2025 (11) TMI 844 - HC - Service Tax

SVLDRS-3: Extension granted for payment due to COVID-19; Rs. 38,28,280 payable within four weeks with 6% interest

Midas Events India Pvt. Ltd. Versus The Union of India & Ors.

HC granted relief to the petitioner, following coordinate-bench decisions, and held that parties were entitled to extension of time for payment under the ... Lapse of SVLDRS-3 scheme - seeking extension of time for payment under the scheme due to COVID-19 pandemic - Recovery of service tax with interest and penalty - dismissal of Petitioner’s appeal for non-compliance with the requirement of pre-deposit - HELD THAT:- The decisions of the coordinate benches of this Court in the case of Sitec Labs Ltd. [2024 (6) TMI 585 - BOMBAY HIGH COURT], Innovative Antares Pvt. Ltd. [2023 (2) TMI 12 - BOMBAY HIGH COURT] and Cradle Runways Pvt. Ltd. [2024 (8) TMI 155 - BOMBAY HIGH COURT] were delivered after considering the decision in Yashi Constructions [2022 (3) TMI 110 - SC ORDER]. Therefore, as a coordinate bench, these decisions are followed and it is inclined to grant relief to the Petitioner. The Review Petition in the case of Sitec Labs Ltd. concerns the issue of payment of interest, where an opportunity is granted to make belated payments under the SVLDRS scheme. Therefore, it is not as if the department in the said Review Petition has challenged the issue of extension itself. The decision of this Court in the case of Sitec Labs Ltd., Innovative Antares Pvt. Ltd., Cradle Runways Pvt. Ltd. and a decision of the Himachal Pradesh High Court in East Bourne Hotels Pvt. Ltd. [2025 (6) TMI 361 - HIMACHAL PRADESH HIGH COURT] support Ms. Patil’s contention. These decisions take the view that, though the notification of 14 May 2020 extended the time limit for payment under the SVLDRS to 30 June 2020, having regard to the prevailing Covid-19 pandemic, the parties would be entitled to an extension of time. The Petitioner’s case deserves to be governed by the decisions of the coordinate bench in the case of Innovative Antares Pvt. Ltd. and Cradle Runways Pvt. Ltd. The Respondents are directed to accept the amount of Rs. 38,28,280/- if paid within 4 weeks from the date of uploading of this order, together with interest @6% per annum on the said amount commencing from 30 June 2020, till the date of payment - petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether a taxpayer is entitled to an extension of time to make payment under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS) where the original payment period was affected by the COVID-19 pandemic. 2. Whether a revenue authority is obliged to accept belated payment at the declared SVLDRS liability and issue the requisite certificate (SVLDRS-4) where payment is tendered after the scheme period, but before enforcement of original demands, in circumstances affected by the pandemic. 3. What rate of interest is appropriate where relief is granted permitting belated payment under the SVLDRS - whether a higher rate (e.g., 15% per annum) or a lower rate (e.g., 6% per annum) should apply. 4. Whether the existence of a pending review or other challenge to coordinate-bench decisions on related points prevents following those coordinate-bench decisions granting pandemic-related extension or similar relief. ISSUE-WISE DETAILED ANALYSIS - Extension of Time under SVLDRS Due to COVID-19 Legal framework: The SVLDRS fixed a period for declaration and payment of accepted liability; governmental notifications extended such periods in light of COVID-19. Relief under writ jurisdiction can be sought where administrative timelines produce hardship due to exceptional circumstances. Precedent treatment: Coordinate-bench decisions of the same High Court and certain other High Courts have granted extensions or relief for belated payments under SVLDRS in view of pandemic disruptions. Some decisions of coordinate benches have considered and applied a Supreme Court acknowledgment of pandemic-related extension of limitation periods. Interpretation and reasoning: The Court reasoned that the COVID-19 pandemic materially affected the petitioner's ability to carry on business and make the payment within the extended SVLDRS period. Having regard to prior coordinate-bench decisions that addressed materially similar facts and granted extensions or relief, the Court was persuaded to follow those decisions as applicable precedent. The Court observed that the challenge before it was to permit payment of the declared SVLDRS amount notwithstanding lapse of the formal scheme period, in circumstances where administrative response was awaited and pandemic restrictions impeded payment. Ratio vs. Obiter: Ratio - where pandemic-related restrictions prevented payment within the scheme period, the Court will follow coordinate-bench precedent permitting extension/acceptance of belated payment so long as payment is made within a short further period and appropriate interest is paid. Obiter - broader policy considerations about the design or scope of amnesty schemes beyond these facts. Conclusion: The Court allowed extension to enable payment of the declared SVLDRS liability within a specified short period, applying coordinate-bench precedent dealing with pandemic disruptions. ISSUE-WISE DETAILED ANALYSIS - Obligation to Accept Belated SVLDRS Payment and Issue Certificate Legal framework: SVLDRS contemplates issuance of a certificate upon compliance with scheme