2022 (6) TMI 616 - HC - Service Tax

Set aside demand for Rs.1,54,20,216 under Sabka Vishwas Scheme for lack of hearing and improper ITC examination

The HC set aside the impugned order that demanded Rs.1,54,20,216, finding no opportunity of hearing and no proper examination of input tax credit ... Correct calculation of tax liability - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Works Contract - Erection Commission and Installation Services - benefit of input tax credit - opportunity of hearing not provided - HELD THAT:- The demand if any could have been restricted only to the net of the amount after adjustment of Rs.1,03,71,501 from Rs.3,49,09,640 less the amount deposited by the petitioner merely because the credit cannot be denied, provided the credit was validly availed. This ought to have been properly examined by the Designated Committee as unnecessarily the assessee is being denied is not of the right to settle the dispute under the Scheme - If the credit was lying un-utilized, the petitioner was entitled to pay 50% of the net amount that is the tax due from the petitioner. However, this has not been done. There is no discussion in the Impugned Order. There is no merits in the impugned order passed by the respondents by demanding a sum of Rs.1,54,20,216 from the petitioner. The rules contemplate hearing. The hearing is meant for proper determination of the amount to be paid by an assessee. The petitioner has not been heard - the impugned order is set aside - case remitted back to the jurisdictional officer to arrive at the proper amount to be paid by the petitioner in the provisions of the scheme. Petition allowed by way of remand. Issues Involved:1. Correct tax liability determination under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.2. Adjustment of pre-deposited amounts and Input Tax Credit (ITC).3. Compliance with procedural requirements and hearing before passing the impugned order.Detailed Analysis:1. Correct Tax Liability Determination:The petitioner challenged the impugned order dated 14.01.2020, issued by the second respondent, which determined the amount payable under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, as Rs.1,54,20,216/-. The petitioner contended that the correct tax liability should be Rs.1,74,54,820/- as per Section 124 of the Finance (No.2) Act, 2019. The dispute arose from the services rendered under a works contract, which was subject to tax under both the TNVAT Act, 2006, and Chapter V of the Finance Act, 1994.2. Adjustment of Pre-Deposited Amounts and ITC:The petitioner argued that the pre-deposited amount of Rs.1,86,22,409/- and unutilized ITC of Rs.1,03,71,501/- should be adjusted against the tax liability. The petitioner claimed that the Show Cause Notice did not account for the Cenvat Credit portion, resulting in double taxation. The petitioner referred to Circular No.1071/4/2019-CX.8, which clarified that tax paid through input credit should be adjusted by the Designated Committee. The petitioner also cited various decisions supporting the adjustment of ITC.3. Compliance with Procedural Requirements and Hearing:The petitioner contended that the designated authority did not provide an opportunity for a hearing before passing the order. The petitioner emphasized that the hearing is essential for the proper determination of the amount payable under the scheme. The petitioner requested the quashing of the impugned order and remittance of the case for proper determination under Sections 126 (1 & 2) of the Finance (No.2) Act, 2019, and Rule 6 of the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019.Respondents' Argument:The respondents argued that the writ petition lacked merit and that the petitioner was disqualified from the scheme. They contended that the petitioner’s claim for ITC adjustment was not permissible under Section 130 of the Finance (No.2) Act, 2019, which restricts the use of ITC for payment under the scheme. The respondents also highlighted discrepancies in the petitioner's claims and the amounts mentioned in the Show Cause Notice.Court's Decision:The court considered the arguments and found that the Designated Committee did not properly examine the petitioner's claims, particularly regarding the adjustment of ITC. The court noted that the scheme allows for the adjustment of pre-deposited amounts and ITC, as clarified in the circular and FAQs. The court observed that the petitioner was not provided a hearing, which is crucial for determining the correct amount payable. Consequently, the court set aside the impugned order and remitted the case back to the jurisdictional officer for proper determination, ensuring compliance with the procedural requirements.Conclusion:The writ petition was allowed by remanding the case to the second and third respondents for a fresh order, ensuring the petitioner is heard and the correct amount payable is determined under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The court emphasized the need for proper verification and adjustment of ITC and pre-deposited amounts as per the scheme's provisions.