2021 (10) TMI 435 - HC - Service Tax

Court orders reconsideration of Sabka Vishwas Scheme rejections, stresses natural justice principles

The court allowed the writ petitions challenging the rejection of applications under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. It ... Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - rejection of application without following the principles of natural justice and with utter disregard of section 126 of the Act - HELD THAT:- A plain reading of provisions of section 127 of Finance (No.2) Act, 2019 and Rule 6(3) of SVLDRS Rules, makes it clear that the 'Scheme' is a beneficent one and aim and object of the 'Scheme' is to unload the baggage of pending litigation relating to service tax and excise duty. While interpreting a beneficent provision, its aim and object cannot be ignored. Considering the THOUGHT BLURB VERSUS UNION OF INDIA AND ORS. [2020 (10) TMI 1135 - BOMBAY HIGH COURT], it was held that it will be completely illogical and contrary to the object of the 'Scheme' to reject an application on the ground of ineligibility without giving an opportunity to the declarant to explain as to why his declaration should not be accepted and why relief is not due to him. Thus, principles of natural justice were read into the provision by the Bombay High Court. The respondents were not justified in rejecting the petitioners' application without giving them an opportunity - Petition allowed. Issues Involved:1. Rejection of applications under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.2. Principles of natural justice in the rejection process.3. Eligibility criteria under the Scheme.4. Technical glitches in the online application process.5. Remedial measures for petitioners.Detailed Analysis:1. Rejection of Applications under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019:The petitioners challenged the rejection of their applications under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, by the respondents on 18.12.2019. The petitioners, a propriety firm, sought to benefit from the Scheme aimed at resolving legacy tax disputes related to Central Excise and Service Tax. Their applications were rejected due to incorrect entries in the SVLDRS-1 form, which were attributed to the online system's limitations.2. Principles of Natural Justice in the Rejection Process:The petitioners argued that the designated committee failed to issue a notice electronically and did not provide a personal hearing before rejecting the applications. The rejection was marked as 'Incorrect application' on the portal without any prior communication to the petitioners. The court emphasized the importance of following the principles of natural justice, citing various judgments, including Thought Blurb Vs. Union of India and G.R. Palle Electricals Vs. Union of India, which mandated an opportunity of hearing before rejecting applications.3. Eligibility Criteria under the Scheme:The petitioners contended that they were eligible for relief under the 'Arrears' category of the Scheme, as their service tax liability was declared in ST-3 returns for the period between April 2014 and June 2017. They argued that their cases did not fall under the exclusion clauses of Section 125 of the Act. The court noted that the Scheme's objective was to unload the litigation burden and ensure smooth GST implementation, and thus, a liberal interpretation favoring the petitioners was warranted.4. Technical Glitches in the Online Application Process:The petitioners claimed that the online system's inability to accept multiple entries led to errors in their SVLDRS-1 form. They sought assistance from departmental officers while filing the application. The court acknowledged that technical glitches should not defeat the Scheme's purpose and emphasized that the rejection without addressing these issues was arbitrary and illegal.5. Remedial Measures for Petitioners:The court concluded that the respondents were unjustified in rejecting the applications without providing an opportunity for the petitioners to rectify the errors. The court set aside the impugned decisions and directed the petitioners to file fresh online or offline applications. The respondents were instructed to consider these as valid applications, provide a hearing if any flaws were identified, and pass a fresh decision following the principles of natural justice.Conclusion:The court allowed the writ petitions, emphasizing the need for a liberal and just approach in line with the Scheme's objectives. The respondents were directed to reconsider the applications, ensuring compliance with natural justice principles and addressing any technical issues in the application process.