2022 (3) TMI 454 - HC - Service Tax

Rejection of declaration made on the grounds of ineligibility, as illegal, unconstitutional - seeking declaration to first respondent to consider and accept the declaration filed by him against the Audit Qualification of admitted duty - HELD THAT - This court finds that there are no merits in this writ appeal for the simple reason that on 28.05.2019, a search was conducted in the premises of the appellant, pursuant to which, the appellant submitted a letter dated 13.06.2019 admitting such investigation and produced certain documents in continuance of the same. When such being the case, the appeal is hit by the provisions of Clause 121 (r) and 125 (1) (e) of the Scheme, thereby making himself ineligible to invoke section 127 (2) of the scheme. Thus, it is evident that for availing the benefits of the scheme, one of the conditions precedent is that the tax liability of the tax payer ought to have been quantified. Even though the appellant had submitted a letter dated 13.06.2019, much before the date of closure of the scheme, the fact remains that his tax liability has not been quantified and therefore he cannot avail the benefits of the scheme. In fact, the letter dated 13.06.2019 has been given by the appellant for the purpose of quantification of service tax liability in the ongoing investigation pending against him, which itself is a disqualification for the appellant to avail the benefits of the scheme. The appellant, in the letter dated 13.06.2019, did not claim the benefits of the scheme, but only requested the respondents to quantify the tax liability payable by him - the letter dated 13.06.2019 would clearly indicate that the appellant furnished certain documents only for quantification of the service tax liability and there is no whisper that he intended to avail the benefits of the scheme. Secondly, the letter also indicates that as on 13.06.2019, the service tax liability of the appellant has not been quantified, which is one of the pre-conditions to avail the benefits of the scheme. Therefore, the rejection of the application of the appellant by the first respondent herein is proper. Appeal dismissed.

Summary

Issues:
1. Rejection of application under Sabka Vishwas Scheme
2. Dismissal of writ petition due to scheme expiration

Issue 1: Rejection of application under Sabka Vishwas Scheme

The appellant, a cine actor engaged in commercial services, filed a writ petition seeking to challenge the rejection of his application under the Sabka Vishwas Scheme. The appellant registered under taxable services but failed to pay service tax or submit returns. Following search proceedings and submission of documents, the appellant applied under the scheme for quantification of tax liability, which was rejected by the committee on grounds of ineligibility. The appellant then received a notice demanding service tax, leading to the writ petition. The single judge dismissed the petition as the scheme had expired before filing. The appellant argued that the rejection was premature, citing a Delhi High Court case emphasizing hearing before rejection. Additionally, a Madhya Pradesh High Court decision highlighted the scheme's beneficent nature. The appellant contended that his request for quantification predated the scheme's end, blaming the delay on authorities for non-action.

Issue 2: Dismissal of writ petition due to scheme expiration

The respondent argued that the scheme's automated process prevents ineligible applications, noting the appellant's claim of completed investigation was false. The rejection was based on non-finalized investigation and unquantified liabilities. The court found the appellant ineligible under specific clauses of the scheme due to admitting investigation and producing documents post-search. The appellant's failure to quantify tax liability rendered him ineligible for scheme benefits. The court emphasized that quantification was a prerequisite for scheme eligibility. The appellant's letter requesting quantification did not imply scheme application. The court upheld the single judge's decision, stating the appellant's petition was filed after the scheme's expiration, making it non-maintainable.

In conclusion, the High Court upheld the rejection of the appellant's application under the Sabka Vishwas Scheme, citing ineligibility due to unquantified tax liabilities and the appellant's failure to meet scheme conditions. The dismissal of the writ petition was affirmed as it was filed after the scheme's expiration, rendering it non-maintainable. The court highlighted the importance of quantification for scheme eligibility and rejected the appellant's arguments based on delays and pre-scheme actions.