2022 (4) TMI 936 - HC - Service Tax

Seeking consideration of declaration of the petitioner as a valid declaration under the category of voluntary disclosure in terms of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - HELD THAT - Petitioner had filed the declaration under the category of voluntary disclosure on 13.09.2019 for the period 01.04.2016 to 31.03.2017. As on the relevant date i.e. 30.06.2019, petitioner was not facing any enquiry or investigation or audit for the said period. Petitioner was, for the first time, asked by the Superintendent vide letter dated 23.07.2019 to submit the information mentioned therein for the purpose of verification for the financial year 2014-2015. As mentioned in the impugned intimation, the said letter was issued following receipt of report on 23.07.2019 from the Anti-evasion Headquarters. However, in the summons dated 11.09.2019 the period of enquiry is not mentioned. In the subject it is mentioned that the summons pertain to certain enquiry for non-payment of service tax. The summons being so vague would have to be read together with the letter dated 23.07.2019 - On a conjoint reading of the two it would mean that the verification pertains to the period 2014- 2015. Therefore, on due consideration, it cannot be said that petitioner was subjected to any enquiry or investigation or audit as on 30.06.2019 and pertaining to the period covered by the declaration at the time of making the declaration. Under Sub-Sections (2) and (3) of Section 127, in a case where the amount estimated by the designated committee exceeds the amount declared by the declarant, then an intimation has to be given to the declarant. However, before insisting on payment of the higher amount determined by the designated committee, the declarant is required to be afforded an opportunity of hearing by the designated committee. If in a situation where the amount estimated by the designated committee is in excess of the amount declared by the declarant, an opportunity of hearing is required to be given by the designated committee to the declarant, then it would be in complete defiance of logic and contrary to the very object of the scheme to outrightly reject a declaration on the ground of ineligibility without affording an opportunity to the declarant to explain as to why his declaration should be accepted and relief under the scheme should be extended to him. The matter is remanded back to respondent Nos.3 and 4 who shall consider the declaration of the petitioner afresh in terms of the scheme as a valid declaration under the category of voluntary disclosure - Petition allowed.

Summary

Issues Involved:
1. Eligibility of the petitioner under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
2. Rejection of the petitioner's declaration under the voluntary disclosure category.
3. Compliance with principles of natural justice.

Issue-Wise Detailed Analysis:

1. Eligibility of the petitioner under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019:

The petitioner, engaged in event management services, sought relief under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, for unpaid service tax dues amounting to ?1,72,93,758 for the period from April 2016 to June 2017. The scheme, introduced by the Finance (No.2) Act, 2019, aims to resolve pending litigations from the pre-GST regime and includes provisions for voluntary disclosure of tax dues without interest and penalties. The petitioner filed a declaration under the voluntary disclosure category on 13.09.2019.

2. Rejection of the petitioner's declaration under the voluntary disclosure category:

The petitioner's declaration was rejected based on Section 125 (1) (f) of the Finance (No.2) Act, 2019, which disqualifies a person from making a voluntary disclosure if they are subjected to an enquiry or investigation or have filed a return indicating an amount of duty as payable but have not paid it. The designated committee found that a departmental investigation had been initiated against the petitioner on 23.07.2019, with summons issued on 11.09.2019. Consequently, the declaration was deemed ineligible under the scheme.

3. Compliance with principles of natural justice:

The court emphasized that the scheme is beneficial and should be interpreted liberally to ensure its success. The court noted that Section 125 (1) (e) and (f) must be read conjunctively, meaning the enquiry or investigation should be pending as of 30.06.2019 and relate to the period covered by the declaration. The court found that the petitioner was not facing any enquiry or investigation for the relevant period (April 2016 to June 2017) as of 30.06.2019. The enquiry initiated on 23.07.2019 pertained to the financial year 2014-2015, and the summons issued on 11.09.2019 did not specify the period of enquiry.

The court also highlighted the importance of natural justice, stating that the petitioner should have been given an opportunity to explain their eligibility before the declaration was rejected. The court referred to a decision by the Bombay High Court in Thought Blurb Vs. Union of India, which held that non-compliance with natural justice principles renders the decision invalid.

Conclusion:

The court set aside the impugned intimation dated 27.09.2019, remanding the matter back to respondent Nos.3 and 4 to reconsider the petitioner's declaration as a valid voluntary disclosure. The respondents were directed to provide an opportunity of hearing to the petitioner and pass a speaking order within eight weeks. The writ petition was allowed without any order as to costs, and miscellaneous petitions, if any, were closed.