2023 (1) TMI 1188 - HC - Service Tax

Court quashes rejection under Sabka Vishwas Scheme, emphasizes procedural fairness.

K. Raheja Private Limited Versus Union of India, Ministry of Finance, Department of Revenue, New Delhi. The Commissioner GST & Central Excise, Mumbai, The Deputy Commissioner CGST & Central Excise, Mumbai, The Additional Commissioner CGST & Central Excise, Mumbai, The Designated Committee Under SVLDRS Scheme, The Deputy Director, Directorate General of GST Intelligence, Mumbai

The court quashed the rejection of the petitioner's declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, citing failure to ... Rejection of declaration in Form-SVLDRS-1 - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - It is the Petitioner’s case that Petitioner never received the said communication of rejection of the declaration on 20 March 2020 either from Respondent No.4 or from the Designated Committed, prior to the 4th Respondent’s letter dated 17 February 2022, by which the letter dated Nil March, 2020 rejecting the declaration was enclosed - HELD THAT:- For being eligible under the SVLDR Scheme, a written communication of the amount of duty liability admitted by the person concerned during enquiry, investigation or audit would be a quantification on or before 30 June 2019, which need not be determined upon completion of investigation by issuance of Show Cause Notice or upon adjudication. It is not in dispute that on 15 February 2018, the Superintendent of the Director General of GSTI and his team visited its office and Petitioner vide its letter dated 15 February 2018 informed the Superintendent that it had handed over the PPL to MCGM. From the definition of enquiry and investigation as set out above, it is clear that search of premises as in the case of Petitioner on 15 February 2018 falls under enquiry or investigation as defined in Section 121(m). By the said communication it was submitted that the Petitioner is entitled to the cenvat & input tax credits since ultimate sale of flats was liable to tax as they had paid the same there would be no reason to issue Show Cause Notice nor impose any penalty and the proceedings be closed as they had complied with provisions of the Service Tax, MVAT and GST law. There has been no reply to this communication. The Designated Committee instead of issuing Form 3 and followed with Form 4 to Petitioner, issued a Show Cause Notice dated 21 June 2021. It is only pursuant to communication dated 14 February 2022 when request was made by Petitioner to issue Form SVLDRS-4 that vide communication dated 17 February 2022, the Respondent No.4- Additional Commissioner of CGST and Central Excise informed Petitioner that Form SVLDRS-1 filed by Petitioner had been rejected on 20 March 2020 and enclosed a copy of the said letter dated nil March 2020. Admittedly, the communication was handed over to the Petitioner on 17 February 2022. Even the SVLDRS portal still indicates the status of the applicant as “Agreed by Taxpayer” - It is not explained as to why if information was furnished to the Designated Committee vide letter dated 27 February 2020, a clarification was sought from the Petitioner on 22 January 2020, a date prior to the communication by the investigating agency. The SVLDR Scheme is a legislation introduced for liquidation of legacy disputes on the one hand and recovery of unpaid taxes to the government on the other. The Respondent cannot contend that the portal was not updated. Once SVLDRS-2 has been issued and there has also been a follow up from the Respondents with respect to the said Form as well as the hearing that was fixed at the appointed date and time, the Respondent-Authorities cannot renege on the same. Particularly so in the peculiar facts and circumstances of this case, where admittedly, the rejection of SVLDRS-1 was not communicated to Petitioner on 20 March 2020, but only communicated to them on 17 February 2022 i.e. after a request came from Petitioner to issue Form SVLDRS-4. Having held that the amount of Rs. 4,60,96,697/-, is the amount quantified pursuant to communication dated 23 March 2018 to the DGGSTI and the Designated Committee having issued Form SVLDRS-2 to Petitioner on 16 January 2020 and the communication of rejection having been communicated to Petitioner only on 17 February 2022, the action of the Respondent Authorities ought to be quashed and set aside - the communication dated nil March, 2020 as well as the Show Cause Notice dated 21 June 2021 cannot be sustained and are hereby quashed and set aside. Petition allowed. Issues Involved:1. Rejection of declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme).2. Quantification of duty payable under the SVLDR Scheme.3. Compliance with principles of natural justice.Detailed Analysis:1. Rejection of Declaration under the SVLDR Scheme:The petitioner challenged the rejection of their declaration in Form-SVLDRS-1 dated 20 December 2019 under the SVLDR Scheme by the Deputy Commissioner, CGST & Central Excise, Mumbai. The declaration was rejected on the grounds that the amount of duty had not been quantified as on 30 June 2019, as communicated by the Directorate General of GST Intelligence (DGGI) on 27 February 2020.2. Quantification of Duty Payable:The petitioner argued that the amount of duty payable was quantified before the cut-off date of 30 June 2019. They referred to their communications dated 23 March 2018 and 11 June 2018, where they had ascertained and furnished details of Cenvat Credit of Service Tax, Education Cess, Secondary & Higher Education Cess, and Krishi Kalyan Cess, totaling Rs. 4,60,96,697/-. This amount was claimed to be quantified within the meaning of Section 121(r) of the Finance Act, 2019, which defines 'quantified' as a written communication of the amount of duty payable.3. Compliance with Principles of Natural Justice:The petitioner contended that the rejection of their declaration was arbitrary, unreasonable, and in breach of the principles of natural justice. They argued that the rejection letter dated Nil March 2020 was not communicated to them until 17 February 2022, which deprived them of an opportunity to respond. Furthermore, the petitioner highlighted that the SVLDRS portal indicated their status as 'Agreed by Taxpayer' even after the rejection date, suggesting a lack of proper communication and procedural irregularities.Court's Observations and Judgment:Quantification and Eligibility:The court referred to Section 123(c) and Section 125(1)(e) of the Finance Act, 2019, and noted that for eligibility under the SVLDR Scheme, the amount of duty payable must be quantified on or before 30 June 2019. The court cited previous judgments, including RS HR Team Solutions Pvt. Ltd. vs. Union of India, which clarified that a written communication of the amount of duty payable, including a letter intimating duty demand or duty liability admitted by the person during enquiry, investigation, or audit, would suffice for quantification.Principles of Natural Justice:The court found that the petitioner had not been given an opportunity to deal with the DGGI's report dated 27 February 2020, which was relied upon to reject the declaration. The court emphasized that the SVLDR Scheme was intended to resolve legacy disputes and should be approached with a view to make the scheme successful. The court held that the rejection of the petitioner's declaration without proper communication and opportunity to respond was in breach of the principles of natural justice.Decision:The court quashed and set aside the communication dated Nil March 2020 and the Show Cause Notice dated 21 June 2021. The respondents were directed to constitute a Designated Committee to consider the petitioner's declaration and issue Form SVLDRS-3 and Form SVLDRS-4 after giving a reasonable opportunity of hearing to the petitioner within eight weeks from the date of the order.Conclusion:The petition was allowed, and the respondents were directed to comply with the court's instructions to reconsider the petitioner's declaration under the SVLDR Scheme. The court emphasized the importance of adhering to procedural fairness and the principles of natural justice in the implementation of the scheme.