2022 (2) TMI 94 - HC - Service Tax

Taxpayer entitled to Sabka Vishwas Scheme despite late investigations; Court emphasizes natural justice principles.

UCC Infrastructure Pvt. Ltd., Versus Union of India represented by the Secretary, Department of Revenue, Ministry of Finance, Central Board of Indirect Taxes and Customs, New Delhi, Joint Commissioner CGST and CX Navi Mumbai, Commissioner CGST and CX, Navi Mumbai, Assistant Commissioner CGST and CX, Navi Mumbai

The High Court held that investigations initiated after the cut-off date should not disqualify a taxpayer from availing the Sabka Vishwas Scheme. The ... Rejection of application under the SVLRDS - summons issued to the petitioner for giving oral evidence or to submit relevant documents - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Declaration Form under SVLRDS-1 on CBEC website under ‘voluntary category’ rejected on the ground that the petitioner was not eligible to opt under the said Scheme, since investigation was already initiated against the petitioner and was pending - HELD THAT:- Hon’ble Supreme Court in case of TATA ENGINEERING & LOCOMOTIVE CO. LTD VERSUS. STATE OF BIHAR AND ANOTHER, [2000 (4) TMI 815 - SUPREME COURT] held that if any enquiry or investigation or audit was initiated on or before 30th June, 2019, such a person would not be eligible to make declaration under the voluntary disclosure category. Logical corollary to this would be that an enquiry or investigation or audit post 30th June, 2019 would not act as a bar to the filing of declaration under the ‘voluntary disclosure’ category. In the facts of that case, the enquiry was initiated after 30th June, 2019. In the present case, this Court was of the opinion that the respondents were not justified in rejecting the declaration of the petitioner dated 26th December, 2019 on the ground that the petitioner was not eligible to file declaration under the category of ‘voluntary disclosure’ since enquiry was initiated against the petitioner on 19th December, 2019. This Court held that though under Section 125(1)(f) of the said Scheme does not mention the date 30th June, 2019 by simply saying that a person making a voluntary disclosure after being subjected to any enquiry or investigation or audit would not be eligible to make a declaration, the said provision if read and understood in the proper context would mean making of a voluntary disclosure after being subjected to an enquiry or investigation or audit on or before 30th June, 2019. Such a view if taken would be a reasonable construct, consistent with the objective of the scheme. In the facts of this case also the respondents had issued a summons only on 30th August, 2019 i.e. after 30th June, 2019 and thus summons issued after the cut-off date of 30th June, 2019 could not be the ground for declaring the application filed by the petitioner under SVLRDS-1 ineligible. In our view, the stand taken by the respondents is contrary to the principles of law laid down by this Court in case of M/S. NEW INDIA CIVIL ERECTORS PRIVATE LIMITED VERSUS UNION OF INDIA AND OTHERS [2021 (3) TMI 545 - BOMBAY HIGH COURT] and also contrary to the objectives, purposes and intent of the said Scheme introduced by the Central Government. The respondents would have been justified to declare the petitioner ineligible to file declaration under ‘voluntary disclosure’ category, if enquiry or investigation or audit would have been initiated on or before 30th June, 2019. The respondents while rejecting the declaration form submitted by the petitioner also did not grant any opportunity of being heard to the petitioner. If an opportunity would have been granted by the respondents to the petitioner, the petitioner would have pointed out that the summons issued after 30th June, 2019 could not be a ground for declaring the petitioner’s application ineligible - the impugned order is in gross violation of principles of natural justice. The Declaration Forms filed by the petitioners are restored to file and are remanded to the respondent no.3 for taking a fresh decision on these two declaration forms filed by the petitioner by treating the same as valid declarations under the ‘voluntary disclosure’ category and thereafter grant the admissible relief to the petitioner. The respondents shall grant an opportunity of personal hearing to the petitioner by issuing seven days clear notice before the date of proposed hearing. The petitioner shall remain present at the time of hearing before the respondent no.3, without fail - petition allowed. Issues:1. Eligibility of the petitioner to opt for Sabka Vishwas Scheme under Article 226 of the Constitution of India.2. Rejection of petitioner's declaration forms under the Scheme due to an ongoing investigation.3. Violation of principles of natural justice by not granting an opportunity of being heard to the petitioner.Issue 1: Eligibility of the petitioner to opt for Sabka Vishwas Scheme:The petitioner filed a writ petition under Article 226 seeking a writ of certiorari to quash the impugned orders dated 9th December, 2020, and 20th February, 2020. The petitioner had submitted a declaration form under the Sabka Vishwas Scheme but was rejected by the respondents on the grounds of ongoing investigation against the petitioner. The petitioner argued that the investigation was initiated after the cut-off date of 30th June, 2019, and therefore, should not affect their eligibility under the Scheme. Reference was made to a judgment by the High Court in a similar case, emphasizing that investigations post the cut-off date should not bar eligibility for the Scheme.Issue 2: Rejection of petitioner's declaration forms:The High Court analyzed the facts and referred to the judgment in a similar case to determine the eligibility of the petitioner under the Sabka Vishwas Scheme. The Court held that investigations initiated after the cut-off date should not disqualify a taxpayer from availing the Scheme. It was emphasized that the investigation initiated after the specified date should not impact the eligibility of the petitioner to file a declaration under the voluntary disclosure category. The Court found the rejection of the petitioner's declaration forms by the respondents to be contrary to the law laid down by the previous judgment and the objectives of the Scheme.Issue 3: Violation of principles of natural justice:The Court noted that the respondents rejected the petitioner's declaration forms without granting an opportunity of being heard. It was held that the impugned order was in violation of principles of natural justice as the petitioner was not given a chance to present their case. The Court emphasized the importance of granting an opportunity of being heard before rejecting such applications. Despite acknowledging the powers of the respondents to take action if false particulars are found, the Court stressed the need for procedural fairness and adherence to natural justice principles.In conclusion, the High Court quashed and set aside the impugned orders, restoring the petitioner's declaration forms for a fresh decision by the respondents. The Court directed the respondents to grant a personal hearing to the petitioner and pass a reasoned order within a specified timeline. The Court also clarified that the respondents could take action if false particulars were found within a year. The writ petition was allowed, and the parties were instructed to act as per the judgment.