2020 (12) TMI 32 - HC - Service Tax

SVLDRS - Rejection of application under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - amount in arrears - allegation that petitioner No. 1 stood ineligible to file declaration under the arrears category - Stand taken by the respondents to justify rejection ofthe declaration of petitioner No.1 is that under section 125(1) (c) the final hearing in the case of petitioner No.1 who had been issued a show cause notice had taken place on 9th May, 2019 i.e. before 30th June, 2019. Therefore, petitioner No.1 was not eligible to make the declaration. HELD THAT - It is true that petitioner No.1 had filed the declaration under arrears category with sub-categorization of appeal not filed or appeal having attained finality - When we talk about arrears or arrears category under the scheme, section 123 (e) has to be read together with section 121(c)(i). A conjoint reading of the two provisions would indicate that tax dues would mean the amount in arrears which in a given case like that of petitioner No.1 would be on account of no appeal having been filed by the declarant against an order or against an order in appeal before expiry of the period for filing appeal. In the present case, pursuant to the show cause notice though the final hearing had taken place on 9th May, 2019 before the cut off date of 30th June, 2019, the order in original was subsequently passed on 9th August, 2019. Against this order in original no appeal was filed by petitioner No.1 who filed the declaration under the arrears category on 8th January, 2020 by which time the limitation period for filing appeal against the order in original had expired. The Board clarified in circular dated 12th December, 2019 that since the main objective behind the scheme is to liquidate the legacy cases under central excise and service tax, it would be desirable that the tax payer is given an opportunity to avail its benefit - As per the answer given above by the department itself, in a case where show cause notice was issued and final hearing had taken place on or before 30th June, 2019, the declarant would not be eligible to make a declaration under the litigation category but once the order is passed the declarant can file a declaration under the arrears category provided no appeal against the order is filed or the appeal period is over. Thus, rejection of the declaration of the petitioner dated 8th January, 2020 by the Designated Committee on 14th February, 2020 is not justified. Accordingly the same is hereby set aside and quashed - petitioner No.1 is eligible to file declaration under the arrears category - the matter is remanded back to the Designated Committee to consider the declaration of petitioner No.1 dated 8th January, 2020 as a valid declaration and thereafter grant consequential relief in terms of the scheme after giving an opportunity of hearing to the petitioners. Petition allowed by way of remand.

Summary

Issues Involved:
1. Eligibility of the petitioner to file a declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
2. Compliance with principles of natural justice in the rejection of the petitioner's declaration.
3. Interpretation and application of relevant sections of the Finance (No.2) Act, 2019 and related circulars.

Detailed Analysis:

1. Eligibility of the Petitioner to File a Declaration under the Scheme:
The petitioner sought to quash the rejection of their application under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, and requested the court to direct the respondents to consider the application as valid. The petitioner, an unregistered partnership firm, was issued a show cause cum demand notice on 5th April, 2019, for non-payment of service tax dues amounting to ?19,21,465.00 for the period from 2013-14 to 2017-18. The adjudicating authority confirmed the demand on 9th August, 2019. The petitioner filed a declaration under the scheme on 8th January, 2020, which was rejected on 14th February, 2020, on the grounds that the final hearing had taken place on 9th May, 2019, before the cut-off date of 30th June, 2019, making them ineligible under section 125(1)(c) of the Finance (No.2) Act, 2019.

2. Compliance with Principles of Natural Justice:
The court noted that the rejection order was devoid of any reason and was not preceded by any notice or hearing, violating the principles of natural justice. The court referred to a previous judgment in Thought Blurb Vs. Union of India, emphasizing that summary rejection without affording an opportunity of hearing to the declarant would be in violation of natural justice principles. The court highlighted that the scheme aims to liquidate legacy disputes and should be interpreted liberally to ensure its success.

3. Interpretation and Application of Relevant Sections of the Finance (No.2) Act, 2019 and Related Circulars:
The court analyzed various sections of the Finance (No.2) Act, 2019, including sections 121(c), 123(e), 124(1)(c), and 125(1)(c). It concluded that the petitioner’s case fell under the arrears category as defined under section 123(e) and section 121(c)(i), which includes cases where no appeal has been filed against an order before the expiry of the appeal period. The court referred to circulars dated 25th September, 2019, and 12th December, 2019, and FAQs prepared by the department, which clarified that cases like the petitioner’s could still fall under the arrears category once the adjudication order is passed and the appeal period is over.

The court concluded that the rejection of the petitioner’s declaration was not justified and set aside the rejection order. The matter was remanded back to the Designated Committee to consider the petitioner’s declaration as valid and grant consequential relief after giving an opportunity of hearing to the petitioners.

Conclusion:
The court allowed the writ petition, set aside the rejection order, and remanded the matter back to the Designated Committee for reconsideration. The decision emphasized the importance of adhering to principles of natural justice and interpreting the scheme liberally to achieve its objective of liquidating legacy disputes.