2021 (12) TMI 184 - HC - Service Tax

Right of the petitioner to get deduction of deposits made prior to the issuance of show cause notice - benefit of SVLDRS - amnesty scheme by way of Finance (No.2) Act, 2019 was introduced by the Central Government - HELD THAT - A bare reading of Section 124(2) reveals that the relief calculated under Section 124(1) is subject to the condition that any amount paid during the enquiry, investigation or audit has to be deducted when issuing the statement indicating the amount payable by the declarant. The bare provision talks of any amount paid , the same does not distinguish between the amounts paid under different heads. It clearly envisages two kinds of deductions firstly any pre-deposit made at any stage of appellate proceedings under the indirect tax enactment and secondly, any deposit made during enquiry, investigation or audit. Both these species of 'pre-deposit' need to be deducted while finalizing the computation. Amount deposited by the petitioner falls in the second category. The provision only talks of amount irrespective of whether it has been paid as tax or interest or penalty. Thus, the view taken by the Designated Committee cannot be sustained. There is another side to the story. Had the petitioner remitted the entire amount paid by him towards tax, the respondents would have given credit of entire amount and his interest liability would have been waived off as well. The petitioner cannot be punished for depositing the amount under different heads once the provision mandates to discount the amount paid during the investigation dehors the head it has been deposited under. The comments of Designated Committee informs SVLDRS-2 and SVLDRS-3 are quashed - Designated Committee is directed to re-consider the claim of the petitioner within two weeks from the receipt of certified copy of the order by adjusting amounts paid towards interest and penalty, in accordance with law and the petitioner is directed to make the payment within two weeks from the date Designated Committee issues SVLDRS-3 - Petition allowed.

Summary

Issues:
1. Computation of amount payable under amnesty scheme by Designated Committee.
2. Entitlement of petitioner for deduction of deposits made prior to show cause notice.
3. Interpretation of Section 124 of Finance Act, 2019 regarding deduction of amounts paid under different heads.

Analysis:
1. The petitioner, an assessee for service tax, was audited for the period 2013-14 to 2016-17. Objections were raised regarding availing cenvat credit on trading of goods, leading to payments of substantial amounts towards service tax, interest, and penalty. A show cause notice sought further recovery, but an amnesty scheme was introduced allowing settlement of disputes. The Designated Committee disagreed with petitioner's computation, leading to the petitioner challenging it via a writ petition under Article 226 of the Constitution of India.

2. The petitioner argued for deduction of deposits made prior to the show cause notice issuance, relying on Section 124 of the Finance Act, 2019. The petitioner contended that the deposited amount falls under 'pre-deposit' and should be deducted while calculating the amount payable. However, the respondents argued against such deduction, emphasizing that payments made towards duty, interest, and penalty are distinct and cannot be adjusted against each other. The critical question was whether the petitioner could claim credit for amounts deposited under interest and penalty heads.

3. Section 124 of the Finance Act, 2019 provides for relief calculation under the scheme, subject to deductions of amounts paid during enquiry, investigation, or audit. The provision does not differentiate between payments made under various heads, mandating deduction of any amount paid during such proceedings. The Designated Committee's view that payments under interest and penalty heads cannot be deducted was deemed unsustainable. The petitioner's deposits, regardless of the head, were to be considered for deduction. The judgment allowed the petition, quashing the Designated Committee's comments, directing a reconsideration of the claim, and specifying the petitioner's payment obligations.

This detailed analysis covers the computation under the amnesty scheme, the entitlement of the petitioner for deduction of deposits, and the interpretation of Section 124 of the Finance Act, 2019 regarding deductions of amounts paid under different heads.