2024 (10) TMI 1742 - HC - Service Tax

One-day delay in SVLDRS-4 remittance deemed reasonable due to COVID-19 lockdown; matter sent back for fresh consideration

HC allowed the writ petition and remanded the matter to the first respondent for fresh consideration, holding that a one-day delay in remitting amounts ... Availing the benefit of SVLDRS-4 Scheme on 31.12.2019 - though the petitioner remitted the tax due, there was a delay of one day in remitting the same - reason for the one day delay is due to Covid-19 lock down period - HELD THAT:- There is no dispute on the aspect that during the year 2020, Covid-19 was at peak, during which period, there was complete shut down and the Companies were not in a position to run their business successfully, as they did before, as an aftermath, they faced huge financial constraint, resulting in loss or closure of their business. Despite the same, since the Income Tax Department harassed the assessee on account of non-filing of returns in time and also negatived the claims of several assessees citing the limitation aspect, the Hon'ble Supreme Court suo motu, in W.P.No.3 of 2020, dated 23.03.2020 [2020 (5) TMI 418 - SC ORDER] has extended the mandatory provisions of the limitations under various Acts due to the reason of Covid-19 pandemic from 01.03.2020 to 28.02.2022 and following the said dictum laid down by the Hon'ble Supreme Court, this Court also considered the similar claim made by the petitioner, who was placed similarly like that of the petitioner herein. This Court is inclined to allow the Writ Petition, inasmuch as, the delay on the part of the petitioner in remitting the amounts as quantified vide SVLDRS-Scheme is only one day, which was due to covid 19, and the same appears to be reasonable. The matter is remanded to the first respondent for fresh consideration - petition allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether cancellation of Form SVLDRS-4 for payment made one day after the stipulated deadline under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS), is sustainable where the delay was caused by COVID-19 lockdown constraints. 2. Whether the time limits for availing benefits and making payments under the SVLDRS are mandatory or directory, and what effect the characterization has on relief where delays occurred during the COVID-19 pandemic. 3. Whether the principles and orders issued by the Supreme Court extending limitation periods during the COVID-19 pandemic (suo motu order) and this Court's earlier decision in a similar matter should govern acceptance of late payment and issuance of Form SVLDRS-4. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of cancellation of Form SVLDRS-4 for one-day delay due to COVID-19 lockdown Legal framework: The SVLDRS prescribes time limits for making payment to avail scheme benefits; Form SVLDRS-3 indicates amount and deadline, and issuance of Form SVLDRS-4 effects discharge of liabilities upon compliance. Precedent treatment: This Court followed its prior ruling in a materially similar writ where a late payment during the pandemic was held to be acceptable and treated as payment under the scheme; that decision accepted COVID-19 constraints and directed issuance of SVLDRS-4 upon fulfilment of payment conditions subject to limited conditions. Interpretation and reasoning: The Court recognized that during the relevant period COVID-19 caused complete shutdowns, business disruptions and acute financial constraints, rendering strict adherence to the one-day deadline inequitable. Given the pandemic context, a single day delay attributable to lockdown conditions was found to be reasonable. The respondents' cancellation of SVLDRS-4 solely for the one-day delay was therefore arbitrary in the circumstances. Ratio vs. Obiter: Ratio-cancellation of SVLDRS-4 for a one-day delay caused by pandemic lockdown is arbitrary and can be set aside; the affected payment may be treated as made under the Scheme where the Court is satisfied the delay is pandemic-related. Obiter-observations on broader policy of departmental notifications and earlier extensions. Conclusion: The cancellation was quashed and matter remitted for fresh consideration consistent with the Court's reasoning that the one-day COVID-related delay was reasonable and payment should be treated as under the Scheme. Issue 2: Mandatory versus directory character of SVLDRS time limits and effect of characterization on relief Legal framework: The Finance Act/Finance Bill empowered the Central Government to fix/extend time limits for availing the SVLDRS and for making payments by notification; statutory delegation bears on whether prescribed periods are mandatory or directory. Precedent treatment: The Court relied on its earlier decision which treated the time-fixing provisions as directory where the Central Government was empowered to extend deadlines by notification; the Court also relied on the Supreme Court's suo motu extension of limitation during the pandemic. Interpretation and reasoning: Delegation of power to set and extend time limits implies a directory character to the Scheme's deadlines because the Central Government retained discretion to respond to prevailing conditions (e.g., COVID-19) by extending dates. If provisions were mandatory, there would be no scope for such delegated temporal adjustments. Given this directory character and the pandemic's effects, equity and the inability of petitioners to comply strictly are relevant considerations permitting judicial intervention. Ratio vs. Obiter: Ratio-time limits under the Scheme are directory in nature where notification power to extend has been conferred; directory character permits relief for pandemic-related noncompliance. Obiter-discussion on policy reasons and expectations of departmental extensions up to the period covered by the Supreme Court's suo motu order. Conclusion: The Court treated the Scheme's time limits as directory, enabling it to excuse short, pandemic-caused defaults and to direct acceptance of payments made shortly after the stipulated date, subject to conditions (e.g., interest or payment within directed period where applicable). Issue 3: Application of the Supreme Court's suo motu extension of limitation and reliance on this Court's prior decision Legal framework: The Supreme Court suo motu extended limitation periods for specified pandemic dates; administrative notifications under the Scheme also extended deadlines episodically. Precedent treatment: The Court followed the Supreme Court's pandemic-related extension principle and the Court's own earlier judgment where late payments made during the pandemic were treated as payments under the SVLDRS and Form SVLDRS-4 was directed to be issued upon compliance with additional conditions. Interpretation and reasoning: The Supreme Court's extension of limitation to address pandemic-related impediments reflects recognition of widespread inability to comply with time-barred obligations. Where the Department had issued some notifications extending Scheme deadlines but had not mirrored the full period of the Supreme Court's extension, the Court held that departmental inaction could not defeat pandemic-related equitable relief. The Court applied the reasoning of its earlier decision to treat the late payment as effective under the Scheme and to require issuance of Form SVLDRS-4 on fresh consideration consistent with that precedent. Ratio vs. Obiter: Ratio-pandemic-period extensions and the equitable considerations endorsed by the Supreme Court support judicial acceptance of late payments made during the pandemic and direct administrative compliance where appropriate. Obiter-remarks on specific notification chronology and the Department's obligations to consider extensions in light of the Supreme Court's order. Conclusion: The Court applied the Supreme Court's suo motu extension principle and its own prior decision to allow relief for pandemic-caused delay, directing the respondents to reconsider and issue Form SVLDRS-4 within a specified period in accordance with the cited reasoning. Relief and directions (consequential and operative conclusions) The impugned cancellation order was quashed, and the matter remitted for fresh consideration in light of the Court's cited reasoning and its prior decision; respondents were directed to issue Form SVLDRS-4 to discharge tax liability within a specified period. The Court emphasized that acceptance of payment and issuance of the discharge certificate should follow the principles applied to pandemic-related delays and subject to conditions/requirements consistent with the precedent (including any directions as to interest or compliance specified in analogous prior orders).