2023 (4) TMI 71 - HC - Service Tax

Rejection of application filed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - the pre-deposit could not be verified, and therefore, the claim of the pre-deposit was denied - whether the rejection of the Petitioners' application was completely arbitrary? - HELD THAT - The Respondents did not dispute the Petitioners' argument based on the Circular issued on 12 December 2019, which states that deposits made after the show cause notice but before adjudication should be considered under the Scheme. The Central Board of Indirect Taxes and Customs has answered affirmatively to the Frequently Asked Question No.26 as to whether pre-deposit made at any stage should be taken into account. The Respondents did not deny the applicability of the Circular or the interpretation given by the Petitioners. The Respondents have cast doubt on the payment made on 10 March 2012, arguing that the challans cannot be considered as a pre-deposit against the show cause notice. However, the reply does not provide any other reason for this doubt, and it is only based on the fact that the payment was made after the issuance of the show cause notice. The Respondents did not comment on the letter dated 30 December 2019, where the Petitioners submitted the challans to the Principal Commissioner, CGST, in support of their claim. This letter was submitted following the hearing on 27 December 2019, but it was not mentioned in the impugned order or in the reply. There is no valid reason to deny the Rs. 23,07,200/- deposited by the Petitioners on 10 March 2012 through challans as pre-deposit for the purpose of the Scheme. The Central Government introduced the Scheme to resolve past disputes, ensure compliance and increase revenue. When interpreting the statute and circular, the aim of the Scheme must be kept in mind. The authorities' approach should not be excessively technical but instead geared towards achieving the Scheme's objectives - the Respondents' objections were unnecessary and went against the spirit of the Scheme, as well as the factual situation. The impugned order dated 13 February 2020 issued by Respondent No.3- Designated Committee is quashed and set aside - the Respondents are directed to examine the material placed on record by the Petitioners and to decide as regards the aspect of section 124(2) in respect of the amount of Rs.23,07,200/- - petition allowed.

Summary

Issues involved:
The rejection of the application under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

Summary:

Issue 1: Application Rejection under the Sabka Vishwas Scheme

The petitioners, a company constructing immovable properties, filed an application under the Sabka Vishwas Scheme, 2019, due to the rejection of their application by order dated 13 February 2020. The petitioners, registered under the Finance Act, 1994, for service tax purposes, rented out premises to a lessee who did not pay service tax initially due to a challenge in the Supreme Court. The petitioners paid the service tax amount of Rs. 23,07,200/- under a challan on 10 March 2012. The Sabka Vishwas Scheme aimed to resolve legacy disputes, and the petitioners declared the dues as Rs. 20,60,000/- with a net payable amount of Nil. However, the Designated Committee disallowed the pre-deposit, proposing an amount of Rs. 6,18,000/- payable under the Scheme.

Issue 2: Application of Circular and Scheme Interpretation

The petitioners argued that the rejection of their application was arbitrary as they had followed the Circular dated 12 December 2019, allowing post-show cause notice deposits to be considered under the Scheme. The Respondents did not dispute this argument or the applicability of the Circular. The Central Board of Indirect Taxes and Customs confirmed that pre-deposits made at any stage should be taken into account. The Respondents' doubt on the payment made on 10 March 2012 was solely based on the timing of the deposit, without providing substantial reasons.

Issue 3: Compliance with Scheme Objectives

The court found the rejection of the petitioners' application unjustified, emphasizing that the Scheme's aim was to resolve past disputes and increase compliance. The Respondents' objections were deemed unnecessary and against the spirit of the Scheme. The court highlighted that authorities should interpret the statute and circular with the Scheme's objectives in mind, avoiding overly technical approaches.

Conclusion:

The court quashed the impugned order and directed the Respondents to re-examine the material placed on record by the petitioners. If the petitioners are found entitled to the benefit under section 124(2) for the deposited amount of Rs. 23,07,200/-, the Respondents must take remedial steps within eight weeks. The writ petition was allowed in favor of the petitioners.