Point of Law: Having regard to the objective of the scheme, in a case of this nature, a reasonable and pragmatic approach has to be adopted so that a declarant can avail the benefits of the scheme; a declarant who seeks benefit under the scheme cannot be put in a worse off condition than he was before making declaration under the scheme. That would defeat the very purpose of the scheme.”

JUDGMENT :

Ujjal Bhuyan, J.

1. 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 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 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