2025 (6) TMI 1817 - HC - Service Tax

Entitlement to avail the benefit of Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 which came into effect from the appointed date - HELD THAT - The petitioner was not entitled to file a declaration in Form SVLDRS-1 in terms of Section 125(1) of the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - In this case the Form SVLDRS-1 that was filed on 30.12.2019 was accepted by the Designated Authority in Form SVLDRS-3 by the respondents herein by mistake as there was no scope for entertaining the application under Section 125(1)(f). Only if the application/declaration in Form SVLDRS-1 was available to the petitioner question of issuance of discharge certificate in Form SVLDRS-4 would arise. Therefore merely because Form SVLDRS-3 was issued to the petitioner on 07.01.2020 ipso facto would not mean that the petitioner was entitled to have the case settled under the provisions of the aforesaid Scheme. The respondents are therefore directed to proceed with the adjudication of the Show Cause Notice on merits and in accordance with law - this Writ Petition is liable to be dismissed.

Summary

The core legal questions considered by the Court include:

1. Whether the petitioner was entitled to avail the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 ("SVLDRS Scheme") by filing a declaration in Form SVLDRS-1 under the category of "Voluntary Disclosure."

2. Whether the tax payment of Rs. 22,08,034/- made by the petitioner on 27.12.2019 could be treated as fulfillment of the petitioner's tax liability under the SVLDRS Scheme and whether the respondents were obligated to issue the Discharge Certificate in Form SVLDRS-4.

3. The legal effect of Section 125(1)(f) of the SVLDRS Scheme, which bars persons from making voluntary disclosures if they have been subjected to enquiry, investigation, or audit or have filed a return indicating duty payable but not paid.

4. Whether the issuance of Form SVLDRS-3 to the petitioner without verification affected the petitioner's entitlement under the Scheme.

5. The scope and applicability of relief provisions under Section 124 of the SVLDRS Scheme to the petitioner's case.

6. The validity and effect of the Show Cause Notice No.40/2020-Service Tax issued after the petitioner's declaration and payment under the Scheme.

Issue-wise Detailed Analysis

Entitlement to Benefit under the SVLDRS Scheme and Validity of Voluntary Disclosure

The SVLDRS Scheme was introduced to provide relief and settle legacy disputes related to Central Excise and Service Tax dues. The petitioner filed a declaration in Form SVLDRS-1 on 30.12.2019 under the category of "Voluntary Disclosure" and paid Rs. 22,08,034/- on 27.12.2019 towards the tax liability on reverse charge services.

Section 125(1)(f) of the Scheme explicitly disqualifies persons from making voluntary disclosures if they have been subjected to any enquiry, investigation, or audit or have filed a return indicating duty payable but not paid. The petitioner had been subjected to summons on 12.06.2019, and statements were recorded during investigation. Hence, the petitioner fell within the disqualification under Section 125(1)(f).

The Court referred to the relevant provisions of Section 125(1)(f), which states:

"a person making a voluntary disclosure:- (i) after being subjected to any enquiry or investigation or audit: or (ii) having filed a return under the indirect tax enactment, wherein he has indicated an amount of duty as payable, but has not paid it" shall not be eligible to file a declaration.

The petitioner admitted that there was a mistake in answering Questions 6 and 8 in Form SVLDRS-1, which relate to whether the petitioner had been subjected to audit, enquiry, or investigation. The petitioner incorrectly answered "yes" to both, which had conflicting implications for eligibility under the Scheme.

The Court also considered Circulars No.1072 and No.1074 issued by the Central Board of Indirect Taxes and Customs, which clarify the scope of eligibility under the Scheme. These circulars emphasize that cases under enquiry, investigation, or audit are generally excluded from voluntary disclosure benefits, and the designated committees have discretion to determine eligibility based on facts.

However, the Court found that the petitioner was clearly under investigation prior to filing the declaration, and the summons and statements recorded confirmed ongoing enquiry. Therefore, the petitioner was barred from filing a voluntary disclosure under the Scheme.

Effect of Issuance of Form SVLDRS-3 and Non-Issuance of Discharge Certificate in Form SVLDRS-4

After filing the declaration, the petitioner received acknowledgment and Form SVLDRS-3 was issued. However, the petitioner did not receive the Discharge Certificate in Form SVLDRS-4, which would have conclusively settled the tax liability under the Scheme.

The respondents admitted that Form SVLDRS-3 was issued without proper verification and that the petitioner was not entitled to the benefit due to disqualification under Section 125(1)(f). The Court held that issuance of Form SVLDRS-3 does not ipso facto entitle the petitioner to settlement under the Scheme, especially where eligibility conditions are not met.

Section 124 of the Scheme delineates the reliefs available to declarants, