2025 (4) TMI 667 - HC - Service Tax

Petitioner's false declaration under SABKA VISHWAS Scheme invalidated due to material misstatements and incorrect category filing

Taufiq Manpower Consultants Private Limited, Represented by its Managing Director Shaik Abdulla Versus The Assistant Commissioner of GST and Central Excise, The Principal Commissioner of GST and Central Excise, The Chief Commissioner of GST and Central Excise, The Designated Committee, Chennai

The HC dismissed the petition challenging the validity of a declaration under the SABKA VISHWAS Scheme, 2019. The petitioner incorrectly filed under ... Entitlement to settle tax liability under the SABKA VISHWAS (Legacy Dispute Resolution) Scheme, 2019, particularly under the category of 'arrears of tax.' - correct filing of declaration under the 'arrears category' of the Scheme - entitlement to the benefits of the Scheme, given the tax liability declared but not paid in the filed return - HELD THAT:- Though there is an apparent contradiction between the relief that is available to a Declarant under Section 124(1)(c)(i) and an embargo under Section 125(1)(f)(ii) of the Scheme, it has to be reconciled between those cases “where Returns have been filed” and those cases “where no Returns have been filed” - there is an embargo if a disclosure is made voluntarily where no Return is filed before 30.06.2019, no abatement/concession is permissible. However, where Returns have been filed on or before 30.06.2019 and “tax due” i.e., “amount of duty” as defined in Section 121(d) of the Scheme has not been paid in terms of Section 123(e) of the Scheme. Thus, the Petitioner was not entitled to file a Declaration in terms of Section 125(1)(f)(ii) of the Scheme. In this case, the Petitioner has wrongly filed the Declaration in Form SVLDRS-1 under the “arrears category” and sub-category “Declared in the Return but not paid”. The Petitioner has deliberately filed the Declaration in Form SVLDRS-1 under the “voluntary disclosure” and thus misled the system. It is also incoceivable, as to how both “arrears category” and the subcategory “Declared in the Return but not paid” can go together? There is no scope for alchemy between the two under the Scheme. As per Section 124(1)(c)(i) of the Scheme where the “tax dues” are relatable to an “amount in arrears”, the relief available to a Declarant under the Scheme was to be calculated at 60% of the tax dues. In other words, on 40% of “amount in arrears” as defined in Clause (c) to Section 121 of the Scheme was payable by a Declarant for settling the dispute under the Scheme - In this case, no amount was paid by the petitioner at an earlier stage. If the Petitioner wanted to pay under “arrears category”, the Petitioner was required to pay 40% of the tax amount declared in ST-3 Return filed on 05.06.2018 in terms of Section 124(1)(c)(i) of the Scheme. Thus, the tax that was payable by the Petitioner under the Scheme would have been Rs. 74,436.20/- being 40% of Rs. 1,86,158/- and not Rs. 29,706/- on 40% of Rs. 74,266/-. Since the Declaration that was filed in Form SVLDRS-1 is actually a Declaration filed on account of “voluntary disclosure”, the Petitioner is neither entitled to any concession in terms of Section 125(1)(f)(ii) of the Scheme nor entitled to file such Declaration under Section 125(1)(f)(ii) of the Scheme - The declaration in Form SVLDRS-1 that was filed by the Petitioner in the “arrears category” is contrary to the tax admitted by the Petitioner in ST-3 Return filed on 05.06.2018 as the Petitioner had declared the tax due as Rs. 74,266.72/-. It is contrary to the admitted tax liability of Rs. 1,36,158/- in the ST-3 Return filed on 05.06.2018. The fact that the Petitioner had resiled from the admitted liability in ST-3 Return dated 05.06.2018 while filing the Declaration in Form SVLDRS- 1 dated 13.01.2020 also indicates that the Petitioner was not entitled to any relief under the Scheme. Since the Form SVLDRS-1 was also actuated by incorrect materials furnished by the Petitioner in Form SVLDRS-1 dated 13.01.2020, the Respondents were entitled to conclude that the Declaration filed in Form SVLDRS-1 was under “voluntary disclosure” and therefore, entitled to invoke the power under Section 129(2)(c) of the Scheme - Since the Petitioner has filed incorrect declaration in Form SVLDRS- 1 on 13.01.2020 which was acted upon and has resulted in issuance of an erroneous Discharge Certificate in Form SVLDRS-4 on 19.01.2020. The power to rectify the mistake need not be exercised by the Department as the Declaration filed by the Petitioner was contrary to admitted tax liability in ST-3 Return dated 05.06.2018. Thus, the Discharge Certificate in Form SVLDRS- 4 dated 19.01.2020 cannot be said to have attained finality as the Declaration filed under the aforesaid Scheme was a Declaration filed under “voluntary disclosure” and not under “arrears category”. Since