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2024 (9) TMI 117 - HC - Service TaxEligibility to make a declaration to get benefit under the provisions of SVLDRS - appropriation of amount quantified in audit report from the eligible refund to the petitioner under Section 16 of the IGST Act read with Section 54 of the CGST Act read with Rule 89 of the CGST Rules 2017 - Rejection of the 27 Forms of SVLDRS 1 filed by the petitioner under the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2015 - sanction/ rejection of refund of the petitioner by adjusting outstanding arrears of service tax from the eligible refund to the petitioner - petitioner did not discharge the service tax liability either in full or in part. It is the case of the petitioner that after filing the returns, the petitioner voluntarily discharged some tax liability through various challans. Whether the petitioner is eligible to make a declaration to get benefit under the provisions of SVLDRS or not? - HELD THAT - On perusal of the provisions of the scheme, it is clear that the petitioner would not be eligible to make a declaration as per Section 125 (1) (e) as the audit in case of the petitioner was initiated prior to 30.06.2019 and the amount of duty involved in the audit was not quantified on 30.06.2019. The question of applicability of Section 123 determining the Tax Dues for the purpose of the Scheme would arise only if the petitioner was eligible to make declaration under the Scheme, however the petitioner falls in exception in clause (e) of section 125 (1) of the Act as the petitioner was subjected to audit and amount of duty involved in audit was not quantified on or before 30.06.2019. Therefore, the respondent authorities have rightly rejected 27 declarations filed by the petitioner at the threshold relying upon the final audit report issued after 30.06.2019. Reliance placed by the petitioner on the decision of Honorable Kerala High Court in case of Hi-Lite Projects Private Limited Vs. The Joint Commissioner, Central Tax and Central Excise 2020 (9) TMI 1069 - KERALA HIGH COURT would not be applicable as the petitioner is found to be ineligible to make a declaration as per the provision of Section 125 (1) (e) of the Scheme. The attempt made by the learned advocate for the petitioner to draw parity between the facts of the case before the Honorable Kerala High Court and the facts of the present case, it is pertinent note that in the facts of the case, admittedly the audit was in process on 30.06.2019 and no show-cause notice was issued as was the case before the Kerala High Court and the amount was quantified by audit after 30.06.2019 and therefore as per the provisions of Section 125 (1) (e) of the Scheme, the petitioner would fall within the exception and would be ineligible to get benefit of the Scheme. Whether the respondent authorities were justified in appropriating the amount quantified in audit report from the refund claim of the petitioner? - HELD THAT - The petitioner had paid an amount of Rs. 5,13,279/- during the course of audit voluntarily and out of the total dues of Rs. 60,40,619/- and accordingly there was outstanding amount quantified in audit report was Rs. 55,27,341/- after considering the payment made by the petitioner. Therefore, as per the proviso to Section 73 of the Finance Act, 1994, the differential amount of Rs. 55,27,341/- could not have been adjusted/ appropriated out of the refund amount of the petitioner without issuing any show-cause notice or giving opportunity of hearing to the petitioner by the respondent authority while adjudicating the refund claim of the petitioner. The respondent authority while adjudicating refund claim was not justified in appropriating the same as outstanding dues as there was no quantified or outstanding service tax dues till that date and as such the rejection of the refund claim on such ground by making appropriation of the alleged outstanding dues is without any basis and contrary to the provisions of the Finance Act, 1994. The order-in-original dated 23.09.2019 and the Appellate order are hereby quashed and set aside and the matter is remanded back to the adjudicating authority to issue fresh show-cause notice to the petitioner and to provide an opportunity of hearing with regard to the refund claim made by the petitioner under Section 16 of the IGST Act read with Section 54 of the CGST Act and Rule 89 of the CGST Rules, 2017. Petition disposed off by way of remand.
Issues Involved:
1. Eligibility of the petitioner to make a declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS). 2. Justification of the respondent authorities in appropriating the amount quantified in the audit report from the eligible refund to the petitioner. Detailed Analysis: Issue 1: Eligibility to Make a Declaration Under SVLDRS 1. Background and Legislative Framework: - The petitioner, a manufacturer of steel furniture, challenged the rejection of 27 Forms of SVLDRS-1 filed under the SVLDRS, 2019. - The SVLDRS aims to reduce litigation under the pre-GST regime, allowing assessees to declare outstanding tax arrears as of June 30, 2019, and file applications in Form SVLDRS-1. 2. Petitioner's Argument: - The petitioner argued eligibility under Section 121(1)(c)(iii) of the Finance Act, 2019, claiming unpaid service tax liabilities as "amount in arrears." - The petitioner contended that the rejection was without due process, as no notice was issued under Sections 126 and 127 of the Scheme. 3. Respondent's Argument: - The respondents argued that under Section 125(1)(e) of the SVLDRS, the petitioner was ineligible since the audit was initiated before June 30, 2019, but the duty amount was not quantified by that date. - The respondents asserted that the petitioner's declarations were rightly rejected as the audit report quantifying the dues was issued after June 30, 2019. 4. Court's Analysis: - The court examined Sections 121, 123, 124, and 125 of the SVLDRS. - It concluded that the petitioner was ineligible under Section 125(1)(e) since the audit was initiated before June 30, 2019, and the duty amount was not quantified by that date. - The court noted that the petitioner's reliance on the Kerala High Court's decision in Hi-Lite Projects Private Limited was misplaced as the facts differed significantly. 5. Conclusion: - The court upheld the rejection of the 27 declarations, confirming the petitioner's ineligibility under the SVLDRS due to the timing of the audit and quantification of dues. Issue 2: Appropriation of Amount Quantified in Audit Report from Refund Claim 1. Background: - The petitioner challenged the adjustment of Rs. 42,10,947/- from the eligible refund towards outstanding service tax dues quantified in an audit report. - The petitioner claimed a refund under Section 16 of the IGST Act, read with Section 54 of the CGST Act and Rule 89 of the CGST Rules, 2017. 2. Petitioner's Argument: - The petitioner argued that the appropriation was done without issuing a show-cause notice or providing an opportunity for a hearing, violating principles of natural justice. - The petitioner contended that the refund claim should not have been adjusted without proper adjudication. 3. Respondent's Argument: - The respondents maintained that the adjustment was justified as the petitioner had admitted the liability during the audit. - They relied on the petitioner's letter dated July 19, 2019, where the petitioner agreed to pay the outstanding dues. 4. Court's Analysis: - The court referred to Section 73(3) of the Finance Act, 1994, which mandates issuing a show-cause notice before recovering any short-paid service tax. - It found that the respondents erred by not issuing a show-cause notice or providing a hearing before appropriating the refund. - The court held that the reliance on the petitioner's letter was insufficient for such appropriation without formal adjudication. 5. Conclusion: - The court quashed the order-in-original dated September 23, 2019, and the appellate order. - It remanded the matter back to the adjudicating authority to issue a fresh show-cause notice and provide an opportunity for a hearing regarding the refund claim. Final Disposition: - The petitions were disposed of, and the rule was made absolute to the extent of quashing the impugned orders and remanding the matter for fresh adjudication. No order as to costs was made.
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