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2025 (6) TMI 1737 - HC - Service TaxLevy of penalties - benefit of Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 (SVLDRS) - seperate/legal existence - application was treated to have been filed by HUF in view of the PAN number of the HUF being shown in the application whereas the penalty was imposed upon the individual - HELD THAT - It is not in dispute that the petitioner has filed the Form-SVLDRS-1 regarding the penalty imposed in case of M/s. Shriram Tubes Private Limited and M/s. Shital Tubes Private Limited. The respondents authorities have accepted the Form-SVLDRS-1 in case of both the companies and other Directors. Even in case of M/s. Shital Tubes Private Limited Form-SVLDRS-1 filed by the petitioner on 14/10/2019 is accepted without any demur and no objection was raised with regard to the surname or PAN shown by the petitioner in the form. The object of SVLDRS is to reduce the litigation by resolution of the disputes so as to liquidate the legacy cases of the Central Excise and Service Tax which are subsumed in GST and which were pending in various forums. Under Section 124(1)(b) of the scheme tax dues are relatable to a show cause notice for pending litigation and the amount of duty or penalty as per the said notice is required to be paid as per the provision of the scheme and if only penalty is imposed under the Act then no amount is required to be paid by filing the form by stating the amount as Nil as the entire amount of either late fee or penalty or interest would be waived. In the facts of the case it is not in dispute that penalty was imposed upon the petitioner in respect of both the companies and therefore the petitioner was eligible to have the benefit of SVLDRS as the petitioner does not fall in any of the clauses being clause-A to clause-H of sub-section 125 which provides that all persons shall be eligible to make a declaration except falling under clause-A to clause-H. It is not even the case of the respondents that the petitioner is not eligible as per Section 125(1) of the scheme. The respondents therefore were not justified in rejecting the application on ground of change in surname of the petitioner to Jain instead of Shah or the PAN of HUF shown in the application which could have been corrected so as to grant benefit of the scheme to the petitioner. The respondent could not have rejected the application Form-SVLDRS-1 filed by the petitioner on the technical grounds denying the benefit of the scheme. Moreover the respondent could not have discarded the representation made by the petitioner by the impugned communication dated 25/07/2023 on the ground that this Court did not quash and set aside the order passed by the designated committee. The approach of the respondent authority in not entertaining the representation made by the petitioner is deprecated and the respondents authorities are accordingly directed to pass appropriate order accepting the application Form-SVLDRS-1 filed by the petitioner changing the PAN shown by the petitioner to that of his individual PAN instead of the PAN of HUF and accepting the name of the petitioner as Jitendra C. Jain instead of Jitendra C. Shah and issue Form-SVLDRS-4. Conclusion - The petitioner is eligible for the benefits of SVLDRS the rejection of the application on technical grounds is unjustified and the respondents are directed to accept the corrected application and issue the requisite Form-SVLDRS-4 within twelve weeks. Application disposed off.
1. ISSUES PRESENTED and CONSIDERED
- Whether the petitioner, who was penalized individually under the Central Excise Act, 1944, is entitled to avail the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS), despite the application being filed under the PAN of a Hindu Undivided Family (HUF) and with a differing surname? - Whether the respondent authorities were justified in rejecting the petitioner's SVLDRS application on the ground that the application was filed by HUF whereas the penalty was imposed on the individual petitioner? - Whether the respondent authority erred in not considering the petitioner's representation for correction of the name and PAN details and in rejecting the representation on the ground that the designated committee had become functus officio and no court order was received directing reconsideration? - Whether the petitioner was eligible under Section 125 of the Finance (No. 2) Act, 2019 to avail the benefits of SVLDRS? - Whether the respondents violated principles of natural justice and the benevolent object of the SVLDRS scheme by rejecting the petitioner's application on technical grounds without providing opportunity for hearing or correction? 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Eligibility of the Petitioner under SVLDRS despite filing under HUF PAN and differing surname Relevant legal framework and precedents: The SVLDRS was introduced under Sections 120 to 135 of the Finance (No. 2) Act, 2019, aiming to resolve legacy disputes in Central Excise and Service Tax by offering concessions including waiver of interest and penalty. Section 125 enumerates persons ineligible to avail the scheme, while Section 124(1)(b) details relief calculation where dues pertain to penalty or late fee only. Court's interpretation and reasoning: The Court noted that the petitioner was penalized individually under the Central Excise Act and was not included in any disqualification clauses under Section 125(1). The petitioner's application was initially filed with the PAN of an HUF and the surname 'Jain' instead of 'Shah', which was the surname used in penalty orders and appeals. The Court observed that the petitioner clarified the discrepancy by submitting an affidavit explaining the surname variation as a sub-caste issue and contended the PAN of HUF was a technical error. Key evidence and findings: The petitioner's Form-SVLDRS-1 was accepted in another instance without objection to the surname or PAN. The petitioner also submitted representations and clarifications to the