2021 (3) TMI 545 - HC - Service Tax

Declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Petitioner s declaration under the scheme was rejected on 29.01.2020 on the ground that petitioner had filed the declaration after initiation of enquiry - HELD THAT - It is found that the date 30.06.2019 is quite significant. We have already noticed the definition of enquiry or investigation as per section 121(m). Coming to section 123 of the Finance (No.2) Act, 2019 which deals with tax dues for the purposes of the scheme, as per clause (c) thereof where an enquiry or investigation or audit is pending against the declarant, the tax dues would mean the amount of duty payable which had been quantified on or before 30.06.2019. Even in the context of eligibility under section 125(1), we find that clause (e) thereof clarifies that any person subjected to an enquiry or investigation or audit and the amount of duty involved in the said enquiry or investigation or audit had not been quantified on or before 30.06.2019 would not be eligible to make a declaration. Therefore, whenever and wherever the scheme talks about an enquiry or investigation or audit, the date 30.06.2019 carries considerable significance and becomes relevant. The enquiry or investigation or audit should commence prior to 30.06.2019. Though clause (f) of sub-section (1) of section 125 does not mention the date 30.06.2019 by simply saying that a person making a voluntary disclosure after being subjected to any enquiry or investigation or audit would not be eligible to make a declaration, the said provision if read and understood in the proper context would mean making of a voluntary disclosure after being subjected to an enquiry or investigation or audit on or before 30.06.2019. Such a view if taken would be a reasonable construct consistent with the objective of the scheme. The respondent No.4 was not justified in rejecting the declaration of the petitioner dated 26.12.2019 on the ground that petitioner was not eligible to file declaration under the category of voluntary disclosure since enquiry was initiated against the petitioner on 19.12.2019 whereafter petitioner filed declaration - the respondent No.4 was not justified in rejecting the declaration of the petitioner, it would not be necessary for us to examine the other points raised by the petitioner particularly relating to the nature of the summons dated 19.12.2019 issued under section 70 of the CGST Act. Matter remanded back to respondent No.4 for taking a fresh decision on the declaration filed by the petitioner on 26.12.2019 treating the same as a valid declaration under the voluntary disclosure category and thereafter grant the admissible relief to the petitioner - petition allowed by way of remand.

Issues Involved:
1. Eligibility of the petitioner to file a declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
2. Interpretation of the initiation of enquiry under the Finance Act, 1994 versus the CGST Act, 2017.
3. Compliance with principles of natural justice in rejecting the declaration.

Detailed Analysis:

1. Eligibility of the Petitioner to File a Declaration:
The petitioner sought to quash the order dated 29.01.2020, which rejected their declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, on the grounds of ineligibility. The rejection was based on Section 125(1)(f) of the Finance (No.2) Act, 2019, which states that a person making a voluntary disclosure after being subjected to any enquiry or investigation is ineligible to make such a declaration. The enquiry against the petitioner was initiated on 19.12.2019, and the declaration was filed on 26.12.2019, thus rendering the petitioner ineligible according to the respondents.

However, the court noted that the scheme's provisions, particularly Section 125(1)(e) and (f), should be read harmoniously. Clause (e) mentions the cut-off date of 30.06.2019 for eligibility, implying that enquiries or investigations initiated after this date should not bar a voluntary disclosure. This interpretation aligns with the scheme's objective to resolve pre-GST disputes and provide relief.

2. Interpretation of the Initiation of Enquiry:
The petitioner argued that the summons dated 19.12.2019 was issued under Section 70 of the CGST Act, not the Finance Act, 1994. Therefore, the enquiry should be considered under the CGST Act, making the petitioner eligible for the scheme. The respondents contended that the mention of the CGST Act was inadvertent and that the enquiry pertained to service tax under the Finance Act, 1994.

The court did not delve deeply into this argument, as it found that the scheme's provisions, when read in context, indicate that the cut-off date for determining eligibility should be 30.06.2019. Thus, the initiation of the enquiry on 19.12.2019 should not disqualify the petitioner from making a voluntary disclosure.

3. Compliance with Principles of Natural Justice:
The court emphasized that the rejection of the petitioner's declaration without seeking clarification or providing an opportunity for a hearing violated principles of natural justice. The court referenced its previous decision in Thought Blurb Vs. Union of India, highlighting that summary rejection without a hearing is contrary to the scheme's intent and the principles of natural justice. The scheme aims to resolve legacy disputes and should be interpreted liberally to achieve this objective.

Conclusion:
The court set aside the order dated 29.01.2020 and remanded the matter back to respondent No.4 for a fresh decision on the petitioner's declaration, treating it as valid under the voluntary disclosure category. The petitioner must be given an opportunity for a hearing, and a speaking order must be passed within eight weeks from the receipt of the court's judgment. The writ petition was allowed to the extent indicated, with no order as to costs.

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