Court orders reconsideration of SVLDR Scheme declarations, emphasizing settlement of tax arrears & liberal approach

The court directed the respondents to reconsider the petitioner's declarations under the SVLDR Scheme, setting aside the initial rejection. The Designated Committee was instructed to review the applications, emphasizing the Scheme's purpose to settle tax arrears and urging a liberal approach in accepting declarations while protecting revenue interests. The judgment highlighted the importance of resolving legacy tax disputes and providing opportunities for declarants to benefit from the Scheme.

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Issues:
1. Eligibility of the petitioner to make a declaration under the SVLDR Scheme.
2. Rejection of the petitioner's declarations by the first respondent.
3. Interpretation of Section 125 of the Finance Act, 2019.
4. Impact of ongoing investigation on the petitioner's eligibility for the Scheme.

Analysis:

Issue 1: Eligibility of the petitioner to make a declaration under the SVLDR Scheme
The petitioner, a service tax assessee, sought to avail benefits under the SVLDR Scheme for tax arrears disclosed in filed returns. The Scheme aims to settle tax arrears and provide relief to declarants. The petitioner filed declarations under the Scheme (Exts.P15 to P17), seeking benefits. However, the first respondent rejected these declarations citing Section 125(1)(e) of the Finance Act, 2019, which deems a person ineligible if the duty amount from an ongoing enquiry or investigation is not quantified by a specified date. The dispute revolves around the petitioner's eligibility given the ongoing investigation.

Issue 2: Rejection of the petitioner's declarations
The rejection of the petitioner's declarations by the first respondent was based on the ongoing investigation by the Directorate of GST Intelligence against the petitioner for non-payment of service tax. The Designated Committee found the declarations non-acceptable under the Scheme, citing Section 125 of the Finance Act. The rejection was defended by the respondents, stating no irregularity in issuing the rejection communication (Ext.P18). The petitioner challenged this rejection seeking acceptance of the declarations and benefits under the SVLDR Scheme.

Issue 3: Interpretation of Section 125 of the Finance Act, 2019
Section 125 outlines the eligibility criteria for making declarations under the SVLDR Scheme. The contention arose as to whether the petitioner, being subject to an ongoing investigation, qualifies to make declarations under the Scheme. The interpretation of Section 125(1)(e) was crucial in determining the petitioner's eligibility, especially concerning the quantification of duty amount before a specified date.

Issue 4: Impact of ongoing investigation on the petitioner's eligibility for the Scheme
The ongoing investigation by the Directorate of GST Intelligence against the petitioner for the period from 2014 onwards raised questions about the petitioner's eligibility under the SVLDR Scheme. The respondents argued that the investigation was ongoing, and the duty amount had not been quantified. However, the petitioner contended that the duty amounts disclosed in filed returns should be considered as quantified for the purpose of the Scheme, as these were declared before the investigation proceedings were initiated.

In conclusion, the court directed the respondents to consider the petitioner's declarations under the SVLDR Scheme, setting aside the rejection communication. The Designated Committee was instructed to review the petitioner's applications after providing an opportunity for a hearing. The judgment emphasized the Scheme's intent to resolve legacy tax disputes and highlighted the need for a liberal approach in entertaining declarations under the Scheme while safeguarding the revenue's interest.

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