2023 (5) TMI 812 - HC - Service Tax

Rejection of declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - time limitation - It is the petitioner s case that it is entitled to the benefit of the Scheme since it had made a declaration under Section 125 of the Finance Act (No. 2), 2019 (declaration as contemplated under the Scheme) - whether the amount of service tax payable by the petitioner was quantified before the stipulated date, that is, before 30.06.2019? HELD THAT - The expression tax dues is defined in wide terms. It encompasses dues that were mentioned in show cause notice(s) or were subject matter of disputes before various authorities. It also includes dues that were voluntarily disclosed by an assessee without the same being subject matter of any enquiry or dispute. Further, it covers arrears in respect of which there was no dispute or any pending litigation. More importantly, it also covers cases where enquiry, investigation or audit were pending but the dues had been quantified - Section 125(1) of the Finance Act (No. 2), 2019 posites that all persons, except those as stipulated, would be eligible to make a declaration under the Scheme. The legislative intent in enacting Chapter V of the Finance Act (No. 2), 2019 (the Scheme) was to maximize the sweep of the Scheme. It was to cover all situations where tax was payable except those cases, which were expressly excluded - Clause (c) of Section 123 of the Finance Act (No. 2), 2019, which covers cases where enquiry, investigation or audit is pending, must be interpreted bearing the aforesaid legislative scheme in mind. In terms of Clause (c), the tax dues in cases where enquiry, investigation or audit was pending against a declarant meant the amount of duty payable under any indirect tax enactment, which was quantified on or before 30.06.2019. The Bombay High Court found that there was a clear admission on the part of the petitioner and that the tax dues were quantified in terms of Section 121(r) of the Finance Act, 1994. It is also relevant to refer to the decision of the Bombay High Court in Thought Blurb v. Union of India Ors. 2020 (10) TMI 1135 - BOMBAY HIGH COURT . In that case, the Bombay High Court had referred to the Circular dated 27.08.2019 and held that, in terms of the letters written by the petitioner / taxpayer, the tax dues were quantified before the relevant date. Reverting back to the facts of the present case, it is found that on the one hand there is a letter of respondent No.3 to the petitioner quantifying the service tax liability for the period 1st April, 2016 to 31st March, 2017 at Rs. 47,44,937.00 which quantification is before the cut off date of 30th June, 2019 and on the other hand for the second period i.e. from 1st April, 2017 to 30th June, 2017 there is a letter dated 18th June, 2019 of the petitioner addressed to respondent No. 3 admitting service tax liability for an amount of Rs. 10,74,011.00 which again is before the cut off date of 30th June, 2019. Thus, petitioner's tax dues were quantified on or before 30th June, 2019 - there are no hesitation to hold that petitioner was eligible to file the application (declaration) as per the scheme under the category of enquiry or investigation or audit whose tax dues stood quantified on or before 30th June, 2019. In the present case, the petitioner had filed a declaration on 24.12.2013 under the VCES declaring that a service tax of ₹36,47,132/- was due on account of service tax, education cess and higher education cess. The petitioner had also paid ₹18,50,000/- pursuant to the declaration made under the VCES - the benefit of the VCES was denied to the petitioner for the reason that it had failed to pay the balance amount within the stipulated period. Subsequently, on 10.12.2015, an Anti Evasion Branch of the Service Tax Department conducted a search on the premises of the petitioner. On the said date, the statement of Sh. Divya Dipti Chopra (one of the Director s of the petitioner company) was recorded. He has referred to the declaration made under the VCES and the disclosure that ₹36,47,132/- was due and payable. He had also disclosed the petitioner s total turnover and had acknowledged that service tax of approximately ₹30,00,000/- including interest would be payable up to November, 2015. It is relevant to note that the respondents had never disputed or doubted the statements submitted by the petitioner. On the contrary, it is apparent that the respondents had accepted the said statements. As noticed above, by the letter dated 03.06.2019, the petitioner was called upon to provide the calculation sheet of the interest liability and to deposit the same so that the investigation may be concluded. Respondent no. 1 had not questioned the calculation of the service tax. It is also material to note that the impugned notice also proceeds on the basis of the dues as quantified by the petitioner. The respondents have calculated the amount of tax payable on the basis of the balance sheets of the petitioner as ₹41,46,688/-, which is materially similar to the computation as furnished by the petitioner (with the difference of ₹11/- only) - it is clear that the tax dues had been quantified as required under Section 121(r) of the Finance Act (No. 2), 2019. The impugned order rejecting the petitioner s declaration on the ground that investigation has not been concluded and hence the demand has not been estimated or concluded on or before the stipulated date is unsustainable. The Scheme does not exclude taxpayers in respect of whom investigations have not been concluded; it expressly includes taxpayers in respect of whom investigation, enquiry or audit is pending - petition allowed.

