2020 (10) TMI 1135 - BOMBAY HIGH COURT

Principles of Natural Justice upheld by the Court/s.

A partnership firm named “Thought Blurb” engaged in the business of advertising and design services.

An investigation was initiated against the aforesaid firm for payment of service tax for two periods i.e. for the period 1st April, 2016 to 31st March, 2017 and again for the period 1st April, 2017 to 30th June, 2018.

Letter dated 21st May, 2019 Respondent No.3 (CGST & Central Excise, Mumbai) informed the Petitioner regarding the enquiry being conducted against it. The Petitioner was directed to pay a service tax liability of ₹ 47, 44,937.00 for the period 2016-17. Accordingly Petitioner was requested to pay the aforesaid amount with interest and penalty along with the return to be filed in 2017-18.

The Petitioner admitted to service tax liability for an amount of ₹ 10, 74,011.00 for a period before 30.06.2019.

Central Government introduced the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (briefly ‘the scheme’ hereinafter) to bring an end to pending litigations under the earlier indirect tax regime which now stood subsumed under the Goods and Services Tax (GST).

The Petitioner, filed an electronic declaration on 12th December, 2019 i.e. Form No. SVLDRS 1 declaring an amount of ₹ 59, 54,669.00 as the tax dues payable. The category under which the application (declaration) was filed was investigation, enquiry or audit.

An amount of ₹ 30, 60,257.00 was paid as pre-deposit. The Respondent rejected the application as tax dues were not finalized as on 30th June, 2019 by the Designated Committee.

The reason being given that the application of Petitioner was not maintainable at all before the Designated Committee and accordingly no question of granting a hearing arose and there was no violation of the principles of natural justice.

The Hon’ble high court agreed to the contentions of the Petitioner.

The court observed that the Petitioner had complied with all the conditions as in submitted a declaration in electronic form. The Petition was filed as investigation, enquiry or audit. An amount of 30, 60,257.00 were paid as pre-deposit.

The Respondent rejected these efforts on the ground of ineligibility stating that tax dues were not finalized as on 30th June, 2019.

Moreover this rejection of the application (declaration) of the Petitioner was without affording any opportunity of hearing to the Petitioner.

The Petitioner had to file a Writ Petition to emphasize on his contentions. The Respondent rejected the application on the ground that tax dues were not finalized as on 30th June, 2019 by the Designated Committee due to non-submission of papers and records by the Petitioner. The Hon’ble high court disapproved of such a flimsy rejection of an application.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (already referred to as “the scheme” herein-before) was introduced by the Finance (No.2) Act, 2019 and notified in the Gazette of India, Extraordinary on 1st August, 2019.

The scheme envisages dual objectives of dispute resolution and amnesty. There are huge pending litigations from pre-GST regime. More than ₹ 3.75 lakh crore is blocked in litigations in service tax and excise. There is a need to unload this baggage and allow the business to move on. Legacy Dispute Resolution scheme will also allow a quick closure of these litigations.

The Hon’ble high court relied on the judgment of Capgemini Technology Services India Limited Versus The Union of India, The Chief Commissioner, Central GST & Customs, Mumbai Zone, The Commissioner, CGST & Central Tax, The Joint Commissioner, CGST & Central Excise, Mumbai East, - 2020 (10) TMI 3 - BOMBAY HIGH COURT. Held that, it is axiomatic that when a person is visited by adverse civil consequences, principles of natural justice like notice and hearing would have to be complied with. Non-compliance to the principles of natural justice would impeach the decision making process rendering the decision invalid in law.

The Respondents failed to keep in mind the broad picture of the above scheme while dealing with the application of the Petitioners.

A liberal interpretation has to be given to the scheme as its intent is to unload the baggage relating to legacy disputes under central excise and service tax and to allow the business to make a fresh beginning.

Accordingly, the Hon’ble high court directed the Respondents that rejection of the application (declaration) of the Petitioner is not justified. Consequently, the same was set aside and quashed. Designated Committee was directed to decide the application (declaration) of the afresh after giving an opportunity of hearing to the Petitioner who shall be informed about the date, time and place of hearing. Such decision shall be taken keeping in mind the observations made by the hon’ble high court in its judgment and shall be in the form of a speaking order with due intimation to the Petitioner.

Thus we may infer that the principles of “natural justice” always need to be observed to prevent any miscarriage of justice. The constitutional courts have always acted as a watchdog jealously guarding the rights of the citizens against arbitrariness of the authorities.   

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2020 (10) TMI 1135 - BOMBAY HIGH COURT