2021 (8) TMI 830 - HC - Service Tax

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - remission of amount as a pre-condition for issuance of a Discharge Certificate under the Scheme - HELD THAT - The order of rejection suffers from a lack of reasoning as it ought to have set out the reasons cogently for the variation in estimate arrived at between the Declarant/Petitioner and the Designated Authority. The Supreme Court, in the celebrated case of MOHINDER SINGH GILL ANR. VERSUS THE CHIIEF ELECTION COMMISSIONER, NEW DELHI ORS. 1977 (12) TMI 138 - SUPREME COURT has stated that orders are not like old wine becoming better over time. Thus, an order, to be valid, must speak for itself and contain reasoning for the conclusions arrived at. Seen in this light, the impugned order is clearly deficient. Circular No.1073/06/2019.CX in F.No.276/78/2019/CX-8.Pt.III dated 29.10.2019, issued by the Central Board of Indirect Taxes and Customs provides clarifications for several issues arising from the application of the Scheme - the Circular refers to the Supreme Court having permitted the lessees to agitate the service tax demands made upon the landlord and the question that then arises is as to whether the reference to 'such persons' , is to the lessee mentioned in the previous sentence or the lessor mentioned earlier. This aspect may not be very material in this case as it is the lessor/landlord who has filed the application and it is hence for it to satisfy all applicable parameters under the Scheme. The impugned order suffers from lack of reasoning, and to set right this flaw, the petitioner will appear before the respondent on Thursday, the 19th of August, 2021 to putforth its case and also to provide proof of payment of tax by the lessees - Petition disposed off.

Summary

Issues:
Challenge to order under Sabka Vishwas Scheme for remittance of amount for Discharge Certificate issuance; Dispute on service tax under Finance Act, 1994 for renting of immovable property services; Credit adjustment for payments made by lessees; Lack of reasoning in impugned order; Interpretation of Circular regarding lessees' rights to challenge service tax demands.

Detailed Analysis:

1. Challenge to Order under Sabka Vishwas Scheme:
The petitioner challenged an order from the Designated Committee under the Sabka Vishwas Scheme, 2019, demanding a payment of approximately ?1.45 Crores for a Discharge Certificate under the Scheme. The petitioner sought settlement for a service tax dispute under the Finance Act, 1994, related to renting of immovable property services.

2. Dispute on Service Tax Liability:
There was extensive litigation regarding the imposition of service tax on rentals from immovable property. The petitioner's defense included passing on the tax liability to their tenants based on private agreements. The challenge to the demands raised, including the validity of statutory provisions, was initiated by tenants in some cases.

3. Credit Adjustment for Lessees' Payments:
The petitioner claimed entitlement to credit for payments made by its lessees towards the tax liability. The petitioner argued that the amount payable under the Scheme should be adjusted considering the payments already made by the lessees.

4. Lack of Reasoning in Impugned Order:
The impugned order issued under the Scheme lacked reasoning for restricting the credit adjustment to a certain amount and rejecting the petitioner's request for a higher credit amount. The court emphasized the necessity of providing a reasoned order when rejecting objections raised by the declarant.

5. Interpretation of Circular on Lessees' Rights:
The Circular issued by the Central Board of Indirect Taxes and Customs clarified that lessees could challenge service tax demands made on landlords subject to certain conditions. The court discussed the ambiguity in the Circular regarding the rights of lessees and landlords in challenging tax demands.

6. Conclusion and Directions:
The court highlighted the deficiency in the impugned order due to lack of reasoning and directed the petitioner to appear before the respondent to provide proof of tax payments by lessees. The court emphasized the need for a reasoned decision by the authority and instructed the respondent to consider the Circular while making a decision. The court set a timeline for passing orders on the matter.

In conclusion, the judgment addressed various issues related to the Sabka Vishwas Scheme, service tax disputes, credit adjustments, and the interpretation of relevant Circulars, emphasizing the importance of providing reasoned decisions and ensuring fairness in resolving tax disputes.