2020 (12) TMI 194 - HC - Service Tax

Benefit of SVLDRS scheme - due date of quantification of liability - Demand of Differential Service Tax - allegation against petitioners is that petitioner had shown lesser taxable value in the service tax returns to evade tax liability - Whether the quantification of the petitioners liability as communicated vide letter dated 27.12.2019 should be deemed to be quantification relating back to the earlier quantification dated 20.05.2019 or not? HELD THAT - In the present case, the admitted position is that the original quantification made on 20.05.2019 was incorrect. A huge demand of more than ₹ 82 crores came to be raised towards the service tax and at that stage there was no Scheme in existence. The Scheme came into existence only w.e.f. 01.09.2019 and its benefit was available till 30.12.2019 for the assessees to apply. During this period from September to December, 2019, the petitioners noticed the mistake committed by the Department and accordingly represented vide letter dated 23.11.2019. The Department realized its mistake and ultimately corrected the demand raised from ₹ 82,26,42,852/- and reduced it to ₹ 4,99,03,524/-. 10 The petitioners may not have been in a position to deposit ₹ 41 crore and odd (being 50% of the initial demand) to avail the benefit of the Scheme, but having received the communication of an amount which was almost 6% of the earlier demand raised, thought it proper and in their interest to apply under the Scheme. The petitioners applied within the time on 31.12.2019. The amount had been wrongly quantified for no fault of the petitioners. It was an apparent mistake made by the Department. The Department thus ought not to have rejected the application of the petitioners by alleging that the quantification had been made after the cut off date. The quantification had been made much prior to the cut off date on 20.05.2019 and according to the Department that was the final quantification and not provisional quantification, but definitely it was an erroneous quantification. The Department realized its mistake, but much later and accordingly corrected it, therefore, in all fairness the Department ought to have treated the quantification made on 27.12.2019 to be substituting the figure communicated vide communication dated 20.05.2019. If this had been done, apparently the application of the petitioners under the Scheme would be entertained and the petitioners would be entitled to claim its benefit. The quantification communicated on 27.12.2019 to be a quantification substituting the figures in the communication dated 20.05.2019 thus the quantification being prior to 30.06.2019. The reason for rejecting / not entertaining the application of the petitioners under the Scheme deserves to be set aside - petition allowed.

Summary

Issues:
Quantification of service tax liability under SVLDRS-2019 scheme.

Analysis:
The case involved a dispute regarding the quantification of service tax liability under the SVLDRS-2019 scheme. The petitioners were initially directed to pay a substantial amount as service tax demand based on a quantification dated 20.05.2019. However, upon realizing an error in the quantification, the petitioners requested a recalculation, leading to a revised quantified amount communicated on 27.12.2019, which was significantly lower. The petitioners applied under the SVLDRS-2019 scheme on 31.12.2019, but their application was rejected on the grounds that the liability was not quantified before the cut-off date of 30.06.2019.

The main issue before the court was whether the revised quantification dated 27.12.2019 should be deemed to relate back to the original quantification of 20.05.2019 for the purpose of eligibility under the SVLDRS-2019 scheme. The court noted that the original quantification was incorrect, and the scheme came into existence after the erroneous quantification. The petitioners, upon discovering the mistake, promptly represented their case and the Department corrected the quantified amount. The court emphasized that the error was on the Department's part and not the petitioners'.

The court held that the revised quantification should be considered as relating back to the original quantification, making the petitioners eligible under the scheme. It was deemed unfair to reject the petitioners' application based on a mistake made by the Department, especially when the error was rectified promptly. Consequently, the court set aside the rejection of the petitioners' application, directing it to be processed within the stipulated time frame. The court's decision aimed to ensure fairness and uphold the principles of justice in the matter of quantifying the service tax liability under the SVLDRS-2019 scheme.