thane-I cited as 2022 (12) TMI 1408 – CESTAT Mumbai dated 20.12.2022.
4. Shri Ramesh Despande and Shri Debdutta Chatterjee Vs. Commissioner of Central Excise, Nagpur cited as 2021(7) TMI 1307 – CESTAT – Mumbai dated 27.07.2021.
5. P.B. Vyas and Ors. Vs. Commissioner of Central Excise, Mumbai-III (17.03.2021 – CESTAT – Mumbai): MANU/CM/0008/2021.
6. Sri Sasthi Charan Banerjee Vs. Commis-sioner of CGST & CX, Bolpur Commissionerate, Nanoor Chandidas Road, Sian (CESTAT-Kolkata): Final Order No.75578/2022 dated 14.12.2022.
7. Manjeet Kaur Bansal Vs. Commissioner of Service Tax/GST, Udaipur dated 21.09.2021 cited as 2022 (56) GSTL 295 (Tri.-Del.).
14. The judgements so referred clearly says that when the demand of duty has been settled under SVLDR Scheme, the imposition of penalty would fail on simple ground that if the appellants had applied under the said scheme, they would have paid ‘nil’ duty, in view of the relief available to them under Section 124(1) (b) of the Finance Act. This Tribunal in similar cir-cumstances has set aside the said penalty imposed in the case of Shri B.V. Kshatriya (su-pra). The relevant paragraph is given below:-
“3.2 Thereafter, on introduction of the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019, the main noticee, M/s. Bhikusa Papers Pvt. Ltd and other co-noticees settled the dispute under SVLDRS, but the present appellant, who is a director of the main noticee failed to opt under the Scheme. However, without considering the di-rections given in the remand order and allowing cross examination, Commissioner has imposed pen-alties on the appellant, just for reason that the appellant did not settle the issue along with others under SVLDRS. Such approach of Commissioner cannot be justified. Even if the appellant has not approached under SVLDRS, Commissioner should have adjudicated as directed by Tribunal. No justi-fication for imposition of penalty on reconsideration as per order of Tribunal is forthcoming.”
15. I find no reasons to differ with the aforesaid view of the Tribunal and, therefore, I set aside the impugned order and the penalty imposed on the appellants. Both the appeals are accordingly allowed.
[Order pronounced on 29.08.2023.]
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