2022 (7) TMI 1118 - HC - Service Tax

Rejection of Form SVLDRS-1 - rejection of petitioner s declaration on the ground that as per final audit report dated 7 th November 2019 the amount of tax dues was not quantified before 30th June 2019 - HELD THAT - To see whether the duty demand was quantified on or before 30th June 2019, let us examine the audit report which was released to petitioner on 9th October 2019. In the audit report the dates on which audit was undertaken is given as 29th March 2019 and 1st April 2019. Though the audit was completed on these two dates the Monitoring Committee held its meeting on 8th July 2019 and the Monitoring Committee issued Minutes of the Meeting on 16th July 2019. This date of 16th July 2019 is what has been relied upon in the impugned rejection letter. First of all, we are unable to accept that the date on which the audit committee decides to have its meeting and issue Minutes of the Meeting can ever be stated to be the date on which the amount was quantified. Generally, the same members of the audit committee may have to carry out audit of various other declarants and it would be impossible for them to prepare Minutes of the Meeting over night. This is one of the reason the circular dated 27th August 2019 has been issued where it says that during the enquiry or audit the liability is admitted by the person in the audit report . As could be seen from the four audit objections mentioned above, the declarant has admitted the duty liability under each head. Since the audit was conducted on 29th March 2019 and 1st April 2019, these would be the dates on which the amount of duty has been quantified. Therefore, the amount of duty has been quantified on or before 30th June 2019. Therefore, draft of the Minutes of the Managing Committee has been prepared by June 2019 itself and hence it can be safely concluded that though there was audit, amount of duty quantified also has been quantified before 30th June 2019. In our view, therefore, rejection of petitioner s declaration on the ground that final audit report is issued after 30th June 2019 is incorrect. Respondents are directed to reconsider the declaration filed by petitioner and issue necessary discharge certificate in Form SVLDRS in accordance with law - petition allowed.

Summary

Issues Involved:
1. Validity of rejection of Form SVLDRS-1 filed by the petitioner.
2. Determination of the date of quantification of duty for eligibility under the SVLDRS scheme.

Issue-wise Detailed Analysis:

1. Validity of rejection of Form SVLDRS-1 filed by the petitioner:

The petitioner challenged the communication dated March 2020 from Respondent No.3, which rejected Form SVLDRS-1 filed on 17th December 2019. The petitioner, engaged in construction and renting of immovable property, had received a notice in February 2018 regarding an excise audit. Following the audit, the petitioner paid the outstanding service tax and informed the authorities. Subsequently, the petitioner applied for relief under the 'Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019' (SVLDRS) by filing Form SVLDRS-1. The respondent rejected the declaration on the grounds that the tax dues were not quantified before the cut-off date of 30th June 2019, as per the final audit report dated 7th November 2019.

2. Determination of the date of quantification of duty for eligibility under the SVLDRS scheme:

The court examined whether the duty was quantified on or before 30th June 2019, which is crucial for eligibility under the SVLDRS scheme. According to Section 124(1)(d) of the Finance Act, 2019, relief is available if the tax dues are linked to an audit and the amount is quantified before the specified date. The court referred to Notification No. 5/2019 and Circular 1071/4/2019, which clarified that written communication indicating duty liability, including audit reports, constitutes quantification. The audit of the petitioner was conducted on 29th March 2019 and 1st April 2019, and the petitioner admitted the duty liability during the audit. The audit report, released on 9th October 2019, indicated that the petitioner had agreed to pay the duty and interest, and the audit committee's minutes were prepared by June 2019.

The court concluded that the duty was quantified during the audit dates, i.e., 29th March 2019 and 1st April 2019, thus meeting the requirement of being quantified before 30th June 2019. The court found the rejection of the petitioner's declaration based on the final audit report's date to be incorrect.

Conclusion:

The court allowed the petition, set aside the rejection letter, and directed the respondents to reconsider the declaration filed by the petitioner and issue the necessary discharge certificate in Form SVLDRS in accordance with the law. The petition was disposed of accordingly.