2020 (11) TMI 845 - HC - Service Tax

Rejection of Declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - direction to the respondents to consider afresh such application (declaration) as per the scheme - alleged non-payment of service tax dues pertain to the period from April 2013 to June 2017 - HELD THAT - From a conjoint reading of sub sections (1) (2) and (3) of section 127 the picture that emerges is that if the amount estimated by the Designated Committee is equal to the amount declared by the declarant then the Designated Committee shall issue a statement in electronic form indicating the amount payable by the declarant. However if the amount estimated by the Designated Committee is higher than the amount declared by the declarant the Designated Committee shall give an opportunity of hearing to the declarant - Once the determined amount is paid discharge certificate is issued by the Designated Committee under sub section (8) of section 127. The proprietor of the petitioner in his statement recorded on 11.01.2018 by the investigating authority admitted the service tax liability of Rs. 60 lakhs (approximately) to be outstanding for the period from 2015-2016 to June 2017. This was corroborated by the departmental authority in the letter dated 24.01.2018 which we have already noted and discussed. Therefore present is a case where there is acknowledgment by the petitioner of the duty liability as well as by the department in its communication to the petitioner. Thus it can be said that in the case of the petitioner the amount of duty involved had been quantified on or before 30.06.2019. In such circumstances rejection of the application (declaration) of the petitioner on the ground of being ineligible with the remark that investigation was still going on and the duty amount was pending for quantification would not be justified. In a case where the amount estimated by the Designated Committee exceeds the amount declared by the declarant then a hearing is given by the Designated Committee to the declarant before determining the amount to be paid by the declarant. In a situation where Designated Committee grants hearing to a declarant when the amount estimated by it exceeds the amount declared by the declarant then it would be wholly inconceivable that before an application (declaration) is rejected on the ground of ineligibility no hearing is granted to the declarant. Matter remanded back to the Designated Committee to consider afresh the application (declaration) of the petitioner dated 12.12.2019 as a valid declaration and grant the consequential relief after giving due opportunity of hearing to the petitioner who shall be informed about the date time and place of the hearing. Such decision shall be in the form of a speaking order with due intimation to the petitioner - petition allowed by way of remand.

Summary

Issues Involved:
1. Eligibility of the petitioner for the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
2. Quantification of service tax dues before the cut-off date.
3. Principles of natural justice in rejecting the declaration without a hearing.

Detailed Analysis:

1. Eligibility of the Petitioner for the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019:
The petitioner sought to quash the order dated 22.01.2020 by the Designated Committee, which rejected its application under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The petitioner contended that it was eligible under the scheme as the service tax dues were quantified before the cut-off date of 30.06.2019. The respondents argued that the petitioner was ineligible because the investigation was ongoing and the duty amount was not quantified before the specified date.

2. Quantification of Service Tax Dues Before the Cut-Off Date:
The petitioner, a proprietorship firm, admitted a service tax liability of Rs. 60 lakhs for the period from 2015-2016 to June 2017 in a statement recorded on 11.01.2018. This was corroborated by a letter from the Superintendent (Anti-Evasion, G-V), CGST and Central Excise, Navi Mumbai, dated 24.01.2018, reminding the petitioner of the admitted liability. The court referred to the scheme's provisions, particularly section 123(c) and section 121(r), which define "tax dues" and "quantified" respectively. It was noted that the quantification of duty through written communication or admission by the declarant before 30.06.2019 made the petitioner eligible under the scheme.

3. Principles of Natural Justice in Rejecting the Declaration Without a Hearing:
The court emphasized the importance of principles of natural justice, noting that the rejection of the petitioner's declaration without a hearing was unjustified. It referred to the scheme's provisions under section 127, which mandate a hearing if the amount estimated by the Designated Committee exceeds the amount declared by the declarant. The court found it illogical and contrary to the scheme's objectives to reject an application without affording the declarant an opportunity to explain. This was supported by the department's circulars and FAQs, which clarified that written communication of duty liability or admission by the declarant before the cut-off date suffices for eligibility.

Conclusion:
The court set aside the order dated 22.01.2020 and remanded the matter back to the Designated Committee to reconsider the petitioner's application as a valid declaration. The Designated Committee was directed to grant a hearing to the petitioner and issue a speaking order within six weeks. The writ petition was allowed, emphasizing a liberal approach to ensure the scheme's success and adherence to principles of natural justice.