2021 (6) TMI 632 - HC - Service Tax

Benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - petitioner had not filed returns during the relevant period - Declarations were only voluntary disclosure - obligation to pay full outstanding amount to get benefit of scheme - HELD THAT - Once it is accepted that the declarations filed by the appellant were factually incorrect in respect of the material particulars furnished therein, the provisions of Section 129(2)(c) of the Finance Act, 2019 would have to be seen as empowering the Department to treat the declarations as never made, and to initiate proceedings for recovery of the tax amounts as per the provisions of the Finance Act, 1994, as amended, governing the levy and collection of Service Tax - The Department, however, has not chosen to deny the petitioner the benefit of the scheme, but has merely suggested a category change in respect of the declarations filed by the appellant. While the appellant had declared that the particulars of outstanding tax were based on returns filed without payment of the tax, the Department treated the declarations as voluntary disclosures . The effect of this category change is that the appellant will be entitled only to the benefits of waiver of interest, penalty, late fees etc. but will be obliged to pay the entire tax amount declared by it in the declarations, by virtue of the provisions of Section 124(1)(e) of the Finance Act, 2019. The stand of the Department is in fact beneficial to the appellant especially since the Department had the option of treating the petitioner's declarations as 'never made', and thereby denying it the benefits under the scheme and initiating proceedings for recovery of the tax amount, together with penalty and interest in accordance with the statutory provisions. The appellant shall make the payments required under the Scheme within 30 days from the date of receipt of a copy of this judgment, and on the appellant making the said payment, the Department shall proceed to finalize the proceedings and issue the discharge certificate to the petitioner - Appeal disposed off.

Issues:
1. Rectification orders passed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
2. Time limit for passing rectification orders under the Scheme.
3. Compliance with procedural formalities for passing rectification orders.
4. Opportunity of hearing prior to passing rectification orders.
5. Factual correctness of declarations filed by the appellant.
6. Interpretation of provisions under Section 129 of the Finance Act, 2019.
7. Benefit of the Scheme granted to the appellant by the Department.
8. Comparison with a judgment of the Madras High Court.
9. Tax liability and payments made by the appellant during specific periods.
10. Payment requirements and finalization of proceedings under the Scheme.

1. Rectification Orders under the Scheme:
The case involved the appellant challenging rectification orders passed by the Department under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The Department rectified earlier orders accepting the appellant's declarations, stating that the appellant had not filed returns in the electronic format during the relevant period, leading to a change in the categorization of the declarations as "voluntary disclosures."

2. Time Limit for Passing Rectification Orders:
The appellant contended that the rectification orders were passed beyond the time prescribed under the Scheme. However, the Department's decision to extend the benefit of the Scheme to the appellant on different terms was considered beneficial to the appellant, as the Department could have denied the benefits and initiated recovery proceedings.

3. Compliance with Procedural Formalities:
The appellant argued that the procedural formalities required for passing rectification orders were not adhered to by the Department. The court noted that even if there were errors in the orders, interference might not be necessary if justice was served.

4. Opportunity of Hearing:
The appellant raised concerns about not being heard before the rectification orders were passed. However, the court did not find it necessary to interfere if justice was done in the case.

5. Factual Correctness of Declarations:
It was established that the appellant's declarations were factually incorrect regarding the filing of returns during the relevant period. The inability to upload returns was attributed to the appellant, and manual filing was deemed unacceptable under the Statute.

6. Interpretation of Provisions under Section 129:
Section 129(2)(c) of the Finance Act, 2019 empowered the Department to treat the declarations as never made due to factual inaccuracies. The Department chose to change the category of declarations, granting the appellant benefits under the Scheme with modifications.

7. Benefit of the Scheme Granted:
The Department's decision to extend the benefits of the Scheme to the appellant, albeit with altered terms, was viewed as favorable to the appellant. The court found the Department's approach beneficial, considering the options available to deny the benefits and initiate recovery proceedings.

8. Comparison with a Judgment of the Madras High Court:
A judgment of the Madras High Court was referenced, but the court disagreed with the interpretation, emphasizing strict interpretation in favor of the Department in matters of taxation and the benefits granted under the Scheme.

9. Tax Liability and Payments Made:
Specific details regarding tax liability and payments made by the appellant during certain periods were analyzed, clarifying the tax liability discharged by the appellant and adjustments to be made in the payments required under the Scheme.

10. Payment Requirements and Finalization of Proceedings:
The appellant was directed to make payments within a specified period, after which the Department would finalize the proceedings and issue a discharge certificate, with the Scheme remaining in force for the purpose of concluding the proceedings.

This detailed analysis of the judgment addresses the issues raised in the case comprehensively, outlining the legal interpretations, procedural aspects, and the final directives provided by the court.

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