2020 (10) TMI 3 - HC - Service Tax

Violation of the principles of natural justice - Issuance of Form SVLDRS-3 against the Declaration filed in Form SVLDRS-1 under Section 125 of the Finance Act, 2019 - rectification of the error in form SVLDRS-3 issued to the Petitioner - HELD THAT - As a one time measure for liquidation of past disputes of Central Excise and Service Tax, the SVLDR Scheme has been issued by the Central Government. The SVLDR Scheme has also been issued to ensure disclosure of unpaid taxes by an eligible person. This appears to have been necessitated as the levy of Central Excise and Service Tax has now been subsumed in the new GST Regime. From a reading of the statement of object and reasons, it is quite evident that the scheme conceived as a one time measure, has the twin objectives of liquidation of past disputes pertaining to central excise and service tax on the one hand and disclosure of unpaid taxes on the other hand. It is not in dispute that the Petitioner is an eligible person. The Petitioner filed a declaration in Form SVLDRS-1 on 27-12-2019 as per Rule 3 of the SVLDRS Rules for relief under Section 124(1)(c)(ii) of the Finance (No.2) Act, 2019. Thereafter SVLDRS-2 was issued by the Designated Committee. As per Rule 6(3) of the SVLDRS Rules, this form is issued along with an estimate of the amount payable by the declarant along with notice of an opportunity for personal hearing. It is also not in dispute that Form SVLDRS-2 states that the estimated tax payable by the petitioner under the Scheme is ₹ 71,11,033.80 - If an opportunity for personal hearing as contemplated in Rule 6(3) of the SVLDRS Rules was given to the Petitioner pursuant to Form SVLDRS-2 with an estimate of an amount of ₹ 71,11,033.80 payable by the declarant, which amount has been accepted by the Petitioner pursuant to Form SVLDRS-2A in accordance with Rule 6(4) of the SVLDRS Rules, then, we do not see any reason as to why when the amount payable is sought to be enhanced from ₹ 71,11,033.80 to ₹ 2,19,82,499/- no such opportunity of hearing was granted to the Petitioner. If at all the Designated Committee wanted to increase the payable amount, the least they should have done was to give an opportunity of hearing to the Petitioner after affording the Petitioner an opportunity to review the report of the jurisdictional divisional commissioner. Rectification application - Section 128 of the Finance Act - HELD THAT - It has been stated by the Respondents in their reply that they have considered the same but since there was no change in the amount after certification from the concerned authorities, they have not issued a revised SVLDRS-3. No order has been passed as contemplated under Section 128 of the Finance Act. This is not acceptable. Also the failure of the Respondents to pass an appropriate order under Section 128 of the Finance Act with respect of the Petitioner s rectification application and merely to state in the Reply Affidavit that since there was no change in the amount after certification from the concerned authorities, they have not issued revised Form SVLDRS-3 is in gross in breach of Rule 6(6) of the SVLDR Rules. Form SVLDRS-3 and Form SVLDRS-4 set aside - the Designated Committee under the SVLDR Scheme are directed to give an opportunity of hearing to the Petitioner and after considering all the material furnished - petition allowed.

Summary

Issues Involved:
1. Issuance of Form SVLDRS-3 demanding a higher amount than initially approved.
2. Inaction on the rectification application filed by the petitioner.
3. Violation of principles of natural justice.
4. Non-compliance with procedural requirements under the SVLDR Scheme.

Issue-wise Detailed Analysis:

1. Issuance of Form SVLDRS-3 demanding a higher amount than initially approved:
The petitioner challenged the issuance of Form SVLDRS-3, which demanded ?2,19,82,499/- against the initially approved amount of ?71,11,033.80 in Form SVLDRS-2. The petitioner argued that the Designated Committee did not provide any benefit for the amount already deposited/pre-deposited by the petitioner, which was beyond the declaration and acceptance.

2. Inaction on the rectification application filed by the petitioner:
The petitioner filed a rectification application under Section 128 of the Finance Act, requesting the Designated Committee to issue a revised Form SVLDRS-3 after considering the pre-deposited amount. Despite repeated reminders, the Designated Committee did not respond, compelling the petitioner to file this petition. The court noted that the Respondents' failure to pass an appropriate order on the rectification application was unacceptable and in breach of Rule 6(6) of the SVLDRS Rules.

3. Violation of principles of natural justice:
The court found that the Designated Committee's action of issuing Form SVLDRS-3 with an increased payable amount without granting the petitioner an opportunity for a hearing violated the principles of natural justice. The court emphasized that when a person faces adverse civil consequences, such as enhanced dues, compliance with principles of natural justice, including notice and hearing, is mandatory. The court held that the decision-making process was invalid due to non-compliance with these principles.

4. Non-compliance with procedural requirements under the SVLDR Scheme:
The court observed that the Respondents initially accepted the amount stated to be payable by the petitioner under the Scheme and issued Form SVLDRS-2 for ?71,11,033.80. However, without the petitioner's knowledge or notice, the Designated Committee issued Form SVLDRS-3 for ?2,19,82,499/-. The court noted that the verification report from the jurisdictional divisional commissioner, which formed the basis for the increased amount, was not shared with the petitioner. The court held that the Respondents' failure to provide an opportunity for the petitioner to review the report and be heard was a gross violation of natural justice principles.

Conclusion:
The court quashed and set aside Form SVLDRS-3 No. L060320SV301216 dated 06-02-2020 and Form SVLDRS-4 L030720SV400980 dated 03-07-2020. The Designated Committee was directed to provide an opportunity for a hearing to the petitioner and, after considering all material and submissions, issue appropriate orders, including revised Forms SVLDRS-3 and SVLDRS-4, within four weeks. The court clarified that it had not expressed any opinion on the merits of the matter and allowed the petition without any order as to costs.