2022 (7) TMI 307 - HC - Service Tax

Court quashes tax statement, upholds petitioner's entitlement under Sabka Vishwas Scheme

B-Earth & Spire (India) Pvt. Ltd. Versus Union Of India & Ors.

The court quashed the impugned statement dated 12.02.2020 as it failed to consider pre-deposits towards tax liability, violating constitutional provisions ... Validity of statement issued in prescribed form SVLDRS 3 - tax liability that was due and payable - setting off of amounts already paid towards tax - Seeking declaration that the impugned statement is ultra vires section 66B of the Finance Act 1994 - seeking declaration that impugned statement violates the provisions of Articles 14, 19 (1) (g), 265 and 300A of the Constitution - HELD THAT:- While there is no dispute about the fact that the petitioner falls under the voluntary disclosure category and that it has deposited before the scheme kicked in i.e., 01.09.2019, amounts towards tax liability, which included the relevant period, the contesting respondents i.e., respondent nos. 2 to 4, refused to take cognizance of the same, as the designated committee under the proviso appended to sub-section (1) of section 126 is not empowered to verify the declaration made concerning the ‘amount of duty’ set forth by the declarant in the prescribed form i.e., SVLDRS-1. The submission of the contesting respondents is that the petitioner cannot go beyond the purview of the scheme, and if the argument of the petitioner is accepted, that there is an ambiguity in the scheme, since it is akin to a beneficial legislation, the provisions of the scheme ought to be interpreted in a manner that favours the revenue, as against the declarant. The expression “tax dues” involves a combination of two words “tax” and “dues” - while the term/word “tax” is commonly understood as meaning imposition of a governmental charge on persons, properties, entities, and transactions to yield public revenue. The word “dues” would be something which is owed or payable (in the context of present matter, tax) constituting a debt2. Therefore, when the words tax and dues are read conjointly, it could only mean imposition of charge which is owed and payable and thus, by necessary implication, would exclude tax liability which is already discharged and/or paid - therefore, the expression “total amount of duty” in clause (d) of section 123 of the 2019 Act, in our opinion, could only mean the total amount of outstanding duty payable by a declarant making voluntary disclosure, as it could never have been intended by the legislature that the revenue would collect and/or recover tax liability which has already been discharged by the declarant. The obvious intent of the legislature in forging the scheme under the 2019 Act is to encourage assessees to make a clean breast of their affairs and resultantly, extend the necessary benefits to the revenue by adding to their financial wherewithal, sans the attendant difficulties and costs that would otherwise have to be incurred to initiate of recovery and legal proceedings - the only caveat that one needs to enter at this stage (and something that does not arise for consideration in this case), is that if a declarant has made a pre-deposit or other deposits which exceed the amount payable, as indicated in the statement issued by the designated committee, the said amount shall not be refunded as per provisions of sub-section (2) of section 130 of 2019 Act. In the instant case, the pre-deposit made by the petitioner is less than the amount stated in the impugned statement and therefore, in this matter, the petitioner steers clear of the aforesaid provision - the construction of provisions of section 123 (d) cannot enure to the benefit of the revenue. Thus, it would suffice if a direction is issued, quashing the impugned statement dated 12.02.2020, and consequentially respondent no. 4 be called upon to issue a fresh statement in the prescribed form i.e., SVLDRS-3, after taking into account the pre-deposit made by the petitioner towards tax liability, as indicated in its declaration made in the form SVLDRS-1 - petition disposed off. Issues Involved:1. Validity of the impugned statement dated 12.02.2020.2. Interpretation of section 66B of the Finance Act 1994 and Chapter V of the Finance Act 2019.3. Violation of Articles 14, 19(1)(g), 265, and 300A of the Constitution.4. Entitlement to benefits under section 124 of the 2019 Act.5. Adjustment of pre-deposited amounts towards tax liability.6. Provisions of the Sabka Vishwas (Legal Disputes Resolution) Scheme Rules, 2019.Detailed Analysis:1. Validity of the Impugned Statement:The petitioner challenged the statement dated 12.02.2020 issued by respondent no. 4, arguing it was ultra vires section 66B of the Finance Act 1994 and Chapter V of the Finance Act 2019. The petitioner sought a declaration that the impugned statement violated Articles 14, 19(1)(g), 265, and 300A of the Constitution. The court examined the provisions of the 2019 Act and concluded that the impugned statement did not consider the pre-deposits made by the petitioner towards the tax liability, thus rendering it invalid.2. Interpretation of Section 66B of the Finance Act 1994 and Chapter V of the Finance Act 2019:The court noted that the Sabka Vishwas (Legal Disputes Resolution) Scheme 2019 was framed under Chapter V of the 2019 Act, which received the President's assent on 01.08.2019. The scheme aimed to provide relief based on the category of the declarant, as outlined in sections 123, 124, 125, 126, and 127 of the 2019 Act. The court emphasized that the scheme's intent was to encourage voluntary disclosure and settlement of tax dues without contestation.3. Violation of Articles 14, 19(1)(g), 265, and 300A of the Constitution:The petitioner argued that the impugned statement violated constitutional provisions by not allowing the adjustment of pre-deposited amounts towards the tax liability. The court agreed, stating that the scheme's provisions should be interpreted to avoid manifestly unjust or unreasonable results, aligning with the principles of natural justice and fairness.4. Entitlement to Benefits under Section 124 of the 2019 Act:The petitioner sought benefits under section 124 of the 2019 Act, arguing that the tax dues should be limited to the amount remaining unpaid after setting off the pre-deposited amounts. The court held that the expression 'total amount of duty' in section 123(d) should be interpreted to mean the outstanding duty payable, excluding the tax liability already discharged.5. Adjustment of Pre-Deposited Amounts towards Tax Liability:The petitioner contended that the amounts pre-deposited towards tax liability should be adjusted against the estimated tax liability. The court agreed, stating that the scheme did not intend to recover tax liability already discharged by the declarant. The court emphasized that the expression 'tax dues' should exclude tax liability already paid, and the impugned statement should be modified accordingly.6. Provisions of the Sabka Vishwas (Legal Disputes Resolution) Scheme Rules, 2019:The court examined the provisions of the SVLDRS Rules, 2019, and noted that the designated committee was not empowered to verify declarations made under the voluntary disclosure category. The court emphasized that the scheme aimed to provide a mechanism for declarants to settle tax dues without contestation, and the impugned statement should reflect this intent.Conclusion:The court quashed the impugned statement dated 12.02.2020 and directed respondent no. 4 to issue a fresh statement in the prescribed form SVLDRS-3, taking into account the pre-deposited amounts towards the tax liability. The writ petition was disposed of with the parties bearing their respective costs.