2025 (1) TMI 226 - HC - Service Tax

Duplication of a part of the demand already confirmed - respondent had failed to make mandatory pre-deposit - Revenue not heard during the appeal process before the Commissioner of Service Tax (Appeals II) - violation of principles of natural justice - HELD THAT - As per Section 124 (2) of the Sabkha Vishwas Legacy Disputes Resolution Scheme, 2019, any amount paid under pre-deposit at any stage of Appellate proceedings under the Indirect tax enactment or as deposit during enquiry, investigation or audit, shall be deducted when issuing the statement indicating the amount payable by the declarant. It stands confirmed that a sum of Rs. 19,15,491/- was paid in excess of amount demanded from the respondent vide Order in Original No. 48/2016 -2017 ST-II dated 14.10.2016, in respect of the second mentioned show cause notice covering the period between April 2008 and March 2010 - The amount that was paid prior to passing of the Order-in-Original No. 48/2016 for a sum of Rs. 99,94,773/- was eligible for being set off against the tax liability of the respondent under the Scheme for the period under dispute covered by the 2nd demand in Show Cause Notice as confirmed by the Order in Original No. 48/2016 dated 14.10.2016 as there was an excess amount of Rs. 15,18,561/- (Rs. 99,94,773/- 84,76,212/-) paid by the petitioner against demand comprised in Order-in-Original No. 48/2016 dated 14.10.2016. Though, the aforesaid sum of Rs. 15,18,561/- cannot be refunded back, it can be adjusted towards the amount payable under the scheme for the demand confirmed vide Order-in-Original No. 48/2016 dated 14.10.2016 for the period mentioned in the second mentioned show cause notice which is the subject matter of the present dispute - The balance amount of Rs. 15,80,561/- (Rs. 99,94,773 Rs.84,76,212) is to be allowed for adjustment towards the amount determined in SVLDRS III dated 06.12.2019. The balance amount of Rs. 15,80,561/- (Rs. 99,94,773 Rs.84,76,212) is to be allowed for adjustment towards the amount determined in SVLDRS III dated 06.12.2019. Conclusion - The duplication of tax demands should be corrected and that excess pre-deposits can be adjusted under the SVLDRS. The amount of Rs. 15,80,561/- (Rs. 99,94,773 - Rs.84,76,212) has to be adjusted towards liability of the respondent under SVLDRS Scheme 2019. Thus, out of the aforesaid amount of Rs. 15,80,561/- (Rs. 99,94,773 Rs.84,76,212/-), a sum of Rs. 8,75,075/- ought to have been adjusted. The balance of Rs. 7,05,546/- Rs. 15,80,561/- (-) Rs. 8,75,015/- is however, not refundable back to the respondent in terms of proviso to Section 124 (2) of the Act. Appeal dismissed.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment primarily revolves around the following core issues:

Whether the demand of Rs. 19,15,491/- was correctly identified as a duplication of tax demands under two separate Show Cause Notices (SCNs).
Whether the principles of natural justice were violated by not hearing the Revenue during the appeal process before the Commissioner of Service Tax (Appeals II).
Whether the excess pre-deposit made by the respondent should be adjusted towards the liability under the Sabkha Vishwas Legacy Disputes Resolution Scheme, 2019 (SVLDRS).
The interpretation and application of Section 130 of the Finance Act and Section 124 of the SVLDRS regarding the adjustment and refund of pre-deposits.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Duplication of Tax Demands

Relevant Legal Framework and Precedents: The case involved two SCNs with overlapping periods, leading to a duplication of tax demands. The relevant legal framework includes the Finance Act and the Central Excise Act.
Court's Interpretation and Reasoning: The court found that there was indeed a duplication of demands for the periods December 2008 to January 2010 under two separate SCNs. The court concluded that the demand of Rs. 19,15,491/- was duplicated.
Key Evidence and Findings: The court relied on the findings of the Commissioner of Service Tax (Appeals) who confirmed the duplication.
Application of Law to Facts: The court applied the provisions of the Finance Act and the Central Excise Act to determine that the duplication was not justified.
Treatment of Competing Arguments: The Revenue's argument that the duplication should not be considered was rejected based on the evidence of overlapping periods.
Conclusions: The court concluded that the demand was duplicated and should be adjusted accordingly.

Issue 2: Principles of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice require that both parties be heard. However, the applicable legal provisions did not mandate a hearing for the Revenue during the first appeal.
Court's Interpretation and Reasoning: The court noted that the Finance Act did not require the Revenue to be heard in the first appeal, and the panel counsel for the Revenue was present during the proceedings.
Key Evidence and Findings: The court found that the Revenue had the opportunity to request a hearing but did not do so.
Application of Law to Facts: The court applied the provisions of the Finance Act and concluded that there was no violation of natural justice.
Treatment of Competing Arguments: The Revenue's argument of a violation of natural justice was rejected as misconceived.
Conclusions: The court concluded that there was no violation of the principles of natural justice.

Issue 3: Adjustment of Excess Pre-deposit

Relevant Legal Framework and Precedents: The SVLDRS and the Finance Act govern the adjustment of pre-deposits. Section 124 and Section 130 were particularly relevant.
Court's Interpretation and Reasoning: The court interpreted the provisions to allow the adjustment of excess pre-deposits towards the liability under the SVLDRS.
Key Evidence and Findings: The court found that the respondent had made an excess pre-deposit which should be adjusted against the tax liability.
Application of Law to Facts: The court applied the provisions of the SVLDRS to conclude that the excess amount should be adjusted.
Treatment of Competing Arguments: The Revenue's argument that the excess amount should not be adjusted was rejected.
Conclusions: The court concluded that the excess pre-deposit should be adjusted towards the respondent's liability under the SVLDRS.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The revenue agrees in counter that the demand of Rs. 19,15,941/- is duplicated. Hence, according to them, the demand under OinO2 stands reduced to Rs.10,00,775/-of which 30%, as per the Scheme, is a sum of Rs.3,00,232.50."
Core Principles Established: The judgment established that duplication of tax demands should be corrected and that excess pre-deposits can be adjusted under the SVLDRS.
Final Determinations on Each Issue: The court determined that the demand was duplicated, there was no violation of natural justice, and the excess pre-deposit should be adjusted.

← Previous