2021 (1) TMI 67 - HC - Service Tax

Sabka Vishwas (Legacy) Dispute Resolution Scheme, 2019 - delay in payment due to adjustment of amounts paid by the insurance company against the payment under the scheme - stance of the respondents that on a technicality of payment under a separate head, the compensation payable by the insurance company would not be adjusted against the dues under the scheme, is not in accordance with the purpose and intent of the scheme - HELD THAT - The dues payable by the Petitioner has now been crystallised at ₹ 2,56,91,472/-. On payment of this amount, under the scheme, the Petitioner would have cleared its entire liability to the central excise authorities. The compensation being paid by the 6th Respondent is ₹ 4,60,73,182/-. This would mean that the entire due of the Department is being cleared and a surplus of ₹ 2,03,81,710/- would remain. The stand of the Respondents appears to be that the Petitioner should raise a further sum of ₹ 2,56,91,472/- to be paid under the correct head and then seek refund of the compensation amount of ₹ 4,60,73,182/-. The stance of the respondents that on a technicality of payment under a separate head, the compensation payable by the insurance company would not be adjusted against the dues under the scheme, is not in accordance with the purpose and intent of the scheme. As pointed out by the Hon ble High Court of Delhi, in Seventh Plane Networks Private Limited v. Union of India and ors., 2020 (8) TMI 343 - DELHI HIGH COURT , a liberal interpretation has to be given to the SVLDRS, 2019 as its intent is to unload the baggage relating to legacy disputes under the Central Excise and Service Tax and to allow the businesses to make a fresh beginning. The stand of the Respondents in this regard is clearly hyper technical and arbitrary. The further stand of the Respondents that the last date for payment has expired on 30.09.2020 is also not acceptable. The delay in receiving payment is on account of the refusal of the Respondent No.3 to adjust the compensation amount payable by the 6th Respondent against the crystallised due under the scheme. The 6th Respondent had also issued the discharge voucher on 29.9.2020 and as such it cannot be said that the offer to pay had not been made before the last date. The Petitioner and the 3rd Respondent or such authorised officer on behalf of the central excise department shall sign and submit the Joint discharge voucher to the 6th Respondent within a period of 2 weeks from the date of receipt of this order - Petition disposed off.

Summary

Issues:
1. Adjustment of insurance compensation against dues under Sabka Vishwas Scheme
2. Refusal of authorities to allow adjustment of compensation
3. Legal interpretation of Sabka Vishwas Scheme provisions
4. Petitioner's entitlement to benefit under the scheme
5. Court's direction regarding adjustment and payment process

Adjustment of insurance compensation against dues under Sabka Vishwas Scheme:
The petitioner, a manufacturer of sponge iron, faced attachment of goods by Central Excise authorities due to non-payment of central excise. The petitioner applied under the Sabka Vishwas (Legacy) Dispute Resolution Scheme, 2019 to settle all liabilities. The authorities calculated the due amount as ?2,56,91,472, payable by 30.06.2020, extendable to 30.09.2020. The petitioner, unable to raise funds, requested to sell the attached sponge iron to adjust proceeds against the scheme's payment.

Refusal of authorities to allow adjustment of compensation:
The petitioner's sponge iron, insured for ?10 crores, got damaged in a natural calamity. The petitioner sought to adjust the insurance compensation against the scheme's dues. However, the authorities rejected this request, citing separate accounting head requirements mandated by RBI. The petitioner challenged this refusal in a writ petition, also contesting the stoppage of waybill issuance by state taxation authorities.

Legal interpretation of Sabka Vishwas Scheme provisions:
The respondents argued that the scheme did not allow adjustment of amounts received from insurance companies against scheme dues. The petitioner contended that such adjustment should be permitted, emphasizing the intent of the scheme to resolve legacy disputes and enable a fresh start for businesses. The court noted the hyper-technical and arbitrary stance of the respondents and emphasized a liberal interpretation of the scheme's provisions.

Petitioner's entitlement to benefit under the scheme:
The petitioner's counsel argued that the petitioner should be allowed to adjust the insurance compensation against the scheme's dues, asserting readiness of the insurance company to pay the compensation as directed by the court. The authorities contended that as no payment was made under the scheme by the specified date, the benefit was no longer available to the petitioner.

Court's direction regarding adjustment and payment process:
The court directed the petitioner and the concerned authorities to sign and submit a joint discharge voucher to the insurance company for compensation payment. Upon receipt, the insurance company was to deposit the compensation amount with the authorities, who would adjust the scheme's dues and remit any surplus to the petitioner. The court emphasized the need for a pragmatic approach in resolving the matter and issued specific directions for the payment and adjustment process.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the case and the court's decision regarding the adjustment of insurance compensation against dues under the Sabka Vishwas Scheme.