2021 (3) TMI 171 - HC - Service Tax

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - declaration rejected on the sole ground that department has already initiated enquiry prior to the date of filing declaration - Amnesty Scheme - HELD THAT - Without going into question of receipt or non-receipt of notice, before or after filing of first/second declaration, we find that present petitions deserve to be allowed on the ground that notices/summons initiating enquiry/investigation were issued after 1.9.2019 i.e. date of commencement of the scheme. No cut-off date for different persons like convicted for any offence under the Indirect Tax, arrears, voluntary disclosure etc. has been prescribed. The scheme as per notification No. 5/2019-C.E. (N.T.) dated 21.8.2019 came into force w.e.f. 01.09.2019 and declaration could be filed till 31.12.2019. It means for most of the persons, 30th June 2019 was considered as relevant date and for the category of arrears there was no restriction, however as per respondent voluntary disclosure was not permitted even though enquiry has been initiated after 1.9.2019. Section 125 of FA, 2019 debars few persons from filing declaration but does not prescribe any date though for some categories like pending show cause notice, pending appeal etc. 30.6.2019 has been notified as cut-off date - The scheme came into force w.e.f. 1.9.2019, thus on the said date right/liabilities, eligibility and non-eligibility stood freezed. If as contended by respondent is upheld, there would be different dates of eligibility for every person who files declaration under the category of voluntary disclosure . Thus, contention of respondent being untenable does not appeal to us. Amnesty Scheme is a piece of beneficial legislation and liberal interpretation which makes the scheme successful should be advanced. Strict interpretation which frustrates intent and purport of beneficial legislation deserves to be avoided - Section 125(1)(f) debars a person from making voluntary disclosure after being subjected to any enquiry or investigation or audit. As per respondent, the date of initiation of enquiry is irrelevant as aforesaid clause debars a person who has been subjected to enquiry. If on the date of filing declaration, some notice in form of enquiry is pending though issued after 1.9.2019, applicant is debarred. The Central Board of Indirect Taxes and Customs (for short Board ) has issued various circulars enlarging scope of the scheme. Circular dated 29.10.2019 permits a person to file declaration who has filed appeal after 30.6.2019 though he is not otherwise entitled as per FA, 2019. Similarly, as per Para 2(viii) of the circular dated 12.12.2019, where show cause notice has been issued on or after 1.7.2019, applicant is not eligible to opt for the scheme still application can be filed under the category of arrear . Our courts are flooded with avoidable litigation and government by way present scheme has initiated step to minimise litigation and generate revenue, thus keeping in mind intent and purport of the scheme as well Board Circulars, it would be appropriate to liberally interpret Section 125 of FA, 2019. It is apt to notice that in case of voluntary disclosure, as per section 124(1)(e) of the FA, 2019 no immunity from tax liability is available though immunity from 40% of tax liability is available in other categories including arrears - The scheme came into force w.e.f. 01.09.2019, thus any enquiry/audit/investigation initiated after aforesaid date cannot make any person ineligible because period running from 01.09.2019 to 31.12.2019 is meant for filing application and any event occurring after 01.09.2019 cannot make any person eligible or ineligible. Any other interpretation would be violative of scheme as well article 14 of the Constitution because there would be discrimination between two persons who are similarly situated on 01.09.2019 but enquiry is initiated against any one of them. Petition allowed.

Summary

Issues Involved:
1. Validity of rejection of declarations under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
2. Interpretation of the cut-off date for eligibility under the 'voluntary disclosure' category.
3. Applicability of Section 125 of the Finance Act, 2019 concerning pending enquiries.

Issue-Wise Detailed Analysis:

1. Validity of Rejection of Declarations:
The petitioners sought quashing of orders rejecting their declarations under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The rejection was based on the ground that the department had initiated an enquiry before the filing of the declaration. The court noted that the scheme aimed to reduce litigation and realize pending dues, offering immunity from interest and penalties while benefiting the government by realizing dues without litigation.

2. Interpretation of Cut-off Date for Eligibility:
The petitioners argued that the relevant date for determining eligibility under the 'voluntary disclosure' category should be 31.08.2019, as the declaration could be filed between 01.09.2019 and 31.12.2019. The respondents contended that 30.06.2019 was the cut-off date for different categories, and no specific date was prescribed for 'voluntary disclosure.' The court found that the scheme, effective from 01.09.2019, did not prescribe a specific cut-off date for 'voluntary disclosure,' and any enquiry initiated after 01.09.2019 should not disqualify a declarant.

3. Applicability of Section 125 of the Finance Act, 2019:
The court scrutinized Sections 123, 124, and 125 of the Finance Act, 2019, which were pivotal in resolving the controversy. Section 125(1)(f) debars a person from making a voluntary disclosure after being subjected to any enquiry or investigation. The court noted that the scheme, effective from 01.09.2019, did not prescribe different cut-off dates for different categories of declarations. The court emphasized that the scheme should be liberally interpreted to advance its intent and purpose, avoiding strict interpretations that frustrate the beneficial legislation.

Conclusion:
The court concluded that the petitions deserved to be allowed because the notices or summons initiating enquiries were issued after 01.09.2019, the date of commencement of the scheme. The scheme did not prescribe any cut-off date for 'voluntary disclosure,' and the intent of the legislature was to consider the status of a person as on the date of the scheme's commencement. The court highlighted that the scheme aimed to minimize litigation and generate revenue, and a liberal interpretation should be adopted to achieve this objective. Consequently, the impugned orders were set aside, allowing the declarations under the scheme.