2022 (2) TMI 561 - HC - Service Tax

Court Allows Petitioner's SVLDR Scheme Declaration, Grants Relief

The court held that the petitioner correctly filed a declaration under the 'arrears' category in the SVLDR Scheme, as the tax liability was determined and ... Seeking a writ of mandamus, directing the Designated Committee under SVLDR Scheme to consider the tax dues of demand confirmed, in the Order-inOriginal and declared in the SVLDRS-1 and compute an amount as the estimated/determined amount payable - applying 40% under Section 124(c)(i) of the Finance (No.2) Act, 2019 on the said dues - apparent mismatch in the payment of Service Tax and the turnover of the assessee - Scope of the word 'arrears' and 'litigation'. Whether the petitioner could have filed a declaration under SVLDR Scheme under the category of ‘arrears’ on the basis of the liability determined by the respondent no.2 in Order-in Original dated 23rd December, 2019 or the petitioner ought to have filed the said declaration under the SVLDR Scheme under the category ‘litigation’ under the provisions of the said SVLDR Scheme on the basis of show cause notice? HELD THAT:- The conjoint reading of show cause notice dated 24th April, 2019 and the said Order-in Original dated 23rd December, 2019 indicates that the amount of service tax worked out by the petitioner in response to the said show cause notice was accepted as worked out at ₹ 39,47,420/-. Though the said assessment order was passed on 23rd December, 2019, the respondents did not pass any additional order demanding the additional amount being the differential amount arising out of the financial year 2014-15 to 2017-18 (upto June 2017) till SVLDR -3 form was issued by the respondent no.2 placing the declaration form submitted by the petitioner under ‘litigation’ category i.e. on 4th March, 2020. The petitioner had already availed of the said scheme by filing SVLDR-1 on 31st December, 2019. In our view, the petitioner has rightly filed the declaration form i.e. SVLDR-1 by placing the said declaration under ‘arrears’ category. There is no substance in the submission made by the learned counsel for the respondents that the show cause notice issued by the respondent no.2 having been pending in the circumstances set out in the earlier paragraphs of this order, the petitioner could not have classified its case under ‘arrears’ category though the assessment order passed by the respondent no.2 on 23rd December, 2019 was passed after considering the show cause notice dated 24th April, 2019. The petitioner has rightly filed the said declaration form under the ‘arrears’ category and was not required to file the said form under the ‘litigation’ category in view of the tax dues already having been assessed and quantified before the date of the petitioner filing the said SVLDRS declaration form. A reply to the question no.1 of Frequently Asked Questions (FAQs) would clearly indicate that the person who has recoverable arrears pending is entitled to file a declaration under the said scheme subject to other conditions, under the said scheme. This Court in case of JYOTI PLASTIC WORKS PVT. LTD., JAI PLASTICS, N.D. PATEL VERSUS UNION OF INDIA [2020 (11) TMI 156 - BOMBAY HIGH COURT] after adverting the judgment of this Court in case of THOUGHT BLURB VERSUS UNION OF INDIA AND ORS. [2020 (10) TMI 1135 - BOMBAY HIGH COURT] considered a situation where the total demand of ₹ 94,90,264/made in the show cause-cum-demand notice, had been substantially reduced to ₹ 18,93,585/- in the Order-in Original with corresponding reduction of demand vis-a-vis each of the petitioners. It is held that had the petitioner accepted the order dated 29th March, 2006 like the respondents had accepted and had the petitioner not preferred appeals before the CESTAT, ₹ 18,93,585/- would have been the determined tax dues of the petitioner. This Court held that having regard to the objective of the scheme, in a case of this nature, a reasonable and pragmatic approach has to be adopted so that a declarant can avail the benefits of the scheme; a declarant who seeks benefit under the scheme cannot be put in a worse off condition than he was before making declaration under the scheme. That would defeat the very purpose of the scheme - This Court in case of Thought Blurb has considered the entire scheme SVLDRS threadbare and has also considered the objects, purpose and intent for framing the said scheme by the Central Government. This Court has considered the declaration made by the Hon’ble Finance Minister clearly