the incorrect particulars were furnished by the Petitioner in Form SVLDRS-1 dated 13.01.2020 and the Declaration filed was not to be entertained, the Department was entitled to invoke power under Section 129(2)(c) of the Scheme as per which, in case of a “voluntary disclosure” where any material particulars furnished in the Declaration is subsequently found to be false, within a period of one year of issue of the Discharge Certificate, it shall be presumed that the Declaration was never made and the proceeding under the applicable indirect tax enactment shall be instituted. Conclusion - The Petitioner's declaration under the Scheme was not valid under the 'arrears' category. The Petitioner was not entitled to any relief under the Scheme due to the false particulars furnished in the declaration. The Discharge Certificate was not conclusive, and the Respondents were entitled to proceed with recovery actions. Petition dismissed. ISSUES PRESENTED and CONSIDEREDThe primary legal issue considered in this judgment is whether the Petitioner was entitled to settle their tax liability under the SABKA VISHWAS (Legacy Dispute Resolution) Scheme, 2019, particularly under the category of 'arrears of tax.' The core questions include:Whether the Petitioner correctly filed a declaration under the 'arrears category' of the Scheme.Whether the Petitioner was entitled to the benefits of the Scheme, given the tax liability declared but not paid in the filed return.Whether the issuance of the Discharge Certificate under the Scheme was valid.Whether the Respondents were justified in issuing the Statement of Demand and the subsequent Order-in-Original.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe SABKA VISHWAS (Legacy Dispute Resolution) Scheme, 2019, is governed by Chapter V, Sections 120 to 135 of the Finance Act (No.2) Act, 2019. Key provisions include:Section 121(c) and (d) define 'amount in arrears' and 'amount of duty.'Section 124 outlines the relief available under the Scheme.Section 125 specifies eligibility for making a declaration under the Scheme.Section 129 addresses the conclusiveness of a Discharge Certificate and exceptions thereto.Court's Interpretation and ReasoningThe Court interpreted the Scheme's provisions, emphasizing the distinction between 'arrears' and 'voluntary disclosure.' It found that the Petitioner's declaration was erroneously filed under 'arrears' when it should have been under 'voluntary disclosure' due to the admitted but unpaid tax liability in the ST-3 return filed on 05.06.2018.Key Evidence and FindingsThe Petitioner filed an ST-3 return on 05.06.2018, declaring a tax liability of Rs. 1,86,158/- but did not pay this amount. Instead, in the declaration under the Scheme, the Petitioner claimed a lower tax liability and sought abatement. This inconsistency was central to the Court's findings.Application of Law to FactsThe Court applied Section 125(1)(f)(ii) of the Scheme, which precludes a declarant from making a declaration under 'voluntary disclosure' if they have filed a return indicating a payable amount but have not paid it. The Court concluded that the Petitioner's declaration was invalid under the 'arrears' category, as the correct category was 'voluntary disclosure.'Treatment of Competing ArgumentsThe Petitioner argued that once the dispute was settled under the Scheme, further demands or orders were unwarranted. The Respondents contended that the Petitioner was not entitled to the Scheme's benefits due to the false particulars in the declaration. The Court sided with the Respondents, emphasizing the Petitioner's incorrect declaration.ConclusionsThe Court concluded that the Petitioner's declaration under the Scheme was invalid as it was filed under the wrong category. Consequently, the Discharge Certificate issued was erroneous, and the Respondents were justified in issuing the Statement of Demand and the subsequent Order-in-Original.SIGNIFICANT HOLDINGSCore Principles EstablishedThe judgment reinforces the principle that a declarant cannot benefit from the Scheme if they file a declaration under a misrepresented category, particularly when the tax liability was declared but not paid in the filed return.Final Determinations on Each IssueThe Court held that the Petitioner's declaration under the Scheme was not valid under the 'arrears' category. The Petitioner was not entitled to any relief under the Scheme due to the false particulars furnished in the declaration. The Discharge Certificate was not conclusive, and the Respondents were entitled to proceed with recovery actions.The Court dismissed the Writ Petition, granting the Petitioner the liberty to file a statutory appeal before the Appellate Commissioner within 30 days, failing which the Respondents could proceed with recovery actions. The Appellate Authority was directed to entertain the appeal without being influenced by the Court's observations.