2021 (2) TMI 801 - HC - Service Tax

Benefit of SVLDRS - Credit of amount deposited prior to SCN towards Interest - Levy of Service Tax - Supply of Tangible Goods Services - petitioner had not obtained a registration - period April 2008 to March 2013 - extended period of limitation - HELD THAT - Sub-Section (2) to Section 124 states that the relief computed under Sub- Section (1) shall be subject to the condition that any amount paid as pre-deposit at any stage of appellate proceedings under an indirect tax enactment or as deposit during enquiry, investigation or audit, shall be deducted when issuing the final settlement. In the present case, the petitioner has, admittedly, remitted amounts of ₹ 66.05 and ₹ 16.58 lakhs as deposits even prior to the issuance of show cause notice. However, the petitioner has specifically demarcated the amount of ₹ 66.05 lakhs as towards tax and ₹ 16.58 lakhs as towards interest. Thus the respondent, while accepting the eligibility of the petitioner to the benefit of the Scheme, has proceeded to ignore the amount of ₹ 16.58 lakhs, since the amount has been credited under the accounting head relevant for interest payments. Interestingly, had the declaration filed by the petitioner been accepted, there would have been a total waiver of interest liability, as per the Scheme. Thus if only petitioner had remitted the entire amount of ₹ 82,63,340/- (₹ 66.05 plus ₹ 16.58 lakhs) towards tax, the respondent would have simply given credit to the entire amount, waiving interest liability in full. It is the apportionment that has given rise to the present situation and the petitioner must not be made to suffer on account of this, irrelevant fact - Learned counsel for the petitioner points out that the amount pending payment under the declaration is liable to be paid within 30 days of receipt of the declaration. Since the petitioner has enjoyed an order of interim stay during the pendency of this writ petition, the period of 30 days for effecting payment will start today. Petition allowed.

Summary

Issues:
Assessment under Service Tax for Ship Management Service - Dispute regarding availing Sabka Vishwas Scheme - Interpretation of Section 124(2) for relief calculation - Accounting methodology dispute - Object of the Scheme.

Analysis:
The petitioner, an assessee for Service Tax under 'Ship Management Service,' faced an assessment issue as the Service Tax Commissionerate proposed taxing receipts from ship chartering under 'Supply of Tangible Goods Services' due to lack of registration. The petitioner deposited sums towards tax liability and interest, leading to an order-in-original confirming the proposals, now under appeal at CESTAT. The Sabka Vishwas Scheme, 2018, aimed at dispute resolution, was availed by the petitioner, with a dispute arising on the credit of the interest amount deposited under the Scheme.

The crux of the dispute lies in the interpretation of Section 124(2) for relief calculation under the Scheme. The respondent contended that only the tax amount should be credited, not the interest, based on accounting categorization. However, the petitioner argued for including the interest amount as per Section 125(2) and challenged the rejection of their computation under the Scheme.

The judgment favored the petitioner, citing Section 124(2) to support including the interest deposit in relief calculation. It emphasized that the accounting methodology should not impede substantive relief available to the assessee, referencing judicial precedents. The court highlighted the Scheme's objective of dispute settlement, urging an interpretation aligning with the scheme's purpose to avoid further litigation.

Notably, the court pointed out that had the petitioner remitted the entire amount towards tax, including interest, the interest liability would have been waived entirely under the Scheme. The judgment emphasized that the petitioner should not suffer due to the apportionment of the deposited amounts, emphasizing the need to consider the overall objective of the Scheme.

In conclusion, the court allowed the Writ Petition, directing payment within 30 days of the declaration receipt, considering interim stay granted during the proceedings. The decision favored the petitioner, resolving the dispute and closing the connected Miscellaneous Petitions without costs.