2025 (1) TMI 1263 - HC - Service Tax

Petitioner wins challenge against committee's improper categorization under Sabka Vishwas Legacy Dispute Resolution Scheme 2019

M/s. Ons Buildtech Llp Versus Principal Commissioner & Ors.

The Gujarat HC ruled in favor of the petitioner challenging the designated committee's action under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, ... Challenge to action of the designated committee formed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) by issuing Form No. SVLDRS-3 dated 04.12.2019 - petitioner's case falls under the 'arrears' category or the 'litigation' category under SVLDRS - recovery of service tax with interest - non-payment of service tax under ‘Construction Service in respect of Commercial and Industrial Building and Civil Structure’ during the period from April 2014 to June 2017. HELD THAT:- Considering the provisions of the SVLDRS, it is apparent and crystal clear that the case of the petitioner would fall in the category of “amount in arrears” as admittedly the petitioner has not preferred any appeal before 30.06.2019 challenging the Order-in-original and the demand raised in the Order-in-original amounting to Rs. 32,27,856/-has achieved finality so far as the petitioner is concerned and accordingly, the petitioner would be entitled to the benefit of the SVLDRS which has a basic feature of reducing the disputes and create an atmosphere of trust between the assessee and the respondent-department. However, in the facts of the case it appears that, the designated committee, contrary to the provision of the SVLDRS and with total non-application of mind has issued Form SVLDRS-2 and without taking into consideration reply of the petitioner 29.11.2019 has issued Form SVLDRS-3 in a mechanical manner. The petitioner has been vigilant to challenge such SVLDRS-3 immediately by preferring this petition and this Court has directed the petitioner to deposit 60% of the tax arrears amounting to Rs. 31,32,551.60 which petitioner has already deposited. Therefore, in the facts of the case, when there was no appeal pending filed by the petitioner, the amount of demand raised in the Order-in-original would become the tax dues being the amount in arrears as per clause (e) of section 123 of SVLDRS and accordingly, the petitioner is entitled to get the benefit of the provision of section 124 of the SVLDRS by paying 60% of the amount in arrears as tax dues which the petitioner has already deposited. Conclusion - i) The petitioner's case is categorized under 'amount in arrears' as per Section 121(c) and Section 123(e) of the SVLDRS. ii) The petitioner is entitled to the relief of paying 60% of the tax dues, having already deposited the amount. iii) The designated committee's issuance of Form SVLDRS-3 demanding a higher amount was incorrect and is set aside. Petition allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the petitioner's case falls under the 'arrears' category or the 'litigation' category under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS).Whether the designated committee erred in issuing Form SVLDRS-3 demanding a higher amount than what the petitioner claimed under the SVLDRS.Whether the petitioner is entitled to the relief of paying 60% of the tax dues as per the SVLDRS provisions.2. ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The SVLDRS was introduced to resolve legacy disputes related to indirect taxes. Key provisions include:Section 121(c) defines 'amount in arrears' as the duty recoverable as arrears when no appeal has been filed by the declarant.Section 123 outlines the determination of 'tax dues' under different categories, including litigation and arrears.Section 124 provides for relief calculations under the scheme.Section 127 details the issuance of statements by the designated committee.Court's interpretation and reasoning:The Court interpreted the SVLDRS provisions, emphasizing that the petitioner's case should be categorized under 'amount in arrears' as no appeal was filed by the petitioner before the cut-off date of June 30, 2019. The Court noted that the designated committee's classification of the petitioner's case under 'litigation' was incorrect since the department's appeal was filed after the cut-off date.Key evidence and findings:The petitioner had accepted the Order-in-Original without filing an appeal, making the demand amount final. The department's appeal was filed after the cut-off date, which should not affect the petitioner's categorization under the SVLDRS.Application of law to facts:The Court applied the SVLDRS provisions to determine that the petitioner was entitled to relief under the 'arrears' category. The petitioner had deposited 60% of the tax dues, complying with Section 124(c)(ii) of the SVLDRS.Treatment of competing arguments:The petitioner argued that their case fell under the 'arrears' category, supported by the fact that no appeal was pending as of the cut-off date. The respondent contended that the petitioner was not entitled to relief due to the pending departmental appeal. The Court favored the petitioner's argument, emphasizing the scheme's intent to reduce litigation and the department's appeal being filed beyond the cut-off date.Conclusions:The Court concluded that the petitioner's case falls under the 'arrears' category, entitling them to the relief of paying 60% of the tax dues, which they had already deposited.3. SIGNIFICANT HOLDINGSCore principles established:The categorization of cases under the SVLDRS should adhere strictly to the provisions and cut-off dates outlined in the scheme.The intent of the SVLDRS is to reduce litigation and resolve legacy disputes, which should guide the interpretation of its provisions.Final determinations on each issue:The petitioner's case is categorized under 'amount in arrears' as per Section 121(c) and Section 123(e) of the SVLDRS.The petitioner is entitled to the relief of paying 60% of the tax dues, having already deposited the amount.The designated committee's issuance of Form SVLDRS-3 demanding a higher amount was incorrect and is set aside.The respondents are directed to issue revised Form SVLDRS-3 and Form SVLDRS-4, accepting the deposited amount as the eligible amount for granting the benefit of the SVLDRS.The Court ordered the respondents to complete this exercise within twelve weeks, making the rule absolute to the extent of the petitioner's entitlement under the SVLDRS.