2020 (8) TMI 788 - HC - Service Tax

Court rules in favor of petitioner, finding Committee exceeded jurisdiction in Cenvat credit dispute.

M/. Jagadish Advertising, Versus Designated Committee, Sabka Vishwas (Legacy Dispute Resolution), Central Board Of Indirect Taxes And Customs, New Delhi, Union Of India, Ministry Of Finance, Represented By Secreary, New DelhI

M/. Jagadish Advertising, Versus Designated Committee, Sabka Vishwas (Legacy Dispute Resolution), Central Board Of Indirect Taxes And Customs, New Delhi, ... Issues Involved:1. Jurisdiction of the Designated Committee under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.2. Adjustment of Cenvat credit as pre-deposit under the Scheme.3. Validity of the Designated Committee's decision to disallow Cenvat credit.Issue-wise Detailed Analysis:1. Jurisdiction of the Designated Committee under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019:The petitioner, an advertising agency, received a Show Cause Notice (SCN) from the Directorate General of GST Intelligence demanding service tax and disallowing Cenvat credit. The petitioner applied under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, which aimed at resolving legacy tax disputes and granting amnesty by allowing assessees to settle disputes by paying a portion of the tax dues. The petitioner declared a tax liability and claimed Cenvat credit, which the Designated Committee disallowed, leading to the petitioner seeking judicial intervention.The court emphasized that the Designated Committee's role under the Scheme was to 'verify the correctness of the declaration' and not to adjudicate contentious issues. The term 'verify the correctness' was interpreted to mean examining the accuracy of the declaration based on available records, not determining entitlement or adjudicating disputes. The Designated Committee was meant to ensure the tax liability admitted by the declarant was accurate and issue a statement for payment, without engaging in adjudication.2. Adjustment of Cenvat credit as pre-deposit under the Scheme:The petitioner argued that the Designated Committee wrongly disallowed Cenvat credit of Rs. 4,15,14,081/- while issuing Form No. SVLDRS-2 and Form No. SVLDRS-3. The court noted that the Scheme and the Circular dated 27.08.2019 clarified that tax paid through input credit should be adjusted by the Designated Committee when determining the final amount payable. The Circular explicitly stated that in cases where tax was paid using input credit and was under dispute, the Designated Committee should adjust the tax paid through input credit.The court held that the Designated Committee had no jurisdiction to disallow the Cenvat credit claimed by the petitioner, as it was bound to adjust the tax paid through input credit according to the Scheme's provisions and the Circular.3. Validity of the Designated Committee's decision to disallow Cenvat credit:The Designated Committee disallowed the Cenvat credit by inserting remarks in Form No. SVLDRS-2 and Form No. SVLDRS-3, stating that the petitioner was not entitled to the credit due to non-compliance with Cenvat Credit Rules. The court found this action beyond the Committee's jurisdiction, as it amounted to adjudication rather than verification of the declaration's correctness.The court quashed the remarks in Form No. SVLDRS-2 and Form No. SVLDRS-3, directing the Designated Committee to accept the petitioner's declaration in Form No. SVLDRS-1 as final. The Committee was instructed to issue a modified Form No. SVLDRS-3, giving credit to the Cenvat amount and collecting the remaining tax dues, subsequently issuing a Discharge Certificate to the petitioner.Conclusion:The court allowed the writ petition, holding that the Designated Committee exceeded its jurisdiction by disallowing the Cenvat credit, which should have been adjusted as per the Scheme and the Circular. The Committee was directed to accept the petitioner's declaration and issue the necessary documents, ensuring the petitioner received the benefits under the Scheme.