2025 (11) TMI 953 - HC - Service Tax

Payment under Chapter V of Finance Act, 2019 held within extended limitation; recovery orders quashed, SVLDRS-4 certificate directed

HC held that proceedings under Chapter V of the Finance Act, 2019 and the SVLDRS Rules are quasi-judicial, requiring statutory compliance and adjudication ... SVLDRS - Revenue recovery proceedings initiated against the petitioner towards the arrears of service tax payable by the petitioner - applicability of benefit of the order passed by the Hon’ble Supreme Court extending the period of limitation in [2022 (1) TMI 385 - SC ORDER] - the proceedings under Chapter V of the Finance Act, 2019 and the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019 (SVLDRS) are judicial/quasi-judicial in character or mere administrative action - HELD THAT:- Going by the scheme, it is to be noted that, it contemplates a settlement of tax liability, including service tax liability and the procedure for the same is contemplated in Chapter V of the Finance Act, 2019 (hereinafter referred to as the Act), that consists of section 120 to 135, and the rules framed thereunder, namely Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019, (hereinafter referred to as the Rules). The person who is seeking the benefit of the same, has to submit a declaration under section 125 in Form SVLDRS-1. The details furnished in the said form shall be considered by the designated committee constituted under section 126 read with Rule 5 of the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019. On going through the entire scheme of the Act and the Rules, it can be seen that, there is an obligation upon the designated authority, to examine the particulars furnished in the declaration, cross check the same with the records maintained by the Department and thereafter arrive at a decision whether the amount declared by the declarant is to be accepted or not. In case, the amount is found to be higher than the amount claimed by the declarant, a further enquiry is contemplated after giving the declarant an opportunity for being heard. While carrying out all these exercises, the designated authority has to follow the relevant rules and regulations, to determine the amount payable by the declarant. In that sense, such a decision cannot be taken upon the personal satisfaction of the authorities concerned, but on the other hand, it has to be strictly in accordance with the statutory provisions which are relevant for the said purpose. What is being determined is the liability of a person, which in turn, affects the rights and liabilities of the person concerned, enumerated under the Income Tax Act, the Finance Act, 2019, and the rules framed thereunder. Thus, the only conclusion possible is that, in the light of the extension of time, the petitioner is entitled to the relief sought for, as the petitioner has remitted the amount on 16.11.2020, which is within the extended period of limitation. This writ petition is disposed of quashing Exts.P5 and P8, with a direction the 2nd respondent or the competent officer in this regard, to treat the payment made by the petitioner as the one in compliance of Chapter V of Finance Act, 2019 and issue a certificate in SVLDRS-4. ISSUES PRESENTED AND CONSIDERED 1. Whether proceedings under Chapter V of the Finance Act, 2019 and the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019 (SVLDRS) are judicial/quasi-judicial in character or mere administrative action. 2. Whether the period of limitation extended by the Supreme Court in its suo motu orders relating to the Covid-19 pandemic applies to SVLDRS proceedings (in particular, to the last date for payment under Rule 7 / section 127(5)). 3. Whether a declarant who made payment after the cut-off date prescribed under SVLDRS but within the period excluded/extended by the Supreme Court's suo motu orders is entitled to the benefit of the Scheme and issue of discharge certificate (Form SVLDRS-4). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Nature of SVLDRS proceedings: judicial/quasi-judicial or administrative? Legal framework: Chapter V (sections 120-135) of the Finance Act, 2019 and SVLDRS Rules 2019 (notably sections 125-127 and Rules 6-9) set out declaration, verification by a designated committee, issuance of estimate/statement (Forms SVLDRS-2/3), opportunity of hearing, payment within 30 days of statement and issuance of discharge certificate (Form SVLDRS-4) after payment and proof of withdrawal of appeals/writs. Precedent treatment: The Court reviewed established tests distinguishing administrative from quasi-judicial acts, citing Province of Bombay v. Khushaldas S. Advani; Jaswant Sugar Mills Ltd. v. Lakshmi Chand; Dwaraka Nath v. ITO; Indian National Congress (I) v. Institute of Social Welfare; and BP & Co. v. Patel Engg. Ltd. These authorities articulate criteria: obligation to act judicially (express or implied), application of objective standards, declaration of rights/obligations, inquiry with opportunity to be heard and decision based on legal rules rather than subjective satisfaction. Interpretation and reasoning: Applying the criteria, the designated committee's duties under section 126/127 and Rule 6 require verification against departmental records, issuance of estimates, an opportunity of personal hearing and final statements in accordance with statutory rules. The determination affects civil rights/liabilities (tax liability) and must be made by application of statutory provisions and objective standards rather than mere subjective satisfaction. The process includes investigative and adjudicatory features (verification, hearing, reasoned determination and issuance