2021 (1) TMI 1167 - HC - Service Tax

Rejection of declaration of the petitioner under the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - seeking a direction to the respondents to accept the said declaration of the petitioner as a valid declaration - HELD THAT - It is evident that petitioner in his letter dated 22nd May 2018 addressed to respondent No. 3 had specifically mentioned that the service tax amount due to be paid by the petitioner was 40, 95, 110.00. In his declaration in terms of the scheme he mentioned the duty payable as 40, 91, 524.00 which amount corresponds to the quantification arrived at by respondent No. 4 post 30th June 2019 at 40, 91, 524.00. When petitioner had admitted duty liability of a slightly higher figure much before the cut off date of 30th June 2019 it would be too technical and narrow an approach to reject the declaration of the petitioner on the ground that the said figure was arrived at by the respondents after 30th June 2019. The impugned rejection of the declaration of the petitioner is devoid of any reason. The rejection has only be explained by the respondents in the affidavits. Having regard to the principles of natural justice petitioner ought to have been given an opportunity of hearing before rejection of the declaration. Matter remanded back to respondent Nos. 3, 4 and 5 to consider the declaration of the petitioner in terms of the scheme as a valid declaration under the category of investigation inquiry and audit and thereafter grant the consequential relief - petition allowed by way of remand.

Summary

Issues Involved:
1. Quashing of order rejecting the petitioner's declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
2. Determination of eligibility under the scheme based on the quantification date of service tax dues.

Detailed Analysis:

1. Quashing of Order Rejecting Declaration:
The petitioner, a sole proprietor of a consultancy firm registered under the Finance Act, 1994, sought to quash the order dated 21st February 2020, which rejected their declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The petitioner argued that they had filed the declaration in good faith, declaring an amount of ?40,91,524.00 as service tax dues. The rejection was based on the ground that the quantification of service tax dues occurred post the cut-off date of 30th June 2019. The court noted that the rejection was devoid of any reason and was only explained through affidavits. It emphasized the principles of natural justice, stating that the petitioner should have been given an opportunity of hearing before the rejection.

2. Determination of Eligibility Based on Quantification Date:
The core issue was whether the petitioner was eligible for the scheme under the category of investigation, inquiry, or audit, given the quantification of service tax dues occurred post the cut-off date. The court referred to previous judgments and circulars clarifying the definition of "quantified." In Thought Blurb Vs. Union of India, it was held that written communication indicating duty demand or liability admitted by the person during inquiry, investigation, or audit before the cut-off date qualifies as quantification. Similarly, in M/s. G.R. Palle Electricals Vs. Union of India and Saksham Facility Private Limited Vs. Union of India, the court reiterated that acknowledgment of duty liability before the cut-off date, even if not crystallized through adjudication, suffices for eligibility under the scheme.

In the present case, the petitioner had acknowledged a service tax liability of ?40,95,110.00 in a letter dated 22nd May 2018, which was before the cut-off date. The court found it too technical and narrow to reject the declaration based on the quantification date by the respondents post the cut-off date, especially when the petitioner had admitted a slightly higher liability earlier. The court emphasized that such an approach would defeat the scheme's objective of resolving past disputes to allow trade and industry to move forward.

Conclusion:
The court set aside the order dated 21st February 2020 and remanded the matter back to the respondents to consider the petitioner's declaration as valid under the scheme. The respondents were directed to provide an opportunity of hearing to the petitioner and pass a speaking order within six weeks. The writ petition was allowed, with no order as to cost.