Service tax dues quantified before 30.06.2019 under SVLDRS s.123(c) despite pending investigation; rejection set aside, relief granted

The dominant issue was whether service tax "tax dues" were "quantified" on or before 30.06.2019 so as to qualify for relief under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 despite a pending investigation. The HC held that the Scheme is intended to have a broad sweep, and s.123(c) covers pending enquiry/investigation/audit where the duty payable stands quantified by departmental communication or the declarant's admitted computation accepted in substance by the department. As liability for two periods was quantified/admitted before 30.06.2019, the petitioner was eligible; rejection on the ground that investigation was not concluded was set aside and the writ was allowed.

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Issues Involved:
1. Whether the service tax amount payable by the petitioner was quantified before the stipulated date (30.06.2019).
2. Whether the petitioner is entitled to the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
3. Validity of the demand-cum-show cause notice issued by the Principal Commissioner of Central Excise, Goods & Service Tax.

Issue 1: Quantification of Service Tax Amount

The principal controversy to be addressed in the present petition is whether the amount of service tax payable by the petitioner was quantified before the stipulated date, that is, before 30.06.2019.

According to the respondents, the petitioner is not entitled to the benefit of the Scheme as at the material time, the investigation concerning the petitioner was pending and the amount of service tax was not "˜quantified' within the meaning of Clause (r) of Section 121 of the Finance Act (No. 2), 2019.

Section 123 of the Finance Act (No. 2), 2019 defines the expression "tax dues" and includes cases where enquiry, investigation, or audit was pending but the dues had been quantified.

The expression "quantified" has been defined under Section 121(r) of the Finance Act (No. 2), 2019 as: "a written communication of the amount of duty payable under the indirect tax enactment."

It must necessarily mean a case where enquiry, audit, or investigation is pending but the quantification of the tax dues is ascertainable from a written communication on record.

The CBIC had clarified that such written communication will include a letter intimating duty demand; or duty liability admitted by the person during enquiry, investigation, or audit; or audit report etc.

Issue 2: Entitlement to the Scheme

The petitioner has filed the present petition impugning an order dated 02.03.2020, whereby its declaration dated 26.12.2019 under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 was rejected.

The Scheme was introduced to settle the legacy cases and to allow quick closure of pending litigations centering around service tax and excise duty.

Section 125(1) of the Finance Act (No. 2), 2019 posits that all persons, except those as stipulated, would be eligible to make a declaration under the Scheme.

The legislative intent in enacting Chapter V of the Finance Act (No. 2), 2019 (the Scheme) was to maximize the sweep of the Scheme, covering all situations where tax was payable except those cases, which were expressly excluded.

The petitioner filed a declaration in terms of the Scheme under the category, "Investigation, Enquiry or Audit" and sub-category, "Investigation By Commissionerate".

The impugned order rejecting the petitioner's declaration on the ground that "investigation has not been concluded and hence the demand has not been estimated or concluded on or before the stipulated date" is unsustainable.

Issue 3: Validity of the Demand-Cum-Show Cause Notice

The petitioner also impugns a demand-cum-show cause notice dated 30.12.2020 issued by the Principal Commissioner of Central Excise, Goods & Service Tax under Section 73(1) of the Finance Act, 1994.

The impugned notice was issued on the premise that the petitioner's dues have not been settled.

The respondents shall process the petitioner's declaration in accordance with the Scheme. Since the impugned notice has been issued to the petitioner on the premise that the petitioner's dues have not been settled, the same also is set aside.

Conclusion:

The petition is allowed. The respondents shall process the petitioner's declaration in accordance with the Scheme. The impugned demand-cum-show cause notice is set aside.

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