2025 (1) TMI 940 - HC - Service Tax

Quantification of petitioner s duty liability on or before June 30 2019 during the enquiry or investigation making them eligible for the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 (SVLDRS) - petitioner s admission of liability in their communication qualifies as quantified under the SVLDRS or not - It is the case of the petitioner that he having admitted the liability is entitled for the benefit under the aforesaid scheme which has been incorrectly rejected thereby passing the aforesaid impugned order and issuance of show cause notice. HELD THAT - On considering the communication in the wake of the provisions of Section 121 of Chapter V which provides for SVLDRS 2019 the petitioner s case is very much qualified to have the benefit particularly having regard to the definition of quantified under clause (r) thereunder and also Section 123 which provides for tax dues. The petitioner was eligible to make a declaration under the aforesaid Scheme as on June 19 2019. The petitioner has admitted the liability to pay the service tax in the communication dated June 19 2019 which was duly acknowledged by the respondents - the stand taken by the respondents so as to claim that the petitioner was not eligible in terms of Section 123 of the Finance Act 2019 cannot be accepted in view of the admission of liability already communicated. The impugned communication dated February 11 2020 issued to the petitioner produced at Annexure-7 thereby rejecting the online application of the petitioner and consequently the impugned show cause notice dated June 25 2020 produced at Annexure-10 are not sustainable and are liable to be quashed and set aside and are accordingly quashed and set aside. Conclusion - The word quantified under the scheme would mean a written communication of the amount of duty payable which will include a letter intimating duty demand or duty liability admitted by the person concerned during enquiry investigation or audit. Matter remanded back to the respondent No. 2-The Designated Committee of SVLDRS to consider the declaration of the petitioner dated December 05 2019 in the wake of admission given by the petitioner in his communication dated June 19 2019 afresh as a valid declaration in terms of the Scheme under the category of investigation enquiry and audit and may proceed to grant the consequential relief to the petitioner. Petition allowed by way of remand.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the petitioner's duty liability was quantified on or before June 30, 2019, during the enquiry or investigation, making them eligible for the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS).
Whether the petitioner's admission of liability in their communication qualifies as "quantified" under the SVLDRS.
Whether the rejection of the petitioner's application under the SVLDRS and the issuance of a show cause notice were valid.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility under SVLDRS based on quantification of duty liability

Relevant legal framework and precedents: The SVLDRS was introduced to settle disputes under the old indirect tax regime. Section 123 of the Finance Act, 2019, defines "tax dues" and includes cases where duty demand has been quantified before June 30, 2019. The term "quantified" is clarified in a circular dated August 27, 2019, to include written communication of duty liability.
Court's interpretation and reasoning: The court interpreted "quantified" to include any written communication acknowledging duty liability, such as letters or statements made during investigations.
Key evidence and findings: The petitioner's communication dated June 19, 2019, admitted a service tax liability of Rs. 97,54,079, which was acknowledged by the respondents.
Application of law to facts: The court found that the petitioner's admission of liability before June 30, 2019, qualified as "quantified" under the SVLDRS, making them eligible for the scheme.
Treatment of competing arguments: The respondents argued that the petitioner's self-estimation did not constitute an official quantification. However, the court emphasized that the petitioner's written admission sufficed under the clarified definition.
Conclusions: The court concluded that the petitioner was eligible for the SVLDRS based on their admitted liability communicated before the cutoff date.

Issue 2: Validity of the rejection of the application and issuance of a show cause notice

Relevant legal framework and precedents: The SVLDRS allows for settlement of tax disputes if the taxpayer meets specific criteria, including the quantification of dues before a set date.
Court's interpretation and reasoning: The court held that the petitioner's eligibility under the SVLDRS was improperly assessed, given their compliance with the scheme's requirements.
Key evidence and findings: The petitioner's application was rejected based on a misinterpretation of the term "quantified" and the conditions of the SVLDRS.
Application of law to facts: The court applied the clarified definition of "quantified" and found that the petitioner's application was wrongly rejected.
Treatment of competing arguments: The respondents' reliance on strict compliance with the scheme's terms was countered by the court's broader interpretation of "quantified" as including the petitioner's admission.
Conclusions: The court determined that the rejection of the petitioner's application and the issuance of the show cause notice were not sustainable.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The court stated, "The word 'quantified' under the scheme would mean a written communication of the amount of duty payable which will include a letter intimating duty demand or duty liability admitted by the person concerned during enquiry, investigation or audit."
Core principles established: The judgment emphasized that written admissions of tax liability before the cutoff date qualify as "quantified" under the SVLDRS, making taxpayers eligible for the scheme.
Final determinations on each issue: The court quashed the impugned communications, remanding the matter to the Designated Committee to consider the petitioner's declaration as valid under the SVLDRS and to provide a hearing and a speaking order within twelve weeks.

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