2021 (7) TMI 24 - HC - Service Tax

Levy of tax which was claimed under Form SVLDRS-1 - the application under the scheme was rejected on the ground of late filing of returns - penalty and interest for late payment of tax for late filing of returns, liable to be imposed but was not imposed - opportunity of hearing not provided to the petitioner - HELD THAT - According to the Scheme, once an assessee avails the Scheme and files the return by declaration, the verification of declaration by the designated Committee was prescribed under Section 126 of the SVLDRS Scheme and the issue of statement by the designated committee is covered under Section 127 of the SVLDRS Scheme - As per Section 127 of the SVLDRS Scheme, when the declaration made by the petitioner was rejected, meaning thereby he would be liable to pay further interest and penalty on late payment and return. However, to levy any such liability under Section 127 of the SVLDRS Scheme, under Section 127(3), it mandates that after the issue of estimate under Section 127(2), the designated committee shall give opportunity of being heard to the declarant, if he so desires, before issuing the statement indicating the amount payable by the declarant. The order which is on record whereby the declaration of the petitioner was rejected, meaning thereby he would be liable to pay the additional amount, which would be a levy imposed. In order to impose such levy, the designated committee was duty bound to hear the petitioner by giving him an opportunity of hearing. Considering the benevolent scheme which has been set into motion by the respondents, the petitioner was required to be heard even otherwise under the statutory mandate. The case is remitted back to the designated committee with a direction to give an opportunity of hearing to the petitioner by adhering to the rules of natural justice - Petition allowed by way of remand.

Summary

Issues:
Challenge to levy of tax under SVLDRS Scheme 2019, rejection of Form SVLDRS-1 without opportunity of hearing, interpretation of provisions of SVLDRS Scheme 2019, duty of designated committee to provide opportunity of hearing before imposing additional liability.

Analysis:
The writ petition challenges the levy of tax claimed under Form SVLDRS-1 under the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019. The petitioner filed service tax returns late for the period from April 2014 to September 2018, without paying interest or penalty. The petitioner applied under the SVLDRS Scheme seeking waiver from interest and penalty as promised. The order summarily rejecting the Form SVLDRS-1 without a hearing was challenged by the petitioner. The petitioner contended that the rejection order imposed a duty to pay penalty and interest without providing an opportunity of hearing.

The SVLDRS Scheme 2019 was introduced by the Government to resolve legacy disputes, providing eligible persons with the opportunity to declare and resolve tax issues. The Scheme aimed to end existing or previous disputes in a benevolent manner. Section 125 of the SVLDRS Scheme outlines the eligibility criteria for making declarations, excluding certain categories of individuals. Once an assessee avails the Scheme and files a return by declaration, the designated Committee verifies the declaration under Section 126 and issues a statement under Section 127.

The rejection of the petitioner's Form SVLDRS-1 by the Committee was based on ineligibility, as no relief for late fee/penalty was requested in the application. The rejection implied that the petitioner would be liable to pay further interest and penalty. However, under Section 127(3) of the SVLDRS Scheme, the designated committee is mandated to provide an opportunity of being heard before imposing additional liabilities. The petitioner was entitled to this opportunity under the statutory mandate and principles of natural justice.

The Court set aside the rejection order and remitted the case back to the designated committee with directions to provide the petitioner with an opportunity of hearing in accordance with the rules of natural justice. The designated committee was instructed to pass orders in accordance with the law after hearing the petitioner. Consequently, the writ petition was allowed to the extent indicated above.