2021 (6) TMI 1185 - HC - Service Tax

Interpretation and application of the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - quantification of tax dues after the prescribed time period for payment has lapsed - HELD THAT - Similar issue as arising in this writ petition and in 2021 (7) TMI 257 - MADRAS HIGH COURT where it was held that The petitioner is permitted to remit the amount quantified in Form 3 along with interest at the rate of 15% in terms of Notification No. 13 of 2016 dated 01.03.2016 and Section 75 of the Finance Act 1994 under which service tax is levied from 01.07.2020 till date of remittance before the third respondent within a period of one (1) week from today. This matter is similar to that writ petition except certain differences in dates and the above order may thus be read as passed in the present case as well. This writ petition has been filed by the petitioner on 28.09.2020. Thus the delay arising in this matter is for a period of nearly three months. Let the petitioner remit the amount under the scheme which is an amount of Rs. 3, 17, 090/- along with interest at 15% computed from 01.07.2020 till date of payment within a period of one week from today. List on 29.06.2021 as a successive item to W.P. No. 9769 of 2020.

Summary

The core legal questions considered by the Court in this matter revolve around the interpretation and application of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (hereinafter 'the Scheme'), specifically: (a) whether the petitioner is entitled to a mandamus directing the Union of India to accept payment of the quantified tax dues after the prescribed time period for payment has lapsed; (b) the effect of the COVID-19 pandemic and consequent lockdown on the time limits prescribed under the Scheme; (c) the validity and scope of extensions granted unilaterally by the Department of Revenue; (d) the consequences of delay in payment beyond the extended deadline; and (e) whether the authorities have a duty or discretion to accept payments after the expiry of the Scheme's stipulated timelines, especially in light of the pandemic-induced difficulties.

Regarding the first issue, the Scheme under Section 127 of the Finance (No. 2) Act, 2019, provides a mechanism for settling legacy tax disputes through payment of a quantified amount within a specified period (30 days from issuance of Form 3). The petitioner had complied with the procedural steps under the Scheme, including filing the application, attending personal hearing, and accepting the quantified amount in Form 3. However, the petitioner failed to remit the payment within the original 30-day period, which expired on 05.04.2020.

The Court noted that the COVID-19 pandemic and the resulting nationwide lockdown, starting from 25.03.2020, created unprecedented difficulties for taxpayers in meeting statutory deadlines. Recognizing this, the Department of Revenue itself amended the Scheme to extend the payment deadline unilaterally to 30.06.2020. This extension effectively overrode the original 30-day payment period. However, the petitioner did not remit the amount even by the extended deadline, instead filing the present writ petition expressing readiness to pay the quantified amount along with an undertaking to remit within any time granted by the Court. The delay in payment was thus approximately nine days beyond the extended deadline.

In addressing the effect of the delay, the Court referred to a precedent from the Gujarat High Court, where a similar situation was considered. There, the Court directed the petitioner to deposit the amount within a fixed timeframe and then approach the Central Board of Indirect Taxes (CBIC) to accept the payment under the Scheme. The Gujarat High Court emphasized the need for the Board to find a viable solution for such cases, recognizing the practical difficulties faced by taxpayers.

The Court further highlighted an Instruction issued by the Board dated 14.07.2020, acknowledging that several declarants were unable to remit the amounts before 30.06.2020 due to pandemic-related difficulties but were likely to pay in the near future. This Instruction indicated a potential willingness by the Board to accept payments beyond the extended deadline, possibly subject to conditions such as levy of interest. The Board had also requested Zonal Officers to survey recoverable amounts and report back, suggesting ongoing consideration of the issue at the administrative level.

The Court also examined the Supreme Court's stance in a related writ petition concerning extension of GST amnesty schemes and reliefs related to late fees during the lockdown period. The Supreme Court declined to interfere, holding that such reliefs involve policy decisions beyond the scope of judicial intervention. This reinforced the principle that the Court should not rewrite or extend the Scheme beyond its terms, but could consider equitable relief in appropriate cases.

Applying these principles to the facts, the Court observed that the petitioner had substantially complied with the Scheme requirements except for the delay in payment by nine days. Given the pandemic context and the Board's own recognition of difficulties faced by taxpayers, the Court found it appropriate to permit the petitioner to remit the quantified amount along with interest at 15% per annum (as per Notification No. 13 of 2016 and Section 75 of the Finance Act, 1994) from 01.07.2020 until the date of payment. This was allowed within a limited timeframe of one week from the order date.

The Court clarified that this permission to remit the amount should not be construed as an acceptance of the petitioner's claim for mandamus or a grant of the relief sought. Rather, it was a measure to enable the petitioner to demonstrate bona fides. The Court also noted the absence of any clear stand from the respondents on how such delayed payments would be treated and directed the Board to take a decision and communicate it to the petitioner before the next hearing.

In a related writ petition with similar facts but a longer delay of approximately three months, the Court applied the same reasoning and permitted the petitioner to remit the quantified amount along with interest at 15% computed from 01.07.2020 within one week, listing the matter for further hearing alongside the earlier petition.

The Court's treatment of competing arguments was balanced. While acknowledging the strict timelines prescribed under the Scheme and the policy considerations highlighted by the Supreme Court, the Court was mindful of the exceptional circumstances caused by the pandemic and the administrative recognition of these difficulties. It sought to strike an equitable balance by allowing payment with interest, without undermining the Scheme's overall framework or judicially rewriting its terms.

Significant holdings from the judgment include the following core principles:

"The original time of 30 days from issuance of Form 3 has been overridden by the Department itself in recognition of the present difficulties."

"The petitioner has complied with the Scheme requirements substantially in time, except for last stage of remittance of the quantified amount, where there was a delay of 9 days."

"The Board states that the declarants were 'likely to pay in the near future' indicating a possibility that the Board might be inclined to accept the amounts even after 30.06.2020, subject to any stipulations including levy of interest."

"The above permission does not, by any stretch, indicate that the prayer of the petitioner has been accepted and the relief sought, granted. It is only a measure to enable the petitioner to prove its bona fides."

"A decision may be taken by the Board and circulated after serving a copy upon the petitioner, prior to the next date of hearing."

In conclusion, the Court recognized the binding nature of the Scheme's timelines but also the exceptional impact of the COVID-19 pandemic on taxpayers' ability to comply. The Court's order to permit payment with interest within a limited period serves as a pragmatic approach to balance legal compliance with equitable considerations, while leaving the ultimate acceptance of such payments to the administrative authorities. This judgment underscores the importance of administrative flexibility in implementation of statutory schemes during extraordinary circumstances and the role of courts in facilitating such flexibility without encroaching upon policy domains.