of discharge certificate). Ratio vs. Obiter: Ratio - the SVLDRS proceedings are quasi-judicial in nature because the designated committee is obligated to act judicially, apply objective standards and make determinations affecting rights/liabilities. Observations distinguishing purely administrative actions and emphasizing statutory indicia are integral to the ratio. Conclusion: The Court holds that SVLDRS proceedings amount to quasi-judicial proceedings, not mere administrative actions. Issue 2 - Applicability of Supreme Court's suo motu limitation extension to SVLDRS proceedings Legal framework: Supreme Court's sequence of suo motu orders (beginning 23.03.2020 and subsequent orders culminating in a final order excluding the period 15.03.2020-28.02.2022 in computing limitation for 'judicial or quasi-judicial proceedings' and, more generally, extending limitation for suits, appeals, applications and proceedings under general or special laws). Precedent treatment: The Court considered divergent High Court and Supreme Court treatments: some High Courts (and later Supreme Court denials of SLPs) have declined extension for delayed payments under SVLDRS (e.g., decisions where time limits in the Scheme were held sacrosanct and SLPs dismissed), while other High Courts (including Madras and Jharkhand decisions) have applied the suo motu extension where proceedings were held quasi-judicial. The Court noted that in the Supreme Court refusals (e.g., Yashi Constructions and Ken Computek SLPs) there was no explicit reference to the suo motu extension orders. Interpretation and reasoning: Given the Court's finding that SVLDRS proceedings are quasi-judicial, the suo motu orders extending limitation for all 'judicial or quasi-judicial proceedings' and broadly for 'proceedings' under general or special laws logically encompass SVLDRS. The suo motu orders expressly excluded specified periods from computation of limitation for proceedings; some orders also provided 90-day windows thereafter. The Court distinguishes decisions refusing relief where the Supreme Court's extension was not considered or where the scheme's fixed payment deadline was emphasized; those refusals did not resolve the applicability of the suo motu orders to SVLDRS when the proceeding is quasi-judicial. Ratio vs. Obiter: Ratio - the suo motu extension applies to SVLDRS proceedings because they are quasi-judicial and the Supreme Court's orders excluded specified pandemic periods from computation of limitation for judicial/quasi-judicial proceedings and 'proceedings' under general/special laws. Observations distinguishing contrary authorities that did not consider the suo motu orders are explanatory but not binding on the ratio. Conclusion: The Court holds that the Supreme Court's suo motu extension of limitation (period 15.03.2020-28.02.2022 excluded) applies to SVLDRS proceedings. Issue 3 - Entitlement to Scheme benefit where payment was made after Scheme cut-off but within the suo motu extended period Legal framework: Section 127(5) requires payment within 30 days of issuance of the statement (Form SVLDRS-3); Rule 7 reiterates the 30-day payment requirement; Rule 9 ties issuance of the discharge certificate to satisfaction that payment has been made and proof of withdrawal of appeals/writs. The Supreme Court's suo motu orders excluded pandemic periods from limitation and provided availability of balance period thereafter (including a 90-day rule for expiries within the excluded period). Precedent treatment: The Court referenced High Court decisions that granted relief where payments were made within the extended period (Madras High Court decisions and other High Court orders) and contrasted them with decisions denying relief where the scheme timeline was strictly enforced (and where the suo motu extension was not considered by higher courts when dismissing SLPs). Interpretation and reasoning: Because the SVLDRS proceeding remains in existence until issuance of Form SVLDRS-4 (which depends on payment), payment made during the period excluded by the suo motu orders is within the extended limitation for the quasi-judicial proceeding. The designated committee's obligation to issue discharge upon payment and proof of withdrawal is procedural and, absent other disqualifying features in the Scheme, a payment effected within the extended period satisfies the time condition for obtaining the Scheme's benefit. The Court rejects the administrative-only characterization and the narrow reading urged by respondents; it distinguishes authorities that did not address the suo motu orders or relied on different factual matrices. Ratio vs. Obiter: Ratio - a declarant who pays the amount due under Form SVLDRS-3 within the period excluded by the Supreme Court's suo motu orders is entitled to treatment as compliant with Chapter V and to issuance of Form SVLDRS-4. Observations on contrasting case law and policy considerations are explanatory. Conclusion: The Court concludes that payment made on 16.11.2020 (falling within the period excluded/extended by the Supreme Court's suo motu orders) must be treated as compliance with SVLDRS payment requirements and entitles the declarant to issuance of discharge certificate (Form SVLDRS-4). Relief and procedural direction (consequential to conclusions above) Given the findings that SVLDRS is quasi-judicial, that the suo motu limitation extension applies, and that the payment was within the extended period, the Court directs that the contested recovery notices be quashed and that the competent officer treat the payment as compliance with Chapter V and issue the discharge certificate in Form SVLDRS-4 within a stipulated period.