2022 (9) TMI 627 - HC - Service Tax

Rejection of declarations vide SVLDRS-01 application filed under the category of Voluntary Disclosure for relaxation of applicable interest and penalty - HELD THAT - (Sabka Vishwas) (Legacy Dispute Resolution) Scheme, 2019 was introduced by the Finance (No.2) Act, 2019, which was notified in the Gazette of India, Extra Ordinary on 01.08.2019. Statement of objects and reasons with which the Scheme was introduced was that the Scheme is a one time measure for liquidation of past disputes of Central Excise and Service Tax as well as to ensure disclosure of unpaid taxes by a person eligible to make a declaration - It was also stated that the Scheme provides certain immunities including reliefs against penalty, interest or any other proceedings under the Central Excise Act, 1944 or Chapter V of the Finance Act 1994 to those persons, who pay the declared tax dues. The Scheme has twin objectives of liquidation of past disputes pertaining to Central Excise and Service Tax on the one hand and disclosure of unpaid taxes on the other hand, the primary focus is to unload the baggage of pending litigations in respect of Service Tax and Central Excise from pre-GST regime so that the business can move on. It is crystal clear that a person making Voluntary Disclosure after being subjected to any enquiry or investigation or audit is clearly ineligible to avail the benefit of the Scheme of 2019 and, therefore, ineligible to proceed further under the Voluntary Disclosure category. Once we have considered the statutory Scheme based on admitted facts on record and thereby reached at the conclusion based on our own reading of clause (f) of Sub-Section (1) of Section 125 of the Finance (No.2) Act, 2019, in our considered opinion, as also in view of the foregone conclusion, only on the ground that the opportunity of hearing was not afforded to the petitioner, we are not inclined to interfere with the decision of the respondents in rejecting petitioner s declaration holding ineligible to avail the benefit of the Scheme of 2019. The subsequent challenge to the legality and validity of audit proceedings, internal audit report and show cause notice must also fail - Petition dismissed.

Summary

Issues Involved:
1. Eligibility under the SVLDRS-2019 Scheme.
2. Interpretation of Section 125(1)(f) of the Finance (No.2) Act, 2019.
3. Violation of principles of natural justice.
4. Legality of audit proceedings, internal audit report, and show cause notice.

Detailed Analysis:

1. Eligibility under the SVLDRS-2019 Scheme:
The petitioner challenged the rejection of their declarations under the SVLDRS-2019 Scheme. The petitioner argued that they were eligible for the scheme as the audit proceedings were initiated after the cut-off date of 30.06.2019. The respondents countered that the petitioner was subjected to an audit before filing the SVLDRS application, making them ineligible under Section 125(1)(f) of the Finance (No.2) Act, 2019.

2. Interpretation of Section 125(1)(f) of the Finance (No.2) Act, 2019:
The court examined the legislative intent behind the SVLDRS-2019 Scheme, emphasizing its twin objectives: liquidation of past disputes and disclosure of unpaid taxes. Section 125(1)(f) excludes persons making a 'Voluntary Disclosure' after being subjected to any enquiry, investigation, or audit. The court noted that Clause (f) does not include the cut-off date of 30.06.2019, unlike Clause (e). Therefore, a person subjected to an audit after the promulgation of the policy and then making a voluntary disclosure is ineligible for the scheme.

3. Violation of principles of natural justice:
The petitioner contended that they were not given an opportunity for a hearing before the rejection of their declarations. The court held that the petitioner had suppressed material facts about the ongoing audit proceedings initiated on 28.11.2019. The suppression misled the authorities, leading to the erroneous issuance of the discharge certificate. The court concluded that the rejection of the petitioner's declarations was justified under Section 129(2)(c) of the Finance (No.2) Act, 2019, which allows for the presumption that a declaration was never made if material particulars are found to be false.

4. Legality of audit proceedings, internal audit report, and show cause notice:
The petitioner also sought to quash the audit report and show cause notice. The court found that the petitioner was subjected to an audit before filing the SVLDRS application and had delayed providing necessary documents. Consequently, the audit proceedings, internal audit report, and show cause notice were deemed valid and maintainable.

Conclusion:
The petition was dismissed as the petitioner was ineligible for the SVLDRS-2019 Scheme due to the ongoing audit proceedings before filing the application. The court upheld the rejection of the petitioner's declarations and the validity of the subsequent audit proceedings, internal audit report, and show cause notice.