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2020 (8) TMI 788 - HC - Service TaxBenefit of Amnesty Scheme - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - CENVAT Credit on input services - Revenue contended that since the returns were not filed within the prescribed time and since the entitlement to avail of the input credit had lapsed, the petitioner could not be permitted to take advantage of the Cenvat credit - whether the petitioner could contend that he was entitled to take advantage of Cenvat credit on input services amounting to ₹ 4,15,14,081/- and consider the same as a pre-deposit under the scheme? - Circular dated 27.08.2019. HELD THAT - The Circular dated 27.08.2019 issued by the Department categorically states that one of the objectives of the Scheme was to give an opportunity to those who had failed to correctly pay the tax. The Circular states that to this extent the Scheme comprised of an Amnesty component. The Circular also clarified a few issues raised after the Scheme was notified - a reading of the said clause would clearly indicate that in certain matters when tax had been paid by utilizing the input credit and the matter was under dispute, the tax already paid through input credit should be adjusted by the Designated Committee at the time of determination of the final amount payable under the Scheme. Therefore, even if there was a dispute regarding the tax paid through input credit, the Circular mandated that the Designated Committee should adjust the tax already paid through input credit. It, therefore, follows that the Designated Committee cannot embark upon an exercise of adjudication and state that it was not permissible for the declarant to claim that he had paid the tax through input credit. It was not in dispute that the petitioner was entitled to avail of the input credit. However, the only contention of the Revenue was that the petitioner became disentitled to avail of the input credit because the requisite forms were not filed within the prescribed period and his right to claim input credit had lapsed. From a reading of the clarification issued in the Circular, it is clear that the tax paid by utilizing the input credit which was under dispute had to be taken into consideration by the Designated Committee while issuing Form No.SVLDRS-3. The Designated Committee, in fact, while issuing Form No.SVLDRS-2, has created a Remarks column which is not actually provided for in the prescribed statutory form. This, by itself, indicates that the Designated Committee wanted to express as to why it was disallowing the claim made by the declarant. The Designated Committee, under the Scheme, can only verify the correctness of the figures furnished by the declarant and it cannot decide whether the entitlement of a declarant was justified or not - The Revenue had issued a SCN stating that the petitioner was not entitled for availing of the input credit and in response the petitioner was contending that this view of the Revenue was incorrect and he was entitled to the input credit. Therefore, a dispute regarding entitlement was raised and was pending when the Scheme had been enacted. In fact, in order to ensure that the Designated Committee does not dispute the tax through input credit, a specific clarification was issued in the Circular. This clarification was obviously to alleviate any doubts regarding the tax paid through input credit. If a declarant, on the basis of the clarification, chose to take advantage of the scheme and availed of the scheme, he cannot be deprived of this benefit conferred by the scheme, by the Designated Committee by taking a decision that the petitioner was not entitled to input credit. It is, therefore, clear that the action of the Designated Committee in coming to the conclusion that the petitioner was disentitled to tax paid through input credit by inserting a remarks column in Form Nos.SVLDRS-2 and 3, was one which was totally without jurisdiction. Form No.SVLDRS-1 filed by the petitioner as per Annexure-F would have to be accepted as final. The Designated Committee is directed to accept the declaration filed by the petitioner in Form No.SVLDRS-1 (Annexure-F) as final and issue a modified Form No SVLDRS- 3 giving credit to the sum of ₹ 4,15,14,081/- as deposit and collect the remaining sum as tax dues and on payment of the said dues, issue the petitioner a Discharge Certificate that the petitioner is entitled to under the Scheme - Petition allowed.
Issues Involved:
1. Jurisdiction of the Designated Committee under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. 2. Adjustment of Cenvat credit as pre-deposit under the Scheme. 3. Validity of the Designated Committee's decision to disallow Cenvat credit. Issue-wise Detailed Analysis: 1. Jurisdiction of the Designated Committee under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019: The petitioner, an advertising agency, received a Show Cause Notice (SCN) from the Directorate General of GST Intelligence demanding service tax and disallowing Cenvat credit. The petitioner applied under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, which aimed at resolving legacy tax disputes and granting amnesty by allowing assessees to settle disputes by paying a portion of the tax dues. The petitioner declared a tax liability and claimed Cenvat credit, which the Designated Committee disallowed, leading to the petitioner seeking judicial intervention. The court emphasized that the Designated Committee's role under the Scheme was to "verify the correctness of the declaration" and not to adjudicate contentious issues. The term "verify the correctness" was interpreted to mean examining the accuracy of the declaration based on available records, not determining entitlement or adjudicating disputes. The Designated Committee was meant to ensure the tax liability admitted by the declarant was accurate and issue a statement for payment, without engaging in adjudication. 2. Adjustment of Cenvat credit as pre-deposit under the Scheme: The petitioner argued that the Designated Committee wrongly disallowed Cenvat credit of ?4,15,14,081/- while issuing Form No. SVLDRS-2 and Form No. SVLDRS-3. The court noted that the Scheme and the Circular dated 27.08.2019 clarified that tax paid through input credit should be adjusted by the Designated Committee when determining the final amount payable. The Circular explicitly stated that in cases where tax was paid using input credit and was under dispute, the Designated Committee should adjust the tax paid through input credit. The court held that the Designated Committee had no jurisdiction to disallow the Cenvat credit claimed by the petitioner, as it was bound to adjust the tax paid through input credit according to the Scheme's provisions and the Circular. 3. Validity of the Designated Committee's decision to disallow Cenvat credit: The Designated Committee disallowed the Cenvat credit by inserting remarks in Form No. SVLDRS-2 and Form No. SVLDRS-3, stating that the petitioner was not entitled to the credit due to non-compliance with Cenvat Credit Rules. The court found this action beyond the Committee's jurisdiction, as it amounted to adjudication rather than verification of the declaration's correctness. The court quashed the remarks in Form No. SVLDRS-2 and Form No. SVLDRS-3, directing the Designated Committee to accept the petitioner's declaration in Form No. SVLDRS-1 as final. The Committee was instructed to issue a modified Form No. SVLDRS-3, giving credit to the Cenvat amount and collecting the remaining tax dues, subsequently issuing a Discharge Certificate to the petitioner. Conclusion: The court allowed the writ petition, holding that the Designated Committee exceeded its jurisdiction by disallowing the Cenvat credit, which should have been adjusted as per the Scheme and the Circular. The Committee was directed to accept the petitioner's declaration and issue the necessary documents, ensuring the petitioner received the benefits under the Scheme.
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