conditions, including payment of accepted liability. Administrative action to recover pre-existing demands may resume once the scheme period lapses. Precedent treatment: Coordinate-bench rulings have directed revenue authorities to accept belated payments tendered in pandemic-affected cases and to issue the requisite scheme certificate upon receipt of payment and interest. Interpretation and reasoning: The Court held that where the taxpayer had declared the liability, obtained communication accepting the declared amount, and was prevented by pandemic conditions from timely payment, equity and precedent support allowing the taxpayer a short, final window to pay the declared amount. On receipt of such payment (with interest), the authority should treat the requirements as satisfied and issue the scheme certificate, thereby foreclosing the original demand to the extent covered by the scheme payment. Ratio vs. Obiter: Ratio - authorities must accept belated payments and issue SVLDRS certificates where payments are made within the court-directed extended window and interest is paid, in COVID-affected cases following coordinate-bench precedent. Obiter - commentary on the legitimacy of departmental insistence on strict timelines in amnesty schemes generally. Conclusion: The Court directed the revenue to accept the declared amount if paid within the granted window and to issue the SVLDRS-4 certificate upon receipt with interest, thereby giving effect to the scheme relief despite the lapse of the formal period. ISSUE-WISE DETAILED ANALYSIS - Appropriate Rate of Interest on Belated Payment Legal framework: Interest on delayed payment under statutory schemes is a matter of judicial discretion when relief from strict timelines is granted; courts have adopted differing rates in different factual matrices. Precedent treatment: Divergent coordinate-bench orders exist - some directing interest at 6% per annum where relief was granted for pandemic-affected delay; others have directed a higher rate (15% per annum) in distinct factual settings. Interpretation and reasoning: The Court compared relevant coordinate-bench rulings and examined material facts - specifically the petitioner's inability to carry on business due to COVID-19 (an event management company) and the fact that several division benches had awarded interest at 6% for comparable cases. The Court found the lower rate to be better aligned with the prevailing coordinate-bench approach for like circumstances and more equitable given the petitioner's pandemic-induced incapacity to earn revenue. Ratio vs. Obiter: Ratio - where pandemic-related inability to pay is established and coordinate-bench precedent supports the lower rate, interest on belated SVLDRS payments may be fixed at 6% per annum commencing from the expiry date of the extant scheme period. Obiter - suggestion that higher rates may be appropriate in materially different fact patterns. Conclusion: The Court directed payment of interest at 6% per annum from the stipulated scheme cut-off date until actual payment for the pandemic-affected belated payment scenario presented. ISSUE-WISE DETAILED ANALYSIS - Effect of Pending Review/Challenge to Coordinate-Bench Decisions Legal framework: A coordinate bench is ordinarily bound by earlier decisions of coordinate benches of the same court; the pendency of review or appeal does not automatically erode binding effect of those decisions absent a superior court ruling. Precedent treatment: Coordinate-bench practice accepts following prior coordinate-bench decisions on identical issues unless and until overturned by a higher court; pending internal review petitions do not, by themselves, displace such follow-following. Interpretation and reasoning: The Court noted a review petition existed against one coordinate-bench decision but observed that the review related primarily to the quantum of interest and not to the core proposition that pandemic-affected taxpayers are eligible for extension/acceptance of belated payment. No persuasive material was shown that the coordinate-bench holdings on extension per se had been set aside or were the subject of successful challenge. Therefore, the Court considered itself justified in following the coordinate-bench line of authority granting extension and acceptance of payment with interest at the rate consistent with the more common coordinate-bench approach. Ratio vs. Obiter: Ratio - pendency of a review against a coordinate-bench decision on a collateral point does not preclude following coordinate-bench precedent on the central issue where the review does not impugn that central holding. Obiter - broader implications of multiple conflicting coordinate-bench rulings. Conclusion: The Court followed existing coordinate-bench precedent permitting pandemic-related relief despite a pending review on a limited aspect of one decision and granted relief accordingly. FINAL CONCLUSION The Court, applying the legal framework and following relevant coordinate-bench precedent, allowed a short period to tender the declared SVLDRS liability, directed acceptance of payment with interest at 6% per annum from the scheme cut-off date until payment, and required issuance of the SVLDRS certificate upon receipt, holding that pandemic-related incapacity and the state of precedent justified such relief. The directions were applied as ratio to the facts; commentary on broader policy or divergent factual scenarios is obiter.