Morde Foods Pvt. Ltd. & another Vs Union of India & Others (Bombay High Court)
The question is that if the declarant had filed an appeal before the appellate forum and such appeal was finally heard on or before 30th day of June, 2019; whether the declarant would be eligible to make a declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019? The answer given is that while the declarant would not be eligible under the litigation category but once the order in appeal is passed (which presumably is post 30.06.2019), the declarant can file a declaration under the arrears category provided the appeal has attained finality or further appeal period is over or that the declarant gives an undertaking that he would not file any further appeal. This would go to show that final hearing of the appeal on or before 30th day of June, 2019 is not the only decisive factor in determining eligibility. According to the Board, post 30.06.2019, the declarant can still make a declaration under the arrears category once the order in appeal is passed whereby the matter has attained finality or the declarant gives an undertaking that he would not file any further appeal or the period for filing further appeal is over. While question No.5 and the answer given thereto throw some light that post 30.06.2019 developments can be taken into consideration while determining eligibility, it still does not deal with a situation as in the present case where the appellate forum sets aside the order-in-original and remands the matter back to the adjudicating authority for a fresh decision.
Thus, in the light of the discussions made above, we are of the view that decision of the designated committee i.e., respondent No.2 dated 13.01.2020 rejecting the declaration of petitioner No.1 under the litigation category on the ground of ineligibility was not correct and is liable to be interfered with. Since we have arrived at this finding, it would not be necessary for us to proceed to the subsequent declaration under the arrears category and its rejection by respondent No.2 on 30.01.2020.
The question posed is what would be the position when adjudication order was passed and received prior to 30.06.2019 but appeal is filed on or after 01.07.2019. Answer given by the Board is that in such a case, the declarant would not be eligible under the litigation category. However, if the declarant withdraws the appeal and gives an undertaking not to file further appeal, he can make a declaration under the arrears category. Here also, post 30.06.2019 development is a relevant factor which can be taken into consideration to determine eligibility.
The situation which arises in the present case is not covered by the eligibility exclusions under sub-section (1) of section 125 or under any of the provisions of the scheme. This is so because though the appeal of petitioner No.1 was heard by CESTAT on 10.05.2019 (which was certainly prior to 30.06.2019), it was finally disposed of subsequently on 08.11.2019. While disposing of the appeal, CESTAT set aside the order in original dated 16.06.2015 and remanded the matter back to the adjudicating authority for de novo decision on the show cause notice dated 24.12.2014 firstly by confining to the point of limitation. Therefore, though the appeal was heard on 10.05.2019, by the subsequent order of CESTAT dated 08.11.2019 the said hearing held on 10.05.2019 was rendered redundant reverting the petitioner back to the stage of show cause notice at the stage of adjudication. This was the position when petitioner No.1 filed its declaration under the litigation category and which facts were available on record when the designated committee decided the said declaration on 13.01.2020. If petitioner No.1 was at the stage of show cause notice with no fresh adjudication order then certainly it would be eligible to file declaration under the litigation category.
Accordingly, we set aside the decision of respondent No.2 dated 13.01.2020 and remand the matter back to respondent No.2 to take a fresh decision in accordance with law after giving due opportunity of hearing to the petitioners by treating its declaration dated 12.12.2019 under the litigation category as a valid declaration. The date, time and place of hearing shall be intimated to the petitioners by respondent No.2 who shall pass a speaking order within a period of six weeks from the date of receipt of a copy of this judgment and order.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Heard Mr. Rohan Shah, learned senior counsel for the petitioners; Mr. Niranjan Shimpi, learned counsel for respondent No.1; and Mr. Vijay Kantharia, learned counsel for respondent Nos.2 and 3.
2. By filing this petition under Article 226 of the Constitution of India, petitioners seek quashing of rejection of its application under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (briefly ‘the scheme’ hereinafter) by respondent No.2 on 13.01.2020 and further seek a direction to the respondents to accept its application in terms of the said scheme under the category of “litigation”. Alternative prayer made is for a direction to the respondents to accept the subsequent application of the petitioner in terms of the said scheme under the category of “arrears” after quashing its rejection on 30.01.2020.