authorities explaining the technical mistakes. Application of law to facts: Since the petitioner was eligible under Section 125 and the discrepancies were technical and clarifiable, the Court held that rejection on such grounds was not justified. The benevolent purpose of the scheme to reduce litigation and resolve disputes should not be defeated by hyper-technical objections. Treatment of competing arguments: The respondents argued that the application was not filed by the correct legal entity and that the petitioner was not vigilant in filing the correct details, justifying rejection. However, the Court found that the petitioner's clarifications and representations were sufficient to cure the defects and that the respondents ought to have allowed corrections rather than rejecting outright. Conclusion: The petitioner was eligible to avail the benefit of SVLDRS and the application should not have been rejected on the grounds of PAN and surname discrepancies. Issue 2: Rejection of the petitioner's representation for correction and refusal to reconsider the application Relevant legal framework and precedents: The principle of natural justice requires that representations made by parties be considered fairly. The designated committee's order was impugned, but no court order setting aside the decision or directing reconsideration was issued. The petitioner was permitted to withdraw earlier proceedings to make representation before the authority. Court's interpretation and reasoning: The Court held that the respondent authority was duty bound to consider the petitioner's representation irrespective of the absence of a court order setting aside the committee's decision. The authority's stance that it had become functus officio and could not reconsider was deprecated. Key evidence and findings: The petitioner's representation dated 03/10/2022 requested correction of surname and PAN. The impugned communication dated 25/07/2023 rejected this on the ground of no court direction. The Court found that the withdrawal of the earlier petition to make representation implied that the authority must consider the representation. Application of law to facts: The Court applied the principles of natural justice and procedural fairness to hold that the respondents should have entertained and decided the representation on merits. Treatment of competing arguments: Respondents maintained that no direction was received from the Court and hence reconsideration was not permissible. The Court rejected this technical approach. Conclusion: The respondents erred in refusing to consider the petitioner's representation and are directed to decide it afresh. Issue 3: Application of the benevolent object of SVLDRS and procedural fairness in processing applications Relevant legal framework and precedents: SVLDRS is a beneficial scheme intended to reduce litigation by providing concessions and waivers to taxpayers. The scheme envisages issuance of Form-SVLDRS-2 for raising disputes and providing opportunity to respond before rejecting applications. Court's interpretation and reasoning: The Court emphasized that the scheme's object is to liquidate legacy disputes and provide relief. The respondents failed to issue Form-SVLDRS-2 to the petitioner and instead rejected the application summarily on technical grounds without affording adequate opportunity. Key evidence and findings: The petitioner was called to appear before the Deputy Commissioner, and a show cause notice was issued, but no formal opportunity as per the scheme's procedure was granted. The petitioner promptly replied clarifying the discrepancies. Application of law to facts: The Court held that the respondents' failure to follow the scheme's procedure and their reliance on hyper-technical grounds defeated the scheme's purpose and violated principles of natural justice. Treatment of competing arguments: Respondents argued the petitioner's failure to file correct details justified rejection. The Court found that the petitioner's clarifications and conduct warranted acceptance and correction rather than rejection. Conclusion: The respondents should have processed the application in accordance with the scheme's spirit and procedure. 3. SIGNIFICANT HOLDINGS "The respondents therefore were not justified in rejecting the application on ground of change in surname of the petitioner to 'Jain' instead of 'Shah' or the PAN of HUF shown in the application which could have been corrected so as to grant benefit of the scheme to the petitioner." "Once this Court permitted the petitioner to withdraw the petition so as to make representation, it is implied that the respondent authority was duty bound to decide the representation made by the petitioner irrespective of any direction or order passed by the court setting aside the order in question or giving any direction to the respondent authority to pass fresh order to decide the representation in accordance with law." "The approach of the respondent authority in not entertaining the representation made by the petitioner is deprecated and the respondents authorities are accordingly directed to pass appropriate order accepting the application Form-SVLDRS-1 filed by the petitioner changing the PAN shown by the petitioner to that of his individual PAN instead of the PAN of HUF and accepting the name of the petitioner as 'Jitendra C. Jain' instead of 'Jitendra C. Shah' and issue Form-SVLDRS-4." "The object of SVLDRS is to reduce the litigation by resolution of the disputes so as to liquidate the legacy cases... As per the scheme for dispute resolution, substantial relief in tax dues for all categories of cases as well as full waiver of interest, fine and penalty is granted." The Court's final determination was that the petitioner was eligible for the benefits of SVLDRS, the rejection of the application on technical grounds was unjustified, and the respondents were directed to accept the corrected application and issue the requisite Form-SVLDRS-4 within twelve weeks.
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