Voluntary disclosure under the legacy dispute scheme requires a pending enquiry, investigation or audit; rejection without hearing is invalid.

Voluntary disclosure under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 was held ineligible only when the declarant had already been subjected to an enquiry, investigation or audit relevant to the declared period, or had filed a return showing duty payable but unpaid. The Court found no pending enquiry, investigation or audit for the declared period as on 30.06.2019, so rejection under Section 125(1)(f) was unsustainable. It also held that a summary rejection with civil consequences could not be made without giving the declarant an opportunity to be heard. The impugned rejection was set aside and the declaration was remitted for fresh consideration.

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Issues: (i) Whether the declaration filed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 in the category of voluntary disclosure was wrongly rejected under Section 125(1)(f) of the Finance (No.2) Act, 2019; (ii) Whether the rejection could stand when no enquiry, investigation or audit concerning the relevant declared period was pending as on 30.06.2019 and no opportunity of hearing was afforded before rejection.

Issue (i): Whether the declaration filed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 in the category of voluntary disclosure was wrongly rejected under Section 125(1)(f) of the Finance (No.2) Act, 2019.

Analysis: The scheme was treated as a beneficial, one-time measure meant to resolve legacy service tax disputes and therefore called for a liberal construction consistent with its object. On the language of Section 125(1)(f), ineligibility for voluntary disclosure applies only where the declarant had already been subjected to enquiry, investigation or audit, or had filed a return showing duty payable but unpaid. The Court held that the provision must be read according to its plain terms and in the factual context of the declared period.

Conclusion: The rejection on the stated ground was unsustainable and the declaration could not be treated as ineligible under Section 125(1)(f).

Issue (ii): Whether the rejection could stand when no enquiry, investigation or audit concerning the relevant declared period was pending as on 30.06.2019 and no opportunity of hearing was afforded before rejection.

Analysis: The Court found that the department's initial verification related to a different period and that the material placed did not show any enquiry, investigation or audit pending as on 30.06.2019 for the period covered by the declaration. It also held that a summary rejection carrying serious civil consequences could not be made without giving the declarant an opportunity to explain eligibility, especially when the scheme itself contemplated hearing in comparable situations. The decision-making process was therefore inconsistent with the principles of natural justice.

Conclusion: The declaration could not be rejected on this basis, and the impugned intimation was invalid.

Final Conclusion: The impugned rejection was set aside, and the matter was remitted for fresh consideration of the declaration as a voluntary disclosure after hearing the petitioner and passing a speaking order.

Ratio Decidendi: Under the Scheme, ineligibility for voluntary disclosure arises only when the declarant was already subjected to an enquiry, investigation or audit relevant to the declared period, and a rejection having adverse civil consequences cannot be made without observance of natural justice.

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