Tax recovery order quashed as COVID-19 lockdown frustrated Sabka Vishwas Legacy Dispute Resolution Scheme 2019

The HC quashed a tax recovery order passed during COVID-19 lockdown period, finding that the Sabka Vishwas Legacy Dispute Resolution Scheme 2019 was frustrated by the pandemic. The petitioner had filed proper declaration under the scheme on 31.12.2019, but the show cause notice was issued on 02.12.2020 and demand confirmed on 22.06.2021 during intermittent lockdowns. The court noted that Parliament's tax recovery attempt was derailed by COVID-19, and limitations were extended by SC orders and government ordinances. The writ petition was allowed with the condition that petitioner deposit Rs. 38,57,329 plus 15% interest from 01.07.2020 within thirty days.

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Issues:
1. Challenge against Order-in-Original directing payment of Service Tax, interest, and penalty.
2. Dispute settlement under Sabka Vishwas Scheme, 2019.
3. Impact of Covid-19 lockdown on payment timelines.
4. Consideration of legal precedents in similar cases.
5. Extension of limitations and deadlines due to pandemic.

Detailed Analysis:
1. The petitioner challenged an Order-in-Original directing payment of Rs. 38,57,329/- along with interest and penalties. The order invoked extended time under Section 73(1) of the Finance Act, 1994 for demanding Service Tax. It confirmed the demand for services rendered by the petitioner during a specific period and imposed penalties for non-filing of returns and contravention of relevant provisions of law. The petitioner also faced penalties under different sections of the Finance Act, 1994, including penalties on directors. The order was passed under the saving clause of Section 174 of the CGST Act, 2017.

2. The petitioner opted to settle the dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, by filing a declaration in Form No.SVLDRS-1. The petitioner declared a lower tax payable amount, but the respondents determined a higher amount in Form No.SVLDRS-2, which the petitioner agreed to pay within a specific timeframe. However, due to the Covid-19 lockdown and technical glitches in the payment portal, the petitioner faced challenges in making the payment on time. The petitioner sought relief based on previous court decisions in similar cases.

3. The impact of the Covid-19 pandemic and subsequent lockdown was a crucial aspect of the case. The petitioner argued that the lockdown hindered the timely payment of the determined amount, leading to the issuance of a Show Cause Notice and the impugned Order-in-Original. The petitioner highlighted the challenges faced during the pandemic, including the inability to pay due to lockdown restrictions and technical issues in the payment portal.

4. The petitioner relied on previous court decisions, such as N.Sundararajan (Former Partner), M/s.Genupro Yarn Agencies case, M/s.Subramaniya Siva Co.Operative Sugar Mills Limited case, and RR Housing (India) Private Limited case, to support their argument for sympathetic consideration and relief in the current case. These precedents were cited to demonstrate instances where the court had provided relief to parties facing difficulties in payment obligations due to unforeseen circumstances.

5. The judgment considered the extension of limitations and deadlines due to the Covid-19 pandemic. The court noted that various orders from the Hon'ble Supreme Court and legislative actions extended deadlines and limitations to accommodate the challenges posed by the pandemic. The court acknowledged the impact of the lockdown on tax recovery efforts under the Sabka Vishwas Scheme and decided to quash the impugned order, subject to the petitioner depositing the determined amount with interest within a specified timeframe. Failure to comply would result in dismissal of the writ petition and allow the respondents to proceed with the impugned order.

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