2020 (9) TMI 1069 - HC - Service Tax

Rejection of SVLDR scheme - Section 125 (1) (e) of the Finance Act, 2019 - contention of the respondents is that the petitioner has filed the declarations after being subjected to an enquiry/ investigation/audit and hence he is not eligible to make declarations and avail the benefits of the Scheme - HELD THAT - The SVLDR Scheme has been introduced by the Government of India as an endeavour to unload the baggage relating to the legacy taxes that have been subsumed under GST and allow business to make a new beginning and focus on GST. Dispute Resolution and Amnesty are the two components of the SVLDR Scheme. The Dispute Resolution component 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 Scheme is incorporated in chapter V of the Finance Act, 2019. Paragraph 10(b) of Ext.P19 circular dated 27.08.2019 issued by the Government of India, Central Board of Taxes and Customs, would show that the Scheme is not available to an applicant who has been issued a show cause notice relating to refund or erroneous refund. It has potential to lead to an interpretation that such persons will not be able to opt for the Scheme for any other dispute as well, since the restriction is on the person in place of the case - As per the Scheme, as clarified in Ext.P19 circular, if a person has been issued a show cause notice and at the same time he also has other outstanding disputes which are covered under the Scheme, then he will be eligible to file declaration for other cases. Therefore, it is clear that any investigation pertaining to the period from 2014 to 2016 by the authorities should not affect the declarations made by the petitioner in respect of the period from April, 2016 onwards. The contention of the respondents is that the investigation pertains to the period 2016 17 also and the respondents are yet to quantify and communicate the amount due. The respondents are directed to consider Exts. P15 to P17 declarations made by the petitioner under the SVLDR scheme 2019. Ext.P18 letter dated 16.12. 2019 of the Joint Commissioner is set aside. The respondents are directed to place the afore declarations made by the petitioner before the Designated Committee. The Designated Committee is directed to decide the petitioner s applications/declarations after giving an opportunity of hearing to the petitioner - Petition disposed off.

Summary

Issues:
1. Eligibility of the petitioner to make a declaration under the SVLDR Scheme.
2. Rejection of the petitioner's declarations by the first respondent.
3. Interpretation of Section 125 of the Finance Act, 2019.
4. Impact of ongoing investigation on the petitioner's eligibility for the Scheme.

Analysis:

Issue 1: Eligibility of the petitioner to make a declaration under the SVLDR Scheme
The petitioner, a service tax assessee, sought to avail benefits under the SVLDR Scheme for tax arrears disclosed in filed returns. The Scheme aims to settle tax arrears and provide relief to declarants. The petitioner filed declarations under the Scheme (Exts.P15 to P17), seeking benefits. However, the first respondent rejected these declarations citing Section 125(1)(e) of the Finance Act, 2019, which deems a person ineligible if the duty amount from an ongoing enquiry or investigation is not quantified by a specified date. The dispute revolves around the petitioner's eligibility given the ongoing investigation.

Issue 2: Rejection of the petitioner's declarations
The rejection of the petitioner's declarations by the first respondent was based on the ongoing investigation by the Directorate of GST Intelligence against the petitioner for non-payment of service tax. The Designated Committee found the declarations non-acceptable under the Scheme, citing Section 125 of the Finance Act. The rejection was defended by the respondents, stating no irregularity in issuing the rejection communication (Ext.P18). The petitioner challenged this rejection seeking acceptance of the declarations and benefits under the SVLDR Scheme.

Issue 3: Interpretation of Section 125 of the Finance Act, 2019
Section 125 outlines the eligibility criteria for making declarations under the SVLDR Scheme. The contention arose as to whether the petitioner, being subject to an ongoing investigation, qualifies to make declarations under the Scheme. The interpretation of Section 125(1)(e) was crucial in determining the petitioner's eligibility, especially concerning the quantification of duty amount before a specified date.

Issue 4: Impact of ongoing investigation on the petitioner's eligibility for the Scheme
The ongoing investigation by the Directorate of GST Intelligence against the petitioner for the period from 2014 onwards raised questions about the petitioner's eligibility under the SVLDR Scheme. The respondents argued that the investigation was ongoing, and the duty amount had not been quantified. However, the petitioner contended that the duty amounts disclosed in filed returns should be considered as quantified for the purpose of the Scheme, as these were declared before the investigation proceedings were initiated.

In conclusion, the court directed the respondents to consider the petitioner's declarations under the SVLDR Scheme, setting aside the rejection communication. The Designated Committee was instructed to review the petitioner's applications after providing an opportunity for a hearing. The judgment emphasized the Scheme's intent to resolve legacy tax disputes and highlighted the need for a liberal approach in entertaining declarations under the Scheme while safeguarding the revenue's interest.