2024 (6) TMI 1267 - HC - Service Tax

SVLDRS - Initiation of proceeding under Section 129 (2) (c) of the Finance Act 2019 without a finding that any material particular furnished by the declarant in the declaration is false - correctness of the proceeding - voluntary disclosure under the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 (SVLDRS 2019) - HELD THAT - Under Section 129 (2) (c) of the SVLDRS 2019 in a case of voluntary disclosure where any material particular furnished in the declaration is subsequently found to be false within a period of one year of issue of discharge certificate it shall be presumed as if the declaration was never made and proceedings under the applicable indirect tax enactment shall be instituted. Therefore before instituting proceedings under the applicable indirect tax enactment there has to be a finding in a case of voluntary disclosure that a material particular that was furnished in the declaration was false - The Authority should first come to a finding based on the declaration filed that a material particular (and not any particular) furnished in the declaration was false. In the impugned letter the Authority only refers to Section 126 (1) of the Finance (No. 2) Act 2019 read with Rule 6 (1) of the SVLDRS 2019 and Section 129 (2) (c) of the SVLDRS 2019 read with Clause 8 of a Circular and straight away proceeds to say in view of the above you are requested to provided the following documents. As there is no finding that a material particular in the declaration was false and which was that material particular the impugned communication dated 9th November 2020 is quashed and the communication dated 13th November 2020 is followed. Petition disposed off.

Summary

Issues:
1. Interpretation of Section 129 (2) (c) of the SVLDRS, 2019 regarding initiation of proceedings in case of voluntary disclosure.
2. Legality of re-investigation or calling for further documents after issuance of discharge certificate under SVLDRS, 2019.

Analysis:
The High Court of Bombay, in a judgment delivered by K.R. Shriram & Jitendra Jain, JJ., addressed the issue of whether proceedings can be initiated under Section 129 (2) (c) of the Finance Act, 2019 in a case of voluntary disclosure under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS, 2019) without a finding that any material particular furnished by the declarant in the declaration is false. The Court held that before instituting proceedings under the applicable indirect tax enactment in a case of voluntary disclosure, there must be a finding that a material particular furnished in the declaration was false. The Court emphasized the importance of this requirement to prevent unnecessary litigation and ensure fairness. The judgment highlighted that the SVLDRS, 2019 was intended to minimize litigation, not create fresh disputes.

The Court examined a case where the petitioner had filed an application under the SVLDRS-1 for voluntary disclosure for a service tax matter. After the discharge certificate was issued under Section 127(8) of the SVLDRS, 2019, the petitioner received a communication calling for further documents. The petitioner challenged this communication, arguing that it was contrary to the purpose of the SVLDRS, 2019. The respondents contended that Section 129 (2) (c) permits reopening of the declaration in a case of voluntary disclosure, empowering the officer to request additional documents. However, the Court noted that the impugned communication did not contain a finding that a material particular in the declaration was false, as required by the law.

Based on the lack of such a finding, the Court quashed and set aside the impugned communication and subsequent follow-up communication. The judgment emphasized the need for a specific finding of falsity regarding a material particular in the declaration before initiating proceedings under the applicable indirect tax enactment. This decision reaffirmed the importance of adherence to procedural requirements to maintain the integrity of the SVLDRS, 2019 and prevent unwarranted disputes. The petition was disposed of in favor of the petitioner, emphasizing the significance of procedural fairness and legal compliance in matters of voluntary disclosure under the SVLDRS, 2019.