2021 (3) TMI 136 - HC - Customs

Rejection of declaration under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - voluntary disclosure - reason for rejection was mentioned as being ineligible under section 125(1)(f)(i) read with section 121(m) of the Finance (No. 2) Act , 2019 - violation of principles of natural justice - HELD THAT - For determining eligibility under the category of 'voluntary disclosure', a great deal of discretion is vested on the designated committee, who has to decide eligibility on a case to case basis. Needless to say, when a discretion is conferred upon an authority to decide an issue which has civil consequences upon the party concerned, such discretion has to be exercised in a just, fair and reasonable manner complying with the principles of natural justice. Thus, while deciding eligibility, the designated committee is required to consider all relevant materials and also hear the concerned declarant. Having held so, let us deal with the contention of the petitioner that before a declaration is rejected, an opportunity of hearing should be granted to the declarant. Though we do not find any such express provision in the scheme laying down requirement of hearing before rejection of the declaration, we find from section 127 more particularly under sub-sections (3) and (4) thereof that if the designated committee upon verification, determines the amount payable by the declarant to be higher than what is declared by the declarant, then an opportunity of hearing should be granted to a declarant. This coupled with what we have discussed in paragraph 19 above, makes hearing before rejection obligatory. This aspect of the matter was gone into by this Court in Thought Blurb Vs. Union of India 2020 (10) TMI 1135 - BOMBAY HIGH COURT . It has been held that in a situation where the amount estimated by the designated committee is in excess of the amount declared by the declarant, an opportunity of hearing is required to be given by the designated committee to the declarant, then it would be in complete defiance of logic and contrary to the very object of the scheme to outrightly reject a declaration on the ground of being ineligible. Summary rejection of a declaration without affording any opportunity of hearing to the declarant would be in violation of the principles of natural justice impeaching the decision making process thus rendering the decision invalid in law. Since it is found that impugned rejection of the declaration of the petitioner is in violation of the principles of natural justice which has impacted the decision making process thus rendering the decision invalid, it may not be necessary for us to enter into the merits of the challenge as to whether the declaration of the petitioner was in fact valid or not under the category of 'voluntary disclosure'. This is a matter which should be best left to the designated committee to decide after granting opportunity of hearing to the petitioner. Petition disposed off.

Summary

Issues Involved:
1. Quashing of the order rejecting the petitioner’s declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
2. Direction to reconsider the petitioner’s declaration and grant relief under the scheme.
3. Quashing of the show cause cum demand notice issued by the Joint Commissioner, CGST & CX.

Issue-wise Detailed Analysis:

1. Quashing of the order rejecting the petitioner’s declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019:
The petitioner, a private limited company engaged in providing manpower services, submitted a declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, declaring service tax dues for the period from 01.04.2016 to 31.03.2017 amounting to ?39,26,235. However, the declaration was rejected via email dated 21.01.2020 on grounds of ineligibility under section 125(1)(f)(i) read with section 121(m) of the Finance (No. 2) Act, 2019. The rejection was based on a letter dated 24.07.2019 issued to the petitioner by the Assistant Commissioner, CGST & CX, Belapur Commissionerate, which highlighted discrepancies between the petitioner’s service tax return and income tax return for the financial year 2015-16. The petitioner contended that the rejection violated principles of natural justice as no opportunity of hearing was provided and the order was unreasoned.

2. Direction to reconsider the petitioner’s declaration and grant relief under the scheme:
The court examined various provisions of the scheme and noted that while section 125(1) generally allows all persons to make a declaration, ineligibility under voluntary disclosure is specifically addressed in clause (f)(i). It was highlighted that under the scheme, discretion is vested in the designated committee to decide eligibility on a case-to-case basis, which must be exercised in a just, fair, and reasonable manner, complying with the principles of natural justice. The court emphasized that an opportunity of hearing should be granted to the declarant before rejection, particularly when the decision has civil consequences. This principle was reinforced by previous judgments, including Thought Blurb Vs. Union of India, which underscored the necessity of hearing before rejection to avoid arbitrary decisions.

3. Quashing of the show cause cum demand notice issued by the Joint Commissioner, CGST & CX:
During the pendency of the writ petition, the Joint Commissioner issued a show cause cum demand notice dated 24.12.2020, demanding service tax amounting to ?54,40,259 for the periods 2015-16, 2016-17, and 2017-18. The petitioner amended the writ petition to challenge this notice as well. The court, while addressing the main issue of rejection of the declaration, directed that the respondents shall not proceed further with the show cause cum demand notice until the designated committee decides afresh on the petitioner’s declaration after granting an opportunity of hearing.

Conclusion:
The court set aside the order dated 21.01.2020 rejecting the petitioner’s declaration and directed the designated committee to reconsider the declaration under the category of 'voluntary disclosure' after providing an opportunity of hearing to the petitioner. The entire process was to be completed within eight weeks, and until then, the respondents were restrained from proceeding with the show cause cum demand notice dated 24.12.2020. All contentions were kept open, and the writ petition was disposed of without any order as to costs.