2020 (12) TMI 234 - HC - Service Tax

Tax Relief as per Section 124 (1) (c) of Finance Act - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - (SVLDRS) - whether as per Section 124(2) of the Act, relief should be calculated after adjustment of tax already deposited or before adjustment of tax already deposited? - HELD THAT - The case on hand falls under Section 123(e) of the Act. It means Where an amount in arrears relating to the declarant is due, the amount in arrears . The petitioner had already paid a sum of ₹ 3,59,73,729/-. The balance amount originally payable by the petitioner was only ₹ 1,51,17,635/-. That alone can be called as the amount in arrears. The petitioner's counsel would contend that the amount already paid should be considered as a deposit and it should be deducted only after relief is calculated on the entire tax liability of ₹ 5,10,91,364/-. It is true that the provision talks of deposit or pre-deposit . That expression can only refer to those payments made by the declarant even while he is still contesting his liability. If an amount has already been deposited in respect of the duty without demur, then it cannot be called as deposit or pre-deposit. Appropriation had already taken place. In fact, the petitioner's grievance before the original authority was that without taking into account the payment of ₹ 3,59,73,729/-, the order had been passed. The original authority had in fact directed the recovery officers to take into account the said claim. Having cleared his liability in part, now for the purpose of availing the benefit under the scheme, the petitioner cannot turn around and claim that what was paid by him was only deposit and not the tax amount. Petition dismissed.

Summary

Issues:
1. Interpretation of relief calculation under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
2. Application of statutory provisions versus circular issued by the Board.
3. Determination of relief amount considering tax dues and payments made by the declarant.

Analysis:

Issue 1: Interpretation of relief calculation under the Scheme
The petitioner, a private limited company, challenged the demand of service tax under various heads amounting to ?5,10,91,364 along with penalty and interest. The dispute arose when the petitioner's rectification petition was rejected, and they were asked to pay an additional sum of ?90,70,581 under the Sabka Vishwas Scheme. The key contention was whether relief should be calculated after adjusting the tax already deposited or before such adjustment, as per Section 124(2) of the Act. The Court analyzed the relevant provisions of the Finance Act and concluded that relief calculation must be based on the tax dues specified in Section 124(1) before deducting any pre-deposit or deposit made by the declarant. The Court emphasized that statutory provisions cannot be diluted by circulars.

Issue 2: Application of statutory provisions versus circular issued by the Board
The respondents argued that the relief calculation was correctly applied based on the Board circular, which clarified the treatment of tax dues and pre-deposits. However, the Court held that the circular cannot override statutory provisions and that relief must be calculated on tax dues before deducting any payments made by the declarant. The Court highlighted the importance of adhering to the statutory framework to ensure the integrity of the Scheme.

Issue 3: Determination of relief amount considering tax dues and payments made
The Court examined the definitions of "amount in arrears" and "tax dues" under the Act to determine the relief amount for the petitioner. It was established that the petitioner had already paid a significant sum towards the tax liability, and the remaining amount payable was considered as the amount in arrears. Despite the petitioner's argument that the payment should be treated as a deposit, the Court ruled that the payment was voluntary and not made under protest. Consequently, the Designated Committee's decision to grant relief based on the balance amount payable was upheld, and the petitioner's plea for further relief was dismissed.

In conclusion, the Court dismissed the writ petition, affirming the Designated Committee's application of the Scheme provisions in calculating the relief amount for the petitioner. The judgment underscored the importance of interpreting statutory provisions accurately and upholding the integrity of the Scheme for resolving legacy tax disputes.