2020 (10) TMI 58 - HC - Service Tax

SVLDR scheme - recovery of short paid duty in terms of interest contemplated under Section 87 of Finance Act, 1994 - HELD THAT - This Court, without going into the other aspects relating to the 2019 Scheme, would confine this lis to the validity of the recovery notice issued by respondent No.4 as per Annexure-M. When this matter was heard at length, this Court had directed Sri K.V. Aravind, learned counsel appearing for the respondent Nos.1 to 5 to secure instructions in regard to break-up payments made by the petitioner. The petitioner has made payments in the months of April, May, June, till December, 2017 and on all these dates several payments are made towards the declared amount. If these payments are taken note of, then the computation of interest determined by the respondent No.4 runs contrary to Section 110 of Service Tax Voluntary Compliance Encouragement Scheme, 2013. On perusal of these payments made by the petitioner, prima facie, this Court finds that the interest is computed on the declared amount. In fact this Court is of the view that the interest should have been computed on unpaid dues and not on declared amount. Since the impugned notice clearly gives an indication that interest is levied without taking note of partial payments, I am of the view that the order under challenge is not sustainable and the same needs to be quashed with a direction to the respondent No.4 to re-compute the interest by taking note of the payments made on various dates towards the declared amount. Keeping open the contentions raised by the petitioner, writ petition is disposed of directing the respondent No.4 to re-compute the interest by taking note of the payments made on various dates by the petitioner towards the declared amount. The impugned recovery notice issued vide Annexure-M is quashed. The respondent - Bank is directed to permit the petitioner to operate the Bank Account over and above ₹ 5 lakhs - Petition disposed off.

Summary

Issues:
Challenge to recovery notice, Mandamus to consider application under SVLDR scheme, Grant of personal hearing, Refund of recovered amount, Validity of recovery notice, Computation of interest, Sustainability of order, Quashing of recovery notice, Recalculation of interest, Direction to maintain specific amount in bank account.

Analysis:
The petitioner filed a writ petition challenging a recovery notice issued by respondent No.1 and sought a mandamus to consider the application under the SVLDR scheme. The petitioner also requested a personal hearing and refund of INR 4,06,781 recovered illegally. The petitioner, engaged in Event Management and Air Travel Agent services, had applied for the VCES scheme for the period 2012-13. Despite paying 50% of the tax dues, financial constraints led to a delay in the remaining payment. The Assistant Commissioner proposed to recover short-paid duty, but the petitioner had paid the principal amount in full by 2019. The recovery notice indicated an interest amount of INR 17,29,765, which the petitioner contested in the writ petition.

Upon hearing both parties, the Court focused on the validity of the recovery notice issued by respondent No.4. The Court examined the petitioner's payment history and found the interest calculation incorrect. The Court noted that interest should have been computed on unpaid dues, not the declared amount. As the interest was levied without considering partial payments, the Court deemed the order unsustainable and directed respondent No.4 to recompute the interest based on the payments made towards the declared amount. The petitioner's counsel argued that the due amount would not exceed INR 5 lakhs, with interest at INR 7,03,733.58. Respondent's counsel agreed to this and suggested maintaining INR 5 lakhs towards recovery.

The Court disposed of the writ petition, quashing the recovery notice and directing respondent No.4 to recalculate the interest based on the payments made by the petitioner. The Bank was instructed to allow the petitioner to operate the account with a balance exceeding INR 5 lakhs, withholding the specified amount pending further consideration by respondent No.4. The Court did not address certain reliefs sought by the petitioner but kept the contentions open for future consideration.