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TMI Blog2024 (9) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... the rejection of the 27 Forms of SVLDRS-1 filed by the petitioner under the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2015, (for short 'SVLDRS'). The second petition being Special Civil Application No. 11043 of 2023 is filed by the petitioner challenging the order passed by the Appellate authority dated 16.03.2021 confirming the sanction/ rejection of refund of the petitioner by adjusting outstanding arrears of service tax from the eligible refund to the petitioner. 4. The brief facts of the case are as under: 4.1. The petitioner is a manufacturer of steel furniture and was liable for payment of excise duty as well as service tax on the services received under the reverse charge mechanism. 4.2. The petitioner was liable to pay service tax on monthly basis and was also required to be declared in periodical half yearly returns i.e. ST-3 returns. 4.3. The petitioner filed ST-3 returns for the period from April 2015 to June 2017, however the petitioner did not discharge the service tax liability either in full or in part. It is the case of the petitioner that after filing the returns, the petitioner voluntarily discharged some tax liability through various challans. 4.4. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner had adjusted the amount quantified in the FAR from the pending refund of the declarant in the month of September,2019 as the amount quantified in the FAR was admitted by the declarant as mentioned in the FAR. Therefore, there are no arrears pending against the declarant." 4.9. Being aggrieved the petitioner has preferred Special Civil Application no. 11604 of 2020 with following prayers: "(a) Your Lordships be pleased to admit and allow this petition; (b) Your Lordships be pleased to set aside the rejection of 27 Applications/Declarations in Form No. SVLDRS-1 dated 15.01.2020 by the Respondent No. 3 and allow the Petition; (c) Issue a writ of mandamus and/ or any other appropriate writ, order of direction to the Respondents to finally settle their Applications / Declarations in Form No. SVLDRS-1 dated 15.01.2020 under the Scheme; (d) The Hon'ble Court may pending hearing and final disposal of the petition, direct the Respondents, to accept their declaration all in the 27 Applications/Declarations in Form No. SVLDRS-1 dated 15.01.2020and issue Form No. SVLDRS-3 and/or discharge certificate in Form SVLDRS-4 under the Scheme." 4.10. Special Civil A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l filed by the petitioner confirming the order-in-original appropriating the refund amount towards outstanding dues as per the amount of service tax quantified in the audit report observing as under: "The adjudicating authority has rightly deducted the refund amount under Section 54 (10). The relevant portion of the Section 54 (10) are: 10) Where any refund is due under sub-section (3) to a registered person who has defaulted in furnishing any return or who is required to pay any tax, interest, or penalty, which has not been stayed by any court, Tribunal, Appellate, Authority by the specified date, the proper officer may (a) withhold payment of refund due until the said person has furnished the return or paid the tax, interest or penalty, as the case may be: (b) deduct from the refund due, any tax, interest, penalty. fee, or any other amount which the taxable person is liable to pay but which remains unpaid under this Act or under the existing law. After the findings and discussions, it is clear that the adjudicating authority has correctly adjusted sanctioned refund amount of Rs. 42,10,947/- against outstanding liability of Rs. 55,27,341/- as the liability was already ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted that in the letter dated 19.07.2019, the petitioner has categorically stated that the petitioner would be entitled to get benefit of the SVLDRS if eligible and with that condition the petitioner had agreed for voluntary payment of the tax dues to be determined on completion of audit. 5.5. Learned advocate Mr. Namboodiri referred to the Circular dated 26.09.2019 issued by the Central Board of Indirect Taxes and Customs (for short 'CBIC') in relation to the SVLDRS and more particularly clause (iii) of para 2 of the said circular which provides that the Scheme provides for filing of separate declarations for returns filed under the Service Tax Act. It was submitted that the petitioner has filed 27 applications under the Scheme, based on each service availed by the petitioner and therefore such applications ought to have been considered as valid applications based upon the amount in arrears show by the petitioner as per the provisions of the Scheme. 5.6. Learned advocate Mr. Namboodiri further referred to and relied upon circular dated 29.10.2019, to point out that when the CBIC has clarified the doubt expressed whether a party who has filed a ST-3 return and has also pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance was also placed on the decision of the Honorable Kerala High Court at Ernakulam in case of Hi-Lite Projects Private Limited Vs. The Joint Commissioner, Central Tax and Central Excise in Writ Petition(C) No. 14135 of 2020(N) to submit that the Hon'ble Kerala High Court has in the facts of the case relying upon para 10(g) of the Circular held that the quantification as defined under Section 2(r) would include duty payable admitted by the person during inquiry, investigation or audit and when the petitioner in facts of the said case had declared the service tax dues even before the verification proceedings were initiated on 07.09.2017 and therefore the amount admitted by the petitioner was ordered to be taken as quantified amount due from the petitioner for the purpose of testing the eligibility of the petitioner for availing benefit of the Scheme under Section 125 of the SVLDRS. It was therefore submitted that in the facts of the case when the petitioner has filed ST-3 returns prior to 30.06.2019 and the amount of service tax was