2025 (2) TMI 105 - HC - Service Tax

Petitioner entitled to Sabka Vishwas Scheme benefits despite wrong category filing, recovery from directors' accounts quashed

The HC held that the petitioner incorrectly filed under litigation category instead of Amount in Arrears category under the Sabka Vishwas Scheme 2019, as ... Challenge to recovery notice - eligibility for the benefits under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - mis-declaration regarding the pendency of an appeal - misdeclaration regarding date of filing of the appeal - HELD THAT:- Since the declaration in Form SVLDRS-1 dated 31.12.2019 that was filed by the petitioner was not under the “voluntary disclosure category”, the rigours of clause (c) to sub-section (2) to section 129 (1) of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 in Chapter V of the Finance Act, 2019 cannot be pressed against the petitioner - The petitioner ought to have filed a correct declaration under “Amount in Arrears category” as defined in Section 121(c) of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 in Chapter V of the Finance Act, 2019 as no appeal was pending on 30.06.2019. Since the declaration in Form SVLDRS-1 dated 31.12.2019 filed by the petitioner under the “litigation category” [i.e., pendency of appeal] was incorrectly filed and should have been filed under “Amount in Arrears Category”, the amount that was payable by the petitioner would have higher. Since the petitioner was otherwise entitled to relief under Section 124(1)(ii) of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 in Chapter V of the Finance Act, 2019, the benefit of the Scheme cannot be denied, provided the petitioner pays the correct amount - the Impugned Communication dated 30.03.2021 cannot be said to be strictly in consonance with Section 129(2)(c) of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 in Chapter V of the Finance Act, 2019 in revoking the Discharge Certificate in Form SVLDRS-4 dated 07.03.2020. Nevertheless, powers are vested with the Designated Authority under the said Act to correct the mistake in the Discharge Certificate in Form SVLDRS-4, if the Designated Authority was mislead and an improper declaration is filed by a declarant. If the petitioner wants the benefit of the Scheme, the petitioner should pay the correct amount together with interest. Since there is no enabling machinery under the provisions of the Finance Act, 1994 which enables the Department to recover the tax due from the Directors of the Company which is in arrears of tax, recovery / attachment of Bank Accounts of the Directors of the defaulting Company namely M/s.Laundry Projects India Private Limited, the Impugned Communication dated 23.11.2021 seeking to attach the Bank Accounts of the individual Directors purportedly in exercise of powers conferred under Section 87 of the Finance Act, 1994 has to be held to be without jurisdiction - It also appears that a sum of Rs. 22,00,000/- has been recovered from the account of the petitioner in W.P.No.4329 of 2022, who is the Director of the said Company on 10.01.2022. This amount can be adjusted against the aforesaid deficit amount of Rs. 29,94,472.20/- [Rs.45,65,834.20/- - Rs. 15,71,362/-] subject to the petitioner in W.P.No.4329 of 2022 consenting to the same. Conclusion - i) Since there is no provision to recover the dues of the writ petitioner in W.P.No.27248 of 2021 M/s.Laundry Projects India Private Limited (from the Directors of M/s.Laundry Projects India Private Limited) under the Scheme of the provisions of the Finance Act, 1994, the Communication dated 23.11.2021 impugned in W.P.No.4329 of 2022 shall stands quashed with consequential relief. ii) The petitioner was entitled to relief under Section 124(1)(c)(ii) and not under Section 124(1)(a)(ii) due to the absence of a pending appeal as of June 30, 2019. Petition disposed off. ISSUES PRESENTED and CONSIDEREDThe primary issues considered by the Court were:1. Whether the petitioner was eligible for the benefits under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, given the alleged mis-declaration regarding the pendency of an appeal.2. Whether the revocation of the Discharge Certificate issued under the Scheme was justified.3. The legality of the recovery proceedings initiated against the Director of the petitioner company under Section 87 of the Finance Act, 1994.ISSUE-WISE DETAILED ANALYSIS1. Eligibility under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019The legal framework involved the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, particularly Sections 121, 124, and 129, which outline the conditions for eligibility and the relief available under the Scheme.The Court noted that the petitioner filed a declaration under the 'litigation category' claiming an appeal was pending as of June 30, 2019. However, the appeal was filed on July 25, 2019, and dismissed on November 7, 2019, indicating no pending appeal on the cut-off date.The Court determined that the petitioner was not entitled to relief under Section 124(1)(a)(ii) as no appeal was pending. Instead, relief should have been sought under Section 124(1)(c)(ii) for 'amounts in arrears.'The Court found that the petitioner made an incorrect declaration, which affected the relief calculation under the Scheme.2. Revocation of the Discharge CertificateThe Court examined whether the revocation of the Discharge Certificate issued in Form SVLDRS-4 was justified under the Scheme's provisions.It was argued by the respondents that the power to grant a Discharge Certificate inherently includes the power to revoke it if the declaration was based on false information.The Court referred to Section 129 of the Scheme, which allows for revocation in cases of 'voluntary disclosure' if false particulars are found. However, the petitioner's declaration was not under 'voluntary disclosure,' and thus, Section 129(2)(c) could not apply.The Court concluded that while the revocation was not strictly in consonance with Section 129(2)(c), the Designated Authority could correct the mistake if misled by an improper declaration.3. Legality of Recovery ProceedingsThe legal framework involved Section 87 of the Finance Act, 1994, concerning the recovery of dues.The Court found no provision under the Finance Act, 1994, to recover dues from the Directors of a company in arrears. Thus, the attachment of the Director's bank accounts was without jurisdiction.SIGNIFICANT HOLDINGSThe Court held:1. The petitioner was entitled to relief under Section 124(1)(c)(ii) and not under Section 124(1)(a)(ii) due to the absence of a pending appeal as of June 30, 2019.2. The petitioner must pay 60% of the admitted tax liability, amounting to Rs. 1,79,66,833.20, less any pre-deposit, resulting in a deficit of Rs. 29,94,472.20.3. The revocation of the Discharge Certificate was not strictly justified under Section 129(2)(c) but could be corrected by the Designated Authority if the declaration was improper.4. The recovery proceedings against the Director were without jurisdiction, and the attachment of bank accounts was quashed.5. The petitioner was directed to pay the deficit amount within 30 days, with interest, to have the case settled under the Scheme.6. The respondents were instructed to issue a fresh Discharge Certificate upon compliance with the payment directive.