2024 (11) TMI 726 - HC - Service Tax

Wrongly availement of Input Tax Credit (ITC) - Scope of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - HELD THAT - Section 120 introduced the scheme. It was duly notified to come into force. Pursuant thereto by circular dated 27th August, 2019, Central Board of Indirect Taxes and Customs elaborated on it. Petitioner relies on declaration of law made by the Supreme Court in Merino Panel 2022 (12) TMI 453 - SUPREME COURT that circulars issued by revenue are binding on it. The circular says, dispute resolution and amnesty are the two components of the scheme. It is aimed at liquidating the legacy cases locked up in litigation at various forums, whereas the amnesty component gives an opportunity to those who have failed to correctly discharge their tax liability, to pay the tax dues. The circular also says, it may be appreciated that ambit of the scheme is very wide. Section 125 (1) in the Finance Act provides for eligibility of persons to make a declaration under the scheme. There has been no submission made to effect petitioner was or is ineligible to have applied under the scheme. The allegation against petitioner is, it did not make the deposit. That is the effect of forms SVLDRS-2 and 3. So in considering petitioner s contention, of application of the scheme to it and liquidation of the legacy tax demand in the prior period by adjustment of its ITC, we have to adjudicate whether it is entitled to issuance of discharge certificate SVLDRS-4. There has been demonstration that the exact amount demanded under the SCN, petitioner claimed to have paid by adjustment of the ITC. Contention of revenue is omission of required deposit of the wrongly availed ITC, as had been intimated by issuance of SVLDRS-2 and 3. Only then can there be determination of final amount payable under the scheme. There is no dispute that petitioner was entitled to the accumulated credit. Application of it for utilisation to pay tax on outward services was disputed by revenue as ineligible or partially so. Going by clause (c) in said circular dated 27th August, 2019, petitioner s contention fits as a certain matter, where tax was paid by utilizing input credit and the matter is under dispute. The circular requires that in such cases, the tax already paid shall be adjusted by the designated committee at the time of determination of the final amount payable under the scheme. In the circumstances revenue is bound to cause the adjustment, which will leave balance tax to be paid, under the scheme, as nil. Writ petition is allowed. Opposite party no.1 is directed to issue SVLDRS-4 within four weeks of communication of certified copy

Summary

Issues:
Interpretation of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for adjustment of wrongly availed Input Tax Credit (ITC) and issuance of discharge certificate SVLDRS-4.

Analysis:
The petitioner, represented by a senior advocate, sought a mandamus to command the revenue to issue the SVLDRS-4 discharge certificate. The petitioner had applied under the Sabka Vishwas Scheme, indicating payment of the entire demand by adjustment of the ITC. The revenue disputed the eligibility of the petitioner to benefit from the scheme, alleging that the petitioner did not make the required deposit. The revenue argued that the petitioner was required to pay 50% of the litigated amount under the SVLDR Scheme, but the petitioner claimed to have paid the entire disputed amount. The revenue contended that the petitioner wrongly availed the ITC and was not entitled to the scheme's benefits. The court examined the relevant sections of the Finance Act and circulars issued by the revenue, emphasizing the binding nature of such circulars.

The circular explained that the scheme aimed at resolving disputes and providing amnesty to those who failed to discharge their tax liability correctly. The court noted that the scheme's ambit was wide and that eligibility to make a declaration under the scheme was not in question for the petitioner. The petitioner's application under the scheme was related to the demand under the show cause notice, intending to adjust the entire demand by ITC without claiming amnesty. The circular provided for adjustment of tax paid through input credit in disputed matters, which was to be determined by the designated committee for final payment under the scheme.

The court found that the petitioner's case fell under the clause in the circular regarding adjustment of tax paid through input credit in disputed matters. The revenue was obligated to cause the adjustment, leaving the balance tax to be paid under the scheme as nil. Therefore, the court allowed the writ petition and directed the revenue to issue the SVLDRS-4 discharge certificate within four weeks. The judgment disposed of the writ petition, ruling in favor of the petitioner based on the interpretation of the scheme and circular provisions.