2021 (2) TMI 515 - HC - Service Tax

Court allows petitioner's benefit claim under Sabka Vishwas Scheme, emphasizes timely admission of liability.

The court found that the petitioner was eligible to avail benefits under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, as the service tax ... Quantification of tax liability for eligibility under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - written communication as 'quantified' - admission of liability during inquiry, investigation or audit - eligibility under the enquiry, investigation or audit category of the Scheme - principles of natural justice - requirement of hearing and speaking order before rejecting declarationQuantification of tax liability for eligibility under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - written communication as 'quantified' - admission of liability during inquiry, investigation or audit - eligibility under the enquiry, investigation or audit category of the Scheme - Petitioner's declaration was eligible under the enquiry, investigation or audit category because tax liability was quantified by written admission before 30.06.2019. - HELD THAT: - The court held that the Scheme's definition of 'quantified' (a written communication of the amount of duty payable) includes admission of liability by the person during inquiry, investigation or audit and need not await adjudication or issuance of a show-cause notice. Prior statements of the petitioner admitting service tax dues around Rs. 1.93 crores (statement dated 06.07.2018 and 06.06.2019) satisfy the requirement of written communication for quantification before the cut-off date. Discrepancies in exact figures between pre-cut-off admissions and later departmental quantification do not defeat eligibility so long as the admission bears some resemblance to actual dues. Applying these principles and the Board's circular and FAQs, the court found petitioner fulfilled the Scheme's quantification requirement and therefore was eligible to file the declaration under the relevant category. [Paras 21, 22]Declaration was eligible because petitioner had admitted tax liability by written communication prior to 30.06.2019; rejection on ground of ineligibility was not justified.Principles of natural justice - requirement of hearing and speaking order before rejecting declaration - eligibility under the enquiry, investigation or audit category of the Scheme - Order rejecting the declaration was set aside and the matter remanded for fresh consideration with an opportunity of hearing and a speaking order. - HELD THAT: - Relying on precedents, the court concluded that where the Designated Committee estimates an amount higher than declared, the Scheme requires giving the declarant an opportunity of hearing before insisting on payment of any excess; similarly, summary rejection of a declaration on eligibility grounds without hearing violates natural justice. Therefore the rejection dated 31.01.2020 was set aside and the designated committee was directed to reconsider the declaration afresh, afford personal hearing, and pass a speaking order communicating its decision. [Paras 23, 24]Order dated 31.01.2020 set aside; matter remanded to respondent No.1 to reconsider the declaration with an opportunity of hearing and to pass a speaking order within eight weeks.Final Conclusion: Writ petition allowed to the extent that the order rejecting the petitioner's declaration is set aside; the designated committee shall reconsider the declaration as valid under the enquiry/investigation/audit category, afford hearing, and pass a speaking order within eight weeks; no order as to costs. Issues Involved:1. Eligibility of the petitioner to avail benefits under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.2. Whether the service tax dues of the petitioner were quantified on or before 30.06.2019.3. Validity of the rejection of the petitioner’s declaration under the scheme.Detailed Analysis:1. Eligibility of the petitioner to avail benefits under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019:The petitioner filed a declaration under the scheme on 24.12.2019, seeking relief for service tax dues. The scheme, introduced by the Central Government through the Finance (No.2) Act, 2019, aimed to resolve disputes related to central excise and service tax subsumed under GST. The petitioner’s eligibility under the scheme was contested on the grounds that the tax dues were not quantified by the cutoff date of 30.06.2019.2. Whether the service tax dues of the petitioner were quantified on or before 30.06.2019:The petitioner argued that the service tax liability was admitted in statements recorded on 06.07.2018 and 06.06.2019, where he acknowledged dues of around Rs. 1.93 crores. The respondents countered that the final quantification occurred only with the issuance of the show-cause notice on 11.11.2019, which was post the cutoff date. The court referred to previous judgments, such as Thought Blurb Vs. Union of India and M/s G.R. Palle Electricals Vs. Union of India, which clarified that 'quantified' means a written communication of the amount of duty payable, including letters intimating duty demand or admitted liability during inquiry, investigation, or audit. The court found that the petitioner’s admission of liability before 30.06.2019 met this requirement.3. Validity of the rejection of the petitioner’s declaration under the scheme:The court held that the rejection of the petitioner’s declaration on the ground of ineligibility was not justified. The petitioner had admitted the service tax liability in statements recorded before the cutoff date, which should be considered as quantification under the scheme. The court emphasized that the object of the scheme is to encourage settlements for those who had declared outstanding dues before 30.06.2019. The court also noted that principles of natural justice require an opportunity for the declarant to be heard before rejecting the declaration.Conclusion:The court set aside the order dated 31.01.2020 rejecting the petitioner’s declaration and remanded the matter back to the designated committee (respondent No.1) to reconsider the declaration as a valid one under the scheme. The committee was directed to provide an opportunity of hearing to the petitioner and pass a speaking order within eight weeks. The writ petition was allowed to this extent, with no order as to costs.