2021 (3) TMI 294 - HC - Service Tax

Rejection of application under SVLDRS - Effect of remanding back the order by the Tribunal for De-Novo adjudication - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - seeking to direct the respondents to accept its application in terms of the said scheme under the category of litigation - seeking direction to the respondents to accept the subsequent application of the petitioner in terms of the said scheme under the category of arrears after quashing its rejection on 30.01.2020 - HELD THAT - From a perusal of the order dated 08.11.2019, it is seen that in the appeal, petitioner No.1 had challenged the order-in-original on the ground of erroneous computation in determining duty liability resulting in higher duty liability; impropriety in imposition of penalty etc. However, at the time of hearing, it was primarily argued that the show cause notice dated 24.12.2014 was barred by limitation. Therefore, the duty liability etc. beyond the period of limitation could not have been levied. CESTAT came to the conclusion that the adjudicating authority did not apply its mind to the essential aspect of limitation which has a bearing on the outcome of the process initiated by the show cause notice. Therefore, the impugned order-in-original was set aside and the matter was remanded back to the original authority for a fresh decision on the point of limitation after granting an opportunity to the appellant (petitioner No.1 herein) to be heard on all the submissions made in the appeal - What therefore transpires from the above is that firstly, the order-in-original dated 16.06.2015 has been set aside. When the original order passed by the primary authority is set aside by the appellate authority, the legal consequence would be that the original order would cease to remain on record. It would stand erased from the record as if it was never passed. The second aspect is that the question of limitation was found to be the main point by CESTAT because it goes to the root of the demand. If this is upheld then the demand would not survive; but if it is negatived then the demand can certainly be assailed on other grounds since the order-in-original dated 16.06.2015 no longer subsists. This means that the petitioners have been reverted to the stage of hearing by the adjudicating authority on the show cause notice, reply to which was filed by the petitioners. But this hearing after remand has not taken place till date. In the meanwhile, central government introduced the scheme through the Finance (No.2) Act, 2019. The situation which arises in the present case is not covered by the eligibility exclusions under sub-section (1) of section 125 or under any of the provisions of the scheme. This is so because though the appeal of petitioner No.1 was heard by CESTAT on 10.05.2019 (which was certainly prior to 30.06.2019), it was finally disposed of subsequently on 08.11.2019. While disposing of the appeal, CESTAT set aside the order in original dated 16.06.2015 and remanded the matter back to the adjudicating authority for de novo decision on the show cause notice dated 24.12.2014 firstly by confining to the point of limitation - the decision of the designated committee i.e., respondent No.2 dated 13.01.2020 rejecting the declaration of petitioner No.1 under the litigation category on the ground of ineligibility was not correct and is liable to be interfered with. Since we have arrived at this finding, it would not be necessary for us to proceed to the subsequent declaration under the arrears category and its rejection by respondent No.2 on 30.01.2020. Matter remitted back to respondent No.2 to take a fresh decision in accordance with law after giving due opportunity of hearing to the petitioners by treating its declaration dated 12.12.2019 under the litigation category as a valid declaration - petition allowed by way of remand.

Issues Involved:
1. Rejection of the petitioner's application under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 under the "litigation" category.
2. Rejection of the petitioner's subsequent application under the "arrears" category.
3. Eligibility criteria under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
4. Principles of natural justice and opportunity of hearing.

Detailed Analysis:

1. Rejection of the Petitioner's Application under the "Litigation" Category:
The petitioners sought quashing of the rejection of their application under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, by respondent No.2 on 13.01.2020. The rejection was based on the ground of ineligibility, as the appeal was finally heard before 30.06.2019 by CESTAT. The petitioners argued that the rejection was erroneous since, as of the date of the declaration, the appeal had been disposed of by setting aside the original order and remanding the matter back to the adjudicating authority. The court noted that the order-in-original dated 16.06.2015 had been set aside by CESTAT, and the matter was remanded for a fresh decision, primarily on the ground of limitation. Therefore, the petitioners were reverted to the stage of the show cause notice, and no fresh adjudication order was passed. The court held that the rejection on the ground of ineligibility was incorrect as the petitioners were eligible to file a declaration under the litigation category.

2. Rejection of the Petitioner's Subsequent Application under the "Arrears" Category:
The petitioners also sought quashing of the rejection of their subsequent application under the "arrears" category on 30.01.2020. The rejection was based on the ground that the case had been remanded back for a decision by the competent authority in November 2019, and the issue had not yet attained finality as of the date of the declaration. The court noted that the rejection of the subsequent declaration on the ground of ineligibility due to the remand for fresh decision was contrary to the reasons given for rejecting the first declaration. The court observed that the designated committee had taken into consideration relevant factors post 30.06.2019 while determining eligibility.

3. Eligibility Criteria under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019:
The court examined the provisions of the scheme, particularly sections 124 and 125 of the Finance (No.2) Act, 2019. Section 124(1)(a) provides relief to a declarant where the tax dues are relatable to a show cause notice or one or more appeals pending as on 30.06.2019. Section 125(1)(a) states that a person whose appeal was finally heard on or before 30.06.2019 would be ineligible to make a declaration. The court referred to the FAQs issued by the Board, which clarified that post 30.06.2019 developments could be considered for determining eligibility. The court concluded that the petitioners were eligible to file a declaration under the litigation category as the original order was set aside, and the matter was remanded for a fresh decision.

4. Principles of Natural Justice and Opportunity of Hearing:
The court emphasized the importance of granting an opportunity of hearing to the petitioners before rejecting their declarations. The petitioners were not granted any hearing before the rejection of both declarations. The court held that the rejection of the declarations without granting an opportunity of hearing violated the principles of natural justice. The court directed respondent No.2 to take a fresh decision on the petitioners' declaration under the litigation category after granting a due opportunity of hearing.

Conclusion:
The court set aside the decision of respondent No.2 dated 13.01.2020, rejecting the petitioner's declaration under the litigation category, and remanded the matter back to respondent No.2 for a fresh decision in accordance with law after granting a due opportunity of hearing to the petitioners. The court did not proceed to examine the subsequent declaration under the arrears category as the first rejection was found to be incorrect. The writ petition was allowed to the extent indicated, with no order as to costs.

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