2023 (2) TMI 611 - HC - Service Tax

Vivad se Vishwas Scheme - whether the scheme is discriminatory to the petitioner Seeking direction to the respondents to allow adjustment of the amounts already paid by the petitioner while considering their case under 'Vivad se Vishwas Scheme' notified by way of Finance Act, 2019 - also seeking refund of excess amounts already paid - HELD THAT - In the present case, a bare reading of the Act would reveal that though it has been enacted with reference to a fiscal statute, it does not create or exempt levy of tax. It has been enacted with the objective to reduce legacy litigation involving disputed levies of indirect taxes. The object of the scheme is to liquidate the legacy dispute and not to grant any kind of amnesty. It is a legislation to reduce the legacy litigation against positive payment of a part of the disputed dues of tax to encourage voluntary disclosures of undisclosed evaded taxes with an intent to end old or pending indirect tax disputes. As per settled law statutes are not to be construed as theorems of Euclid but with some imagination of the purpose which lie behind them. The interpretation cannot be too literal in meaning of words that it misses the soul and sees the skin only. With respect to the fiscal statutes, it is trite law that the tests of vice of discrimination in the taxating law is less rigorous. The provisions contained in Sections 124 and 130 of the Act have close nexus and are in consonance with the objective sought to be achieved by the legislature in enacting the Act. The object sought to be achieved is to end the disputes without creating liabilities. Legislature in its own wisdom in order to achieve the objective of encashing the disputes has reiterated the underlying condition i.e. no refund has to be granted. The scheme is optional. The petitioner is under no obligation to opt for the same. Petitioner may opt after weighing benefits or may opt to continue with pending appeal. The argument raised by senior counsel for the petitioner that the same will be discriminatory to the petitioner as the assessee who has not deposited more than the pre-deposit will have a march over an assessee like petitioner who has deposited more than pre-deposit is misconceived. Petition dismissed.

Summary

Issues Involved:
1. Adjustment of amounts already paid under 'Vivad se Vishwas Scheme'.
2. Constitutionality of Sections 124(2) and 130(2) of the Finance Act, 2019.
3. Alleged discrimination under Article 14 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Adjustment of amounts already paid under 'Vivad se Vishwas Scheme':

The petitioner, an assessee under the erstwhile service tax regime, sought a writ of certiorari to allow adjustment of amounts already paid while considering their case under the 'Vivad se Vishwas Scheme' and to allow a refund of excess amounts paid. The petitioner had deposited significant amounts under protest during ongoing enquiries and faced multiple show cause notices for different financial years. The Finance Act, 2019, however, only allows adjustment of pre-deposits made during appellate proceedings or deposits made during enquiry, investigation, or audit, excluding other deposits from adjustment and refund.

2. Constitutionality of Sections 124(2) and 130(2) of the Finance Act, 2019:

The petitioner challenged the provisions of Sections 124(2) and 130(2) of the Act as ultra vires, illegal, and unconstitutional. Section 124(2) stipulates that any amount paid as pre-deposit or deposit during enquiry, investigation, or audit shall be deducted when issuing the statement indicating the amount payable by the declarant, and no refund shall be granted if the amount exceeds the payable amount. Section 130(2) reiterates that no refund shall be provided under any circumstances. The court found that these provisions have a close nexus with the objective of the Act, which is to liquidate legacy disputes and not to create new liabilities. The scheme is optional, and the petitioner is not obligated to opt for it.

3. Alleged discrimination under Article 14 of the Constitution of India:

The petitioner argued that Sections 124(2) and 130(2) breed hostile discrimination, benefiting those who deposited only pre-deposit amounts compared to honest assessees who deposited more under protest. The petitioner relied on the Supreme Court's decision in 'Union of India vs. N.S. Rathnam and Sons', which held that similarly situated persons must be treated equally. However, the court held that the reliance on this case was misconceived as the present case involved a scheme aimed at reducing legacy disputes, not creating or exempting tax levies. The court emphasized that taxing statutes have a wide latitude in classification and are not subject to the minute gravities of Article 14. The court also referred to the Supreme Court's decisions in 'Federation of Hotel & Restaurant Association of India vs. Union of India' and 'Union of India vs. NITDIP Textile Processors Private Limited', which upheld the broad discretion of the legislature in taxation matters.

Conclusion:

The court found no merit in the petitioner's arguments and held that the provisions of Sections 124 and 130 of the Act are in consonance with the legislative objective of resolving legacy disputes without creating new liabilities. The scheme is optional, and the petitioner is free to opt for it or continue with the pending appeal. The court dismissed the writ petition, affirming the constitutionality and non-discriminatory nature of the challenged provisions.