2022 (4) TMI 1209 - HC - Service Tax

Refund of amount deposited under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - refund sought on the premise that the withdrawal of the appeal filed by the Tax Department under Government Policy made Petitioners legally entitled for the refund of the amount since there are no dues - effect of CBIC Instructions dated 22nd August, 2019 raising the monetary limit for fling appeals by the Tax Department before different forums - HELD THAT - On the date of issuance of CBIC instructions dated 22nd August, 2019 and follow-up instructions dated 14th October, 2019, nothing was due from the Petitioners. However, to get out of the legal conflict raised by way of department s appeal, the Petitioners applied under the scheme. The authority despite knowledge that the appeal would not survive by virtue of CBIC instructions, still processed the declaration and raised demand by keeping the appeal pending. In short, the department cannot take disadvantage of their own wrong of in action of withdrawing appeal. In that case there was no reason for the Petitioners to apply under the scheme and consequential deposit of amount as per the declaration. In all fairness, the Taxing Department cannot enrich itself by unauthorized collection of the amount which needs to be refunded - the Respondents are directed to refund the sum of ₹ 90,92,263/- to the Petitioners, within three months from the communication of this order - petition allowed.

Issues Involved:
1. Entitlement to refund under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS Scheme).
2. Legality of the Tax Department's demand under SVLDRS Form No. 3.
3. Applicability of CBIC instructions on monetary limits for filing appeals.
4. Interpretation of Section 130 of the Finance Act, 2019, and Article 265 of the Constitution of India.
5. Maintainability of the Writ Petition under Article 226 of the Constitution of India.

Issue-wise Analysis:

1. Entitlement to Refund under SVLDRS Scheme:
The petitioners sought a refund of ?90,92,263/- deposited under the SVLDRS Scheme, arguing that the withdrawal of the Tax Department's appeal under government policy made them legally entitled to the refund since there were no dues. The court noted that the petitioners' service tax demand was set aside by the CESTAT, and the Tax Department's subsequent appeal to the Supreme Court was withdrawn as per the CBIC instructions, which raised the monetary limit for filing appeals to ?2 crores. The court held that the petitioners were entitled to a refund because the Tax Department was not legally entitled to recover the amount once the appeal was withdrawn.

2. Legality of the Tax Department's Demand under SVLDRS Form No. 3:
The court found that the designated committee under the SVLDRS Scheme should not have issued SVLDRS Form No. 3 directing the petitioners to deposit 50% of the amount, as the appeal filed by the Tax Department was supposed to be withdrawn per CBIC instructions. The court emphasized that the Tax Department's action of accepting the petitioners' declaration and raising a demand under the scheme was unjustifiable, as the appeal did not survive in real sense due to the CBIC instructions.

3. Applicability of CBIC Instructions on Monetary Limits for Filing Appeals:
The court highlighted that the CBIC instructions dated 22nd August 2019 and follow-up instructions dated 14th October 2019 raised the monetary limit for filing appeals to ?2 crores. Since the amount involved in the case was below this limit, the Tax Department's appeal to the Supreme Court was supposed to be withdrawn. The court held that the Tax Department's failure to withdraw the appeal in a timely manner could not be used to justify raising a demand under the SVLDRS Scheme.

4. Interpretation of Section 130 of the Finance Act, 2019, and Article 265 of the Constitution of India:
The court rejected the respondents' argument that Section 130 of the Finance Act, 2019, which prohibits refunds under the SVLDRS Scheme, applied in this case. The court reasoned that the petitioners had not availed the benefit of the scheme, and the appeal was withdrawn due to government policy, not under the scheme. The court invoked Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law, and held that the Tax Department's demand was without authority of law.

5. Maintainability of the Writ Petition under Article 226 of the Constitution of India:
The court affirmed the maintainability of the writ petition, citing the Supreme Court's decision in Whirpool Corporation V/s. Registrar of Trade Marks, Mumbai and Others, which allows writ petitions where the order or proceedings are wholly without jurisdiction. The court also referenced the decision in New India Industries Ltd. and Another V/s. Union of India and Another, which supports the use of Article 226 to enforce the state's obligation to refund illegally collected taxes.

Conclusion:
The court allowed the writ petition and directed the respondents to refund the sum of ?90,92,263/- to the petitioners within three months. The court emphasized that the Tax Department could not enrich itself by unauthorized collection of the amount and that the petitioners were entitled to a refund due to the withdrawal of the appeal as per CBIC instructions.

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