CESTAT Rules, Confiscation Order Unsustainable Once Duty Dispute Settled Under SVLDRS
Pranav B Prem
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi has held that confiscation of goods and the imposition of redemption fine cannot survive once the underlying duty dispute for the same investigation and period has been conclusively settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS). The Tribunal emphasised that once a discharge certificate is issued, the department cannot revive any connected liability for that period.
A bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) was hearing two connected appeals filed by Flora Steels Pvt. Ltd. and its Director challenging the order dated 28 March 2024 of the Commissioner (Appeals), which upheld the duty demand, penalties and confiscation of seized goods with an option to redeem them on payment of fine.
The case arose from two show cause notices. The first notice dated 7 November 2014 proposed confiscation of goods under Rule 25 of the Central Excise Rules, 2002, and penalties on the company and its Director under Rule 26. The second notice dated 18 September 2017 demanded central excise duty along with interest and penalties under Section 11A of the Central Excise Act, 1944. Both notices were adjudicated through a common order dated 16 May 2023 by the Additional Commissioner.
During the adjudication of the second show cause notice, Flora Steels opted for the SVLDRS Scheme by filing Form SVLDRS-1 and was issued a discharge certificate (Form SVLDRS-4) on 3 March 2020 for full settlement of dues relating to 1 April 2013 to 31 December 2016. Despite this, the adjudicating authority confirmed the duty demand and penalties under the second notice, which the Commissioner (Appeals) later upheld. However, by order dated 8 May 2025, CESTAT had already set aside the duty confirmation and related penalties linked to the second notice, noting that issuance of the discharge certificate rendered the demand unsustainable. With the demand dispute fully resolved, the sole issue before the Tribunal in the present appeals was whether confiscation arising from the first notice could continue independently.
The Tribunal examined whether confiscation and redemption fine were severable from the duty dispute when both stemmed from the same investigation and period. It referred to Section 129 of the SVLDRS Act, which makes the discharge certificate conclusive as to the matter and time period covered, preventing further liability for duty, interest or penalty. It also took note of judicial precedents where High Courts have held that confiscation and redemption fine are inseparable consequences of non-payment of duty and cannot survive once duty is settled under SVLDRS. These included the decisions of the Delhi High Court in JV Industries, the Allahabad High Court in Jay Shree Industries, and the Bombay High Court in Esbee Electrotech LLP, all holding that redemption fine is “in the nature of a penalty in rem” and stands automatically waived once SVLDRS relief is availed.
Noting that the previous Tribunal order dated 8 May 2025 had already quashed the duty demand and penalties arising from the second show cause notice, the Bench concluded that the confiscation and redemption fine under the first notice could not be legally sustained because the proceedings flowed from the same investigation and period. It held that once the discharge certificate was issued, the matter stood closed and no related consequences could be revived or continued in any form.
Consequently, the Tribunal set aside the Commissioner (Appeals)' order dated 28 March 2024 insofar as it related to the first show cause notice dated 7 November 2014. Both appeals filed by the company and its Director were allowed.
Appearance
Counsel For Appellant: Vipin Jain, Ms. Tuhina and Shri Rishabh Chandak, Advocates
Counsel For Respondent: S.K. Ray, Authorized Representative
Cause Title: M/s. Flora Steels Pvt. Ltd. Versus Commissioner of CGST & Central Excise
Case No: Excise Appeal No. 52374 Of 2024
Coram: Justice Dilip Gupta (President) , P.V. Subba Rao (Technical Member)