Issues Involved:
1. Whether the service tax amount payable by the petitioner was quantified before the stipulated date (30.06.2019).
2. Whether the petitioner is entitled to the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
3. Validity of the demand-cum-show cause notice issued by the Principal Commissioner of Central Excise, Goods & Service Tax.

Issue 1: Quantification of Service Tax Amount

The principal controversy to be addressed in the present petition is whether the amount of service tax payable by the petitioner was quantified before the stipulated date, that is, before 30.06.2019.

According to the respondents, the petitioner is not entitled to the benefit of the Scheme as at the material time, the investigation concerning the petitioner was pending and the amount of service tax was not "˜quantified' within the meaning of Clause (r) of Section 121 of the Finance Act (No. 2), 2019.

Section 123 of the Finance Act (No. 2), 2019 defines the expression "tax dues" and includes cases where enquiry, investigation, or audit was pending but the dues had been quantified.

The expression "quantified" has been defined under Section 121(r) of the Finance Act (No. 2), 2019 as: "a written communication of the amount of duty payable under the indirect tax enactment."

It must necessarily mean a case where enquiry, audit, or investigation is pending but the quantification of the tax dues is ascertainable from a written communication on record.

The CBIC had clarified that such written communication will include a letter intimating duty demand; or duty liability admitted by the person during enquiry, investigation, or audit; or audit report etc.

Issue 2: Entitlement to the Scheme

The petitioner has filed the present petition impugning an order dated 02.03.2020, whereby its declaration dated 26.12.2019 under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 was rejected.

The Scheme was introduced to settle the legacy cases and to allow quick closure of pending litigations centering around service tax and excise duty.

Section 125(1) of the Finance Act (No. 2), 2019 posits that all persons, except those as stipulated, would be eligible to make a declaration under the Scheme.

The legislative intent in enacting Chapter V of the Finance Act (No. 2), 2019 (the Scheme) was to maximize the sweep of the Scheme, covering all situations where tax was payable except those cases, which were expressly excluded.

The petitioner filed a declaration in terms of the Scheme under the category, "Investigation, Enquiry or Audit" and sub-category, "Investigation By Commissionerate".

The impugned order rejecting the petitioner's declaration on the ground that "investigation has not been concluded and hence the demand has not been estimated or concluded on or before the stipulated date" is unsustainable.

Issue 3: Validity of the Demand-Cum-Show Cause Notice

The petitioner also impugns a demand-cum-show cause notice dated 30.12.2020 issued by the Principal Commissioner of Central Excise, Goods & Service Tax under Section 73(1) of the Finance Act, 1994.

The impugned notice was issued on the premise that the petitioner's dues have not been settled.

The respondents shall process the petitioner's declaration in accordance with the Scheme. Since the impugned notice has been issued to the petitioner on the premise that the petitioner's dues have not been settled, the same also is set aside.

Conclusion:

The petition is allowed. The respondents shall process the petitioner's declaration in accordance with the Scheme. The impugned demand-cum-show cause notice is set aside.

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