admittedly not paid by the petitioner, the same amount of Rs.34 lakhs would be amount of tax in arrears on 30.06.2019 and the petitioner would be elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent is not offering any comments at this stage however the same is subject to verification and the answering respondent reserve it's liberty to reply to the same in future. With reference to para-7(b) of the petition, it is submitted that the petitioner declared their liability in ST-3 returns of for the period from F.Y. 2014-15 to 2017-18. It is pertinent here to note that effective from May 14, 2015, new sub-section (1B) has been inserted in Section 73 of the Finance Act to provide that the Service tax amount self-assessed and declared in the Return (ST-3) but not paid (either in part or full) shall be recovered under Section 87 thereof, without service of any notice as required under Section 73 (1) of the Finance Act. Section 73 (1B) of the Finance Act is reproduced hereunder: "(1B) Notwithstanding anything contained in sub-section (1), in a case where the amount of service tax payable has been self-assessed in the return furnished under sub-section (1) of section 70, but not paid either in full or in part, the same shall be recovered along with interest thereon in any of the modes specified in section 87, without service of notice under sub-section (1)." 10. With refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority was justified in appropriating the amount quantified in audit report as outstanding dues payable by the petitioner under the service tax for the period from April 2015 to June 2017. 7. In rejoinder learned advocate Mr. Namboodiri for the petitioner submitted that the respondent authorities were not justified in adjusting or appropriating the amount of refund towards the amount quantified in the audit report without issuing any show-cause notice. Learned advocate Mr. Namboodiri referred to and relied upon Section 73 of the Finance Act, 1994 and proviso thereunder to submit that assuming for a while that the petitioner has made voluntary payment of Rs. 5,13,279/- then for the differential amount, the respondent authorities were required to issue show-cause notice before appropriation of any amount as quantified in audit report assuming for a while that the petitioner has admitted voluntarily payment of amount to be determined in audit during the audit proceedings without prejudice to the other contentions raised by the petitioner. It was submitted that the entire exercise of appropriation is without any basis and adjudication by the respondent authorities is in clear breach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt attaining finality; or (iii) the declarant having filed a return under the indirect tax enactment on or before the 30th day of June, 2019, wherein he has admitted a tax liability but not paid it; 123.(c) where an enquiry or investigation or audit is pending against the declarant, the amount of duty payable under any of the indirect tax enactment which has been quantified on or before the 30th day of June, 2019; (d) where the amount has been voluntarily disclosed by the declarant, then, the total amount of duty stated in the declaration; 124(1)(c) where the tax dues are relatable to an amount in arrears and,- (i) the amount of duty is, rupees fifty lakhs or less, then, sixty percent. Of the tax dues; (ii) the amount of duty is more than rupees fifty lakhs, then, forty percent of the tax dues; (iii) in a return under the indirect tax enactment, wherein the declarant has indicated an amount of duty as payable but not paid it and the duty amount indicated is,- (A) rupees fifty lakhs or less, then, sixty per cent. of the tax dues; (B) amount indicated is more than rupees fifty lakhs, then, forty percent. of the tax dues; Declaration under Scheme 125 (1) All pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect an arithmetical error or clerical error, which is apparent on the face of record, on such error being pointed out by the declarant or suo motu, by the designated committee." 10. On perusal of the above provisions it is clear that the petitioner would not be eligible to make a declaration as per Section 125 (1) (e) as the audit in case of the petitioner was initiated prior to 30.06.2019 and the amount of duty involved in the audit was not quantified on 30.06.2019. 11. Section 123 (1) (c) provides that the petitioner would be entitled to quantify the amount of tax dues as per the amount quantified in audit report on or before 30.06.2019 or in the facts of the case the amount in arrears relating to the declarant is due the amount in arrears. The question of applicability of Section 123 determining the "Tax Dues" for the purpose of the Scheme would arise only if the petitioner was eligible to make declaration under the Scheme, however the petitioner falls in exception in clause (e) of section 125 (1) of the Act as the petitioner was subjected to audit and amount of duty involved in audit was not quantified on or before 30.06.2019. Therefore, the respondent authorities have rightl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch amount in the manner specified in this section, and the period of "one year" referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation.-1. For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the [Central Excise Officer], but for this sub-section. Explanation.- 2. the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made there under shall be imposed in respect of payment of service-tax under this sub-section and interest thereon." 15. On perusal of the above provisions, it is clear that the petitioner had paid an amount of Rs. 5,13,279/- during the course of audit voluntarily and out of the total dues of Rs. 60,40,619/- and accordingly there was outstanding amount quantified in audit report was Rs. 55,27,341/- after considering the payment made by the petitioner. Therefore, as per the proviso to Section 73 of the Finance Act, 1994, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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