deducible from the statement of object and reasons, the scheme as one time measure for liquidation of past disputes of central excise and service tax as well as to ensure disclosure of unpaid taxes by a person eligible to make a declaration. The basic thrust of the scheme is to unload the baggage of pending litigations centering around service tax and excise duty. The focus is to unload this baggage of pre-GST regime and allow business to move ahead. The impugned order is contrary to the object, the purpose and the intent of the Central Government to frame the said scheme as one time measure for liquidation of past disputes of central excise and service tax as well as to ensure disclosure of unpaid taxes by a person eligible to make a declaration and the basic thrust of the scheme is to unload the baggage of pending litigations centering around service tax and excise duty and deserves to be quashed and set aside - the petitioner had rightly filed the said declaration form considering the tax dues as ₹ 39,47,420/- i.e. the amount of demand confirmed in the Order-in Original dated 23rd December, 2019 and had rightly computed an amount of ₹ 15,78,968/as estimated/determined amount payable i.e. by applying 40% under section 124(c)(i) Finance (No.2) Act, 2019 on the said dues of ₹ 39,47,420/-. Petition allowed. Issues Involved:1. Whether the petitioner could file a declaration under the SVLDR Scheme under the category of 'arrears' based on the liability determined in the Order-in-Original dated 23rd December 2019, or should it have been under the category 'litigation' based on the show cause notice.Issue-wise Detailed Analysis:1. Filing Declaration under 'Arrears' or 'Litigation' Category:- The petitioner filed a declaration under the SVLDR Scheme under the 'arrears' category, based on the liability determined in the Order-in-Original dated 23rd December 2019.- The respondents argued that the petitioner should have filed the declaration under the 'litigation' category, as the show cause notice was pending on 30th June 2019.- The court noted that the petitioner had provided all details for the entire period from 2013-14 to 2017-18 in response to the show cause notice.- The Order-in-Original dated 23rd December 2019 confirmed the demand of Service Tax of Rs. 39,47,420/- against the petitioner.- The court concluded that the petitioner rightly filed the declaration under the 'arrears' category since the tax dues were already assessed and quantified before filing the SVLDRS declaration form.2. Definition and Conditions under the SVLDR Scheme:- Section 121(c)(i) of the SVLDR Scheme defines 'amount in arrears' as the amount of duty recoverable as arrears due to no appeal being filed against an order.- Section 123(e) defines 'tax dues' as the amount in arrears.- The court observed that the petitioner satisfied the conditions of Sections 124 and 125(1) of the SVLDR Scheme, making them eligible for relief under the scheme.- The court emphasized that the petitioner’s declaration under the 'arrears' category was appropriate, as the assessment order had attained finality and the tax dues were crystallized.3. Object and Purpose of the SVLDR Scheme:- The court highlighted the intent of the SVLDR Scheme as a one-time measure for liquidation of past disputes of central excise and service tax, and to ensure disclosure of unpaid taxes.- The scheme aimed to unload the baggage of pending litigations and allow businesses to move forward.- The court found the respondents' classification of the petitioner's declaration under the 'litigation' category contrary to the scheme's objective.4. Precedents and Legal Principles:- The court referred to the judgments in Jyoti Plastic Works Pvt. Ltd. and Morde Foods Pvt. Ltd., which supported the petitioner's position.- It was noted that a reasonable and pragmatic approach should be adopted to allow declarants to avail the benefits of the scheme without being worse off than before making the declaration.Conclusion:- The court concluded that the petitioner had rightly filed the declaration considering the tax dues as Rs. 39,47,420/- and computed the amount payable as Rs. 15,78,968/- by applying 40% under Section 124(c)(i) of the Finance (No.2) Act, 2019.- The writ petition was allowed, granting the petitioner two weeks to make the payment and directing the respondents to issue a discharge certificate within thirty days of payment.- The rule was made absolute, with no order as to costs, and the parties were directed to act on the authenticated copy of the order.