2021 (12) TMI 1486 - HC - Indian Laws

Permitting the request of grant of installments of the liability arisen in SVLDRS-3 - Issuance of show cause notice without pre-consultation notice - whether the show cause notices dated 24.09.2020 and 23.09.2021 would require any indulgence? - HELD THAT - It is quite apparent from the chronology of the events that the petitioner was subjected to the search and afterwards when the respondent has come out with the SVLDR Scheme in the year 2019, the last date of payment of dues by the declarant under sub-section (5) of Section 127 was eventually fixed at 28.02.2021. When the Court noticed that the outstanding dues from the various government authorities is of more than Rs. 1.22 crores (rounded off) in a period like this, when the request is made for making payment, if in the past the petitioner could not make the same on account of the outstanding dues of the government authorities, which he could not recover due to pandemic, his request could have been considered sympathetically and bearing in mind all these surrounding circumstances. In absence of such consideration on the part of the respondent, the Court needs to intervene. Issuance of show cause notice without pre-consultation notice - HELD THAT - The CBEC Master Circular dated 10.03.2017 provides for the preconsultation as a mandatory requirement as can be traced to Section 83 of the Finance Act. The instructions issued by the CBEC as per Section 37(B) of the Central Excise Act would be binding on the authorities of the department. The statutory circulars would be binding upon the department so long as they are not inconsistent with statutory provisions nor mitigate the rigor of the law - In the instant case also, there is no adherence to the said circular by adapting the pre-consultation as contemplated under the circular. This itself is the reason for the Court to quash and set aside the show cause notices. Thus, not only on the ground of absence of pre-consultation before issuance of the show cause notice but also from the discussion held hereinabove in respect of need for the intervention on nongrant of any installment for making payment, the Court is inclined to allow this petition. The petitioner is permitted to make payment under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 within a period of six (6) weeks from the date of receipt of copy of this order with statutory interest at the rate prescribed thereon from the first date of his application which he has not abided by - petition allowed.

Summary

Issues Involved:
1. Grant of installments for payment under the SVLDR Scheme.
2. Validity of show cause notices dated 24.09.2020 and 23.09.2021 without pre-consultation.

Detailed Analysis:

1. Grant of Installments for Payment under the SVLDR Scheme:
The petitioner, a private company registered under the Companies Act and providing various services including Architectural Drawing Service, faced a search by the Service Tax Department on 26.04.2018, leading to an assessment of short-paid service tax amounting to Rs. 1,53,11,355/-. The petitioner paid partial amounts of INR 20,41,602/- and INR 11,10,675/-.

In 2019, the Central Government introduced the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme) to settle legacy disputes by paying a specified percentage of tax dues. The petitioner expressed its intent to opt for the SVLDR Scheme and filed a declaration on 24.11.2019, admitting unpaid service tax liability of Rs. 1,29,36,305/- and required to pay INR 53,57,477.50/- after deductions.

Due to financial hardships exacerbated by the COVID-19 pandemic, the petitioner was unable to make the payment within the stipulated time and requested an extension and installment payments. The Joint Commissioner of SVLDRS Committee issued Form SVLDRS-3 on 22.01.2020, but the petitioner failed to make the payment by the extended deadline of 30.06.2020. The petitioner continued to request further extensions citing financial difficulties and outstanding dues from various government entities amounting to over Rs. 1.22 crores.

The court recognized the unprecedented circumstances due to the COVID-19 pandemic and the Supreme Court's suo motu extension of limitation periods. The court noted that the SVLDR Scheme aimed to resolve disputes and promote voluntary compliance. Given the petitioner's genuine financial hardships and the statutory extensions provided by the Supreme Court, the court found it appropriate to allow the petitioner to make the payment under the SVLDR Scheme within six weeks from the date of the order, with statutory interest.

2. Validity of Show Cause Notices Without Pre-Consultation:
The petitioner challenged the show cause notices dated 24.09.2020 and 23.09.2021 issued by the respondents, arguing that they were issued without the mandatory pre-consultation required by the CBEC Master Circular No. 1053/02/2017-CX dated 10.03.2017. The circular mandates pre-show cause notice consultation for demands above Rs. 50 lakhs to facilitate trade and promote voluntary compliance.

The respondents contended that pre-consultation was not necessary for preventive reasons and that the petitioner's financial difficulties were not credible. However, the court emphasized the binding nature of the CBEC circulars and the statutory requirement for pre-consultation.

The court referred to previous judgments, including the case of Dharamshil Agencies vs. Union of India, where non-compliance with the pre-consultation requirement rendered the show cause notice null and void. The court found that the respondents failed to adhere to the mandatory pre-consultation process and quashed the show cause notices.

Conclusion:
The court allowed the petition, permitting the petitioner to make the payment under the SVLDR Scheme within six weeks with statutory interest. The show cause notices dated 24.09.2020 and 23.09.2021 were quashed due to the absence of mandatory pre-consultation. The court clarified that this decision did not preclude the respondents from issuing future show cause notices if the petitioner defaults or fails on merits under the SVLDR Scheme.