3. Case of the petitioners is that petitioner No.1 is a private limited company incorporated under the Companies Act, 1956 having its registered office at Byculla (East), Mumbai. Petitioner No.2 is the director of petitioner No.1. Petitioner No.1 (also referred to as the ‘petitioner company’) is engaged in the manufacturing of cocoa products, chocolates and sugar confectionery.
4. Petitioners have stated that goods manufactured by petitioner No.1 are primarily in the nature of industrial inputs which are utilized by buyers who are manufacturers, hotels, ice-cream parlours and confectioners for their output products. These in turn are supplied by the buyers to their customers. Thus, supplies made by petitioner No.1 are in bulk quantity to be sold either directly to industrial / institutional consumers or to distributors or dealers who in turn sell these goods to retail consumers. It is contended that such packages supplied by petitioner No.1 cannot be said to be retail packages. Since the goods manufactured by petitioner No.1 were supplied to industrial / institutional consumers for their captive use, petitioners have been discharging excise duty on the transactional value on removal of the said goods as per the provisions of section 4 of the Central Excise Act, 1944. The products were not intended for retail sale to end customers but were for sale to industrial / institutional consumers, such as, hotels, bakers etc. Petitioners however launched retail segment with effect from 12.09.2013 and in compliance to the provisions of the Legal Metrology Act, 2009 and the rules framed thereunder, the said products were duly marked with a MRP and appropriate duty as per section 4A of the Central Excise Act, 1944 was paid by petitioner No.1.
5. In May, 2014, an investigation was initiated against the petitioners by the Directorate General of Central Excise Intelligence in relation to goods supplied to industrial / institutional consumers through distributors alleging that the goods supplied through distributors were not covered under the exemption provided in rule 3 of the Legal Metrology (Packaged Commodity) Rules, 2011 and hence central excise duty was payable under section 4A of the Central Excise Act, 1944 (for short ‘Act’) on MRP basis. While the investigation was on, petitioners paid a sum of Rs.1,65,00,000.00 under protest in order to ensure uninterrupted clearance of goods.
6. Pursuant to the above investigation, a show cause notice dated 24.12.2014 was issued to petitioner No.1 for recovering the differential excise duty payable by petitioner No.1 along with interest and penalty. Responding to the show cause notice, petitioners submitted a detailed reply before the adjudicating authority i.e., Principal Commissioner of Central Excise, Pune-II. In this connection, a hearing was given to the petitioners.
7. However, the adjudicating authority passed order-in-original dated 16.06.2015 confirming the demand of differential central excise duty amounting to Rs.4,06,47,261.00 along with interest and penalty in respect of goods cleared during the period from 01.12.2009 to 31.08.2014 besides directing recovery of applicable interest and penalty as per the provisions of the Act.
8. Being aggrieved by the order-in-original dated 16.06.2015, petitioner filed appeal before the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Mumbai (‘CESTAT’ for short) which was registered as Excise Appeal No.86805 of 2015. The appeal was heard by the CESTAT on 10.05.2019. By the order dated 08.11.2019, CESTAT set aside the order dated 16.06.2015 and remanded the matter back to the original authority for a fresh decision after granting an opportunity to the petitioners to be heard on all the submissions made before the CESTAT.
9. In the meanwhile, petitioners submitted declaration as per section 125 of the Finance (No.2) Act, 2019 through which the scheme was introduced. The declaration (also referred to as the ‘application’) was made in the prescribed form on 12.12.2019 under the ‘litigation’ category i.e., show cause notice pending as on 30.06.2019. According to the petitioner, under section 124 of the Finance (No.2) Act, 2019 in case of tax dues being more than fifty lakhs relatable to show cause notice pending as on 30.06.2019 under ‘litigation’ category, the relief amount would be fifty percent of the tax dues. Accordingly, the amount payable in terms of the declaration was assessed at Rs.38,23,630.50. Petitioners have furnished a statement mentioning the duty amount, pre-deposit made and tax dues less tax relief in the following manner:-
