Recovery of service tax on payments to foreign government agencies: pre-deposit deducted when issuing statement, reducing payable under relief scheme.

Recovery of service tax on payments to foreign government agencies for statutory licences is addressed by applying the legacy dispute resolution relief calculation to net outstanding tax dues after specified deductions. The legal basis treats amounts paid as pre-deposit as deposits until appropriation and requires deduction of such deposited sums when issuing the statement of amount payable, not at initial calculation of 60% relief. Consequently the declarants eligible payable under the scheme is reduced by the appropriated pre-deposit and the authority must refund the balance and issue corrected settlement forms.

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Issues Involved:
1. Rejection of the petitioner's application under the Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 (SVLDRS).
2. Calculation of the amount payable under the SVLDRS.
3. Deduction of pre-deposit from the total tax dues.

Issue-wise Detailed Analysis:

1. Rejection of the Petitioner's Application under SVLDRS:
The petitioner challenged the communication dated 14.08.2020, which rejected their application under SVLDRS and served a recovery notice of Rs. 30,34,955/-. The petitioner argued that their declaration under the scheme was wrongly rejected, placing them under a heavy financial burden. The court acknowledged the petitioner's grievance and issued an interim order allowing the petitioner to deposit Rs. 11,22,934/- without prejudice to their rights to claim any refund of excess payment.

2. Calculation of the Amount Payable under SVLDRS:
The petitioner declared Rs. 6,82,805/- as tax dues payable, which was later modified to Rs. 9,86,360/-. However, the respondent calculated the payable amount as Rs. 11,22,933/-. The petitioner argued that the respondent incorrectly calculated the amount by considering the pre-deposit as an appropriation instead of a deposit. The court referred to the provisions of SVLDRS and the CBIC Circular No. 1072/05/2019, which clarified that the relief should be applied to the net outstanding amount after deducting the pre-deposit.

3. Deduction of Pre-deposit from the Total Tax Dues:
The petitioner contended that the pre-deposit of Rs. 2,27,622/- should be deducted from the net amount payable after applying the 60% relief to the tax dues. The court agreed with this interpretation, stating that the amount of pre-deposit should not be deducted from the total tax dues but from the net amount eligible for the scheme. The court cited the Madras High Court's decision in M/s. Himang Infrastructure Solutions Pvt. Ltd., which supported the petitioner's calculation method.

Conclusion:
The court concluded that the respondent's calculation was contrary to the provisions of the SVLDRS and the CBIC circular. The court directed the respondent to appropriate Rs. 9,86,360/- from the amount deposited by the petitioner and return the remaining Rs. 2,27,622/-. The respondent was also instructed to issue a rectified Form SVLDRS-3 and a consequential Form SVLDRS-4, thereby allowing the petition and making the rule absolute.

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