2024 (7) TMI 757 - HC - Service Tax

Recovery of service tax on payment made to the Foreign Government Agencies for statutory fees/charges for the licenses and permissions - Non-acceptenace of declaration/application filed by the petitioner under Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 (SLVDRS) - HELD THAT - The benefit of deduction in tax dues where the amount of duty is less than Rs. 50 lakhs, the amount in arrears is to be computed as per 60% of the amount of duty comprising of amount of central excise duty, service tax and cess payable under the indirect tax enactment. Therefore, the amount of pre-deposit made by the petitioner, at the time of filing of appeal, cannot be said to be an amount paid towards the amount in arrears as such amount is only a deposit. The Legislature has therefore, stipulated in sub-section (2) of section 124 that relief calculated under sub-section (1) shall be subject to the condition that amount paid as pre-deposit at any stage of appeal proceedings under the indirect tax enactment or as deposit during the inquiry etc. shall be deducted when issuing the statement indicating amount payable by the declarant - at the time of calculation of the amount payable under sub-section (1) of section 124, the amount of pre-deposit is not required to be deducted but the same is required to be deducted while issuing the statement indicating amount payable by the declarant. From the Circular No. 1072 dated 25.09.2019, it is clear that CBIC has clarified that the relief available under section 124 (1) (c) is to be applied to the net outstanding amount of tax dues in arrears after deducting the amount already paid in form of pre-deposit appropriated or paid subsequently by the tax payers voluntarily against the outstanding demand. It is also further clarified that money paid before appropriation is in nature of deposit only. The petitioner has therefore rightly deducted the amount of Rs. 2,27,622/- from the net amount eligible for the Scheme after deducting 60% of Rs. 30,34,955/- from the net eligible amounting to Rs. 12,13,982/- The petitioner is therefore liable to pay Rs. 9,86,360/- only under the scheme and not Rs. 11,22,933/- as stated by the respondent No. 3 in Form SVLDRS-3. The respondent-authority is directed to appropriate the amount of Rs. 9,86,360/- from the amount of Rs. 11,22,934/- deposited by the petitioner with the respondent on 27.10.2020 pursuant to the order passed by this Court dated 10.09.2020 and to return the remaining amount of Rs. 2,27,622/- by issuing rectified From SVLDRS-3 towards full and final settlement of the outstanding dues of the petitioner and thereafter, issue consequential Form SVLDRS-4 - Petition allowed.

Summary

Issues Involved:
1. Rejection of the petitioner's application under the Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 (SVLDRS).
2. Calculation of the amount payable under the SVLDRS.
3. Deduction of pre-deposit from the total tax dues.

Issue-wise Detailed Analysis:

1. Rejection of the Petitioner's Application under SVLDRS:
The petitioner challenged the communication dated 14.08.2020, which rejected their application under SVLDRS and served a recovery notice of Rs. 30,34,955/-. The petitioner argued that their declaration under the scheme was wrongly rejected, placing them under a heavy financial burden. The court acknowledged the petitioner's grievance and issued an interim order allowing the petitioner to deposit Rs. 11,22,934/- without prejudice to their rights to claim any refund of excess payment.

2. Calculation of the Amount Payable under SVLDRS:
The petitioner declared Rs. 6,82,805/- as tax dues payable, which was later modified to Rs. 9,86,360/-. However, the respondent calculated the payable amount as Rs. 11,22,933/-. The petitioner argued that the respondent incorrectly calculated the amount by considering the pre-deposit as an appropriation instead of a deposit. The court referred to the provisions of SVLDRS and the CBIC Circular No. 1072/05/2019, which clarified that the relief should be applied to the net outstanding amount after deducting the pre-deposit.

3. Deduction of Pre-deposit from the Total Tax Dues:
The petitioner contended that the pre-deposit of Rs. 2,27,622/- should be deducted from the net amount payable after applying the 60% relief to the tax dues. The court agreed with this interpretation, stating that the amount of pre-deposit should not be deducted from the total tax dues but from the net amount eligible for the scheme. The court cited the Madras High Court's decision in M/s. Himang Infrastructure Solutions Pvt. Ltd., which supported the petitioner's calculation method.

Conclusion:
The court concluded that the respondent's calculation was contrary to the provisions of the SVLDRS and the CBIC circular. The court directed the respondent to appropriate Rs. 9,86,360/- from the amount deposited by the petitioner and return the remaining Rs. 2,27,622/-. The respondent was also instructed to issue a rectified Form SVLDRS-3 and a consequential Form SVLDRS-4, thereby allowing the petition and making the rule absolute.