Taxpayer's SVLDR Scheme Rejection Overturned: Court Calls for Fair Processing and Waiver of Penalties.

Carpet Export Promotion Council Versus Union Of India & Anr.

Carpet Export Promotion Council Versus Union Of India & Anr. - [2023] 117 G S.T.R. 1 (Del) Issues Involved:
1. Rejection of the petitioner's application under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme).
2. Legislative intent and principles of natural justice under the SVLDR Scheme.
3. Procedural compliance by the designated authority under the SVLDR Scheme.

Summary:

Issue 1: Rejection of the petitioner's application under the SVLDR Scheme

The petitioner filed a petition under Article 226 of the Constitution of India challenging the rejection of their application under the SVLDR Scheme. The application was rejected on the grounds of 'ineligibility' with remarks of 'incomplete and selective declaration.' The respondents argued that the petitioner had not included certain amounts in their declaration, which led to the rejection.

Issue 2: Legislative intent and principles of natural justice under the SVLDR Scheme

The court examined the legislative intent behind the SVLDR Scheme, which aimed to resolve pending indirect tax disputes and enable businesses to transition smoothly to the GST regime. The SVLDR Scheme was designed to offer substantial relief to taxpayers, especially small ones, and facilitate the closure of legacy disputes. The Finance Minister's speech and the Ministry of Finance's Press Release emphasized the objective of freeing taxpayers from legacy tax disputes.

Issue 3: Procedural compliance by the designated authority under the SVLDR Scheme

The court noted that the designated authority did not follow the procedure mandated by Section 127 of the Act and Rule 6 of the SVLDR Scheme Rules, which required affording the declarant an opportunity to be heard before rejecting the application. The petitioner was not issued any notice nor given an opportunity to explain the alleged discrepancies in their declaration. The court referenced the case of *Thought Blurb v. Union of India & Ors.*, where the Bombay High Court held that summary rejection without a hearing violates the principles of natural justice.

Conclusion:

The court concluded that the rejection of the petitioner's application was arbitrary and unreasonable, violating Article 14 of the Constitution of India. The petitioner had already deposited the tax dues and was entitled to a waiver of interest and penalty under the SVLDR Scheme. The court set aside the impugned order and directed the designated authority to process the petitioner's declaration in accordance with the SVLDR Scheme within eight weeks.