Karnataka High Court

The Ministry Of Finance vs M/S Brahmananda Sagar Jaggery ... on 25 November, 2023

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                                                          WA No. 100308 of 2021




                    IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH

                          DATED THIS THE 25TH DAY OF NOVEMBER, 2023

                                               PRESENT
                    THE HON'BLE MR JUSTICE SREENIVAS HARISH KUMAR
                                                  AND
                        THE HON'BLE MR JUSTICE RAMACHANDRA D. HUDDAR
                            WRIT APPEAL NO. 100308 OF 2021 (T-RES)


                   Between:


                   1.    The Ministry of Finance
                         Government of India,
                         Rep. by its Secretary Mf (Dr)
                         New Delhi-110011.

                   2.    The Central Board of Indirect Taxes and Customs
                         North Block, Central Secretariat,
                         Represented by Chairman,
                         New Delhi-110011.

JAGADISH           3.    The Commissioner of Central Excise and
                         Service Tax, C.R.Buildings,
TR
                         No.71, Club Road,
Digitally signed         Belagavi-590005.
by JAGADISH T R
Date: 2023.12.12
14:33:38 +0530     4.    The Joint Commissioner of Central Excise
                         and Services Tax, C.R.Buildings,
                         No.71, Club Road,
                         Belagavi-590005.

                                                                      ...Appellants

                   (By Sri. G.S.Hulamani., Advocate)
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                                         WA No. 100308 of 2021




And:

M/s. Brahmananda Sagar Jaggery Industries
Alagavadi, Harugeri, Raibag Taluk
Belagavi District -590001
Represented by its Partner,
Shri. Ashok J Aski,
Aged about 37 years

                                                     ...Respondent
(By Sri. Anirudha R.J.Nayak, Advocate)


       This Writ Appeal is filed under section 4 of Karnataka

High Court Act, 1961, praying to set aside the order passed by

the learned single judge in WP.No.108414/2020 (T-RES) dated

08.10.2021 and allow this writ appeal filed by the appellants

herein thereby dismissing the writ petition filed by the

petitioner/respondent herein, in the interest of justice and

equity.


       This Writ Appeal pertaining to Dharwad Bench having

been heard & reserved on 03.10.2023, and coming on for

pronouncement     through   video     conferencing     this   day,

Sreenivas Harish Kumar J.,          sitting at Principal Bench,

Bengaluru pronounced the following:
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                                            WA No. 100308 of 2021




                                JUDGMENT

This writ appeal is filed challenging the order

dated 8.10.2021 in W.P.No.108414/2020. The

appellants are respondents 1 to 4 in the writ petition.

The parties are referred with respect to their status in

the writ petition.

2. Petitioner is a partnership firm engaged in

manufacture of jaggery powder and khandasari sugar.

It is registered with Central Excise Department.

Khandasari sugar is an exempted product in terms of

notification issued under Central Excise Act and jaggery

powder was not excisable at all. The Joint

Commissioner of Central Excise, i.e., respondent no.4 in

the writ petition visited the premises of the petitioner,

intercepted four trucks containing jaggery powder and

seized four invoices on 15.09.2015. Respondent no.4

classified jaggery powder as cane sugar and based on

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the figures found in the sales register, proposed a

demand for levying customs duty on the score that

there was clandestine clearance of cane sugar. The

petitioner, even before issuance of show cause notice

deposited an amount of Rs.2.96 crore to buy peace with

the department. Respondent no.4 issued a show cause

notice to the petitioner on 25.08.2016 raising demand

for a total duty of Rs.2,96,39,738/- under various

heads. The petitioner replied to the show cause notice

on 16.02.2017 stating that jaggery powder could not be

classified as cane sugar. After affording a personal

hearing to the petitioner, the third respondent

confirmed the demand for a duty of Rs.3,00,58,913/-

and imposed a penalty of Rs.20,00,000/- in lieu of

confiscation of goods. Personal penalty of

Rs.50,00,000/- was levied on Mr. Ashok Aski, a partner

of the petitioner. The petitioner filed an appeal against

this order before the tribunal.

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3. When the appeal was pending, one more

notice was issued to the petitioner on 06.10.2017 for

the period 16.09.2015 to 30.06.2017 on identical

allegations. The petitioner made payment of

Rs.25,00,000/- before issuance of show cause notice to

him and then filed a reply to the show cause notice

which was issued to him subsequently. Respondent

no.4 confirmed the proposal in spite of reply and

imposed penalty on the firm and its partner. This order

was also challenged before the Commissioner who

rejected the appeal and then the petitioner approached

the tribunal challenging the order of the Commissioner.

4. On 21.08.2019, the Ministry of Finance of the

Government of India promulgated a scheme called "The

Sabka Vishwas (Legacy Dispute Resolution) Scheme"

('SVLDR' for short) with effect from 01.09.2019. SVLDR

provided for a relief of waiver of 50% tax if the demand

was more than Rs.50,00,000/- relating to an appeal

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pending before 30.06.2019. SVLDR stipulated that the

excess amount paid by the declarant would not be

refunded and any amount paid as pre-deposit at any

stage of the appellate proceeding or during enquiry,

investigation or audit would be deducted when the

statement indicating the amount payable by the

declarant was to be issued. The petitioner was eligible

to SVLDR and opted to avail it. The petitioner therefore

stated that in relation to its case for the period 2011 -

2015, it had made excess payment of Rs.1.45 Crore

(deducting 50% from Rs.3,00,58,913/-) and sought its

adjustment against the second demand for the period

16.09.2015 to 30.06.2017. Since this request of the

petitioner was rejected, it preferred a writ petition in

which the learned single judge quashed the order in

Form SVLDRS-3 as per Annexure 'H' dated 13.12.2019

and directed respondents 3 and 4 to adjust the excess

amount deposited by the petitioner towards the amount

demanded from it and issue a discharge certificate to

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that effect. Hence this writ appeal by respondents 1 to

4.

5. We have heard the arguments of Sri.

G.S.Hulamani, learned counsel for the appellants and

Sri. Anirudha R.J. Nayak, learned counsel for the

respondent.

6. The argument of Sri. G.S.Hulamani is that

SVLDR does not provide for adjustment of excess

deposit made by the assessee. Refund is also not

permitted. Since SVLDR was introduced for the benefit

of the assessee, he cannot claim adjustment of excess

deposit amount in respect of demand for one period

against the demand for another period. The provisions

of the fiscal laws must be strictly construed. Liberal

interpretation is not permitted. Placing reliance on the

following rulings of the Supreme Court,

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i. Union of India & Others Vs. Nitdip Textile Processors Pvt. Ltd., and others

- (2012) 1 SCC 226 ii. Bharti Telecom Ltd., Vs. The Commissioner of Customs - AIR 2002 SC 74 iii. Modern Hotel Vs. Commissioner of Excise & Others - (2016) 15 SCC 626 iv. Beenu Gupta Vs. Union of India & Others

- 2021 (46) GSTL 37 / MANU/UP/2376/2020 v. Yashi Constructions Vs. Union of India -

            2022          (58)          GSTL          144/
            MANU/SC/0369/2022
     vi.    Rajhans Enterprises Vs. The Union of
            India and Others - 2023 (72) GSTL 23 /
            MANU/MP/1366/2023

he argued that the writ court should not have allowed

the writ petition by applying the principles of equity.

Therefore it is his argument that writ appeal deserves

to be allowed and impugned order set aside.

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7. Sri. Anirudha R.J. Nayak argued that the

impugned order does not suffer from legal infirmity. He

argued that though the demands were in respect of

different periods, any excess pre-deposit made by a

declarant in respect of one period, can be adjusted in

respect of demand for another period. It is true that

SVLDR does not provide for refund of excess deposit, it

does not mean that the excess amount cannot be

adjusted in respect of demand for another period. This

is noticed by the writ court in the impugned order. In

support of his argument he referred to a circular

No.1074/07/2019-CX dated 12.12.2019 and judgment

of the co-ordinate benches of this court in the case of

Designated Committee Sabka Vishwas (Legacy

Dispute Resolution) Scheme Vs. Pierian Services

Pvt. Limited [2023 (74) GSTL 219 (Kar)] and

Hilton Hotel Management Services Pvt. Ltd., Vs.

Union of India [2023 (74) GSTL 447 (P & H)]. He

argued that there is no dispute that after extending the

benefit under SVLDR to the petitioner, it was found that

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there was excess pre-deposit to the extent of

Rs.1,45,70,543/-. The second demand was for

Rs.1,05,01,926/-. Extending benefit under SVLDR for

the second demand, the actual demand was reduced to

Rs.52,50,963/-. The petitioner had made a pre-deposit

of Rs.25,00,000/-. Therefore the petitioner sought

adjustment from the excess amount relating to the first

demand for clearing second demand. It did not claim

any refund. This adjustment is very much permitted in

view of the clarification issued by the customs

department. There is no infirmity in the impugned

order. Hence writ appeal is to be dismissed.

8. The points of arguments are considered. It is

not in dispute that the petitioner is entitled to claim

benefit provided under the Scheme. Rule 130 (1) (b) of

SVLDR Rules, 2019, does not provide for refund under

any circumstance. The two demands raised against the

petitioner is not disputed. It is also not disputed by

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respondent no.4 that the petitioner made a deposit of

Rs.3,00,58,913/- and after extending the relief under

SVLDR, the demand was reduced to Rs.1,50,29,457/-.

There remained excess amount of Rs.1,45,70,543/-.

The second demand was for Rs.1,05,01,926/-.

Petitioner's pre-deposit was Rs.25,00,000/-. The actual

demand after giving the relief under SVLDR was

reduced to Rs.52,50,963/-. The petitioner sought

adjustment of the balance from Rs.1,45,70,543/-

relating to first demand.

9. The only argument of Sri. G.S. Hulamani was

that SVLDR does not provide for adjustment. The

finding of the writ court is that SVLDR was introduced to

provide amnesty and resolution of disputes by making

mutual adjustment with regard to the disputed pre-

deposit made by the petitioner. It is further held that

merely because the assessee has to file a separate

declaration for each period, in the absence of a specific

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bar or prohibition for consolidating or clubbing two

cases and making mutual adjustment, it cannot be said

that mutual adjustment in respect of the very same

assessee in relation to same subject matter or

commodity for the two different periods is

impermissible. We do not think that there is any error

in the observation made by the writ court. In the

circular No.1074/07/2019-CX dated 12.12.2019, the

following clarification is given:

"2. (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

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facilitate the taxpayer, as well as to recognize 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".

10. In the two cases cited by the petitioner, it is

held that the declarant can claim the benefit of

adjustment. Though in the rulings cited by Sri. G.S.

Hulamani, the principle laid down is that the provisions

of taxing law should be strictly construed, it may be

stated that SVLDR does not provide for refund of the

excess deposit which the petitioner has also not

disputed. The petitioner has not claimed refund.

Merely for the reason that SVLDR does not provide for

adjustment, in view of circular issued by the

department, adjustment is permitted. It is to be noted

that declarant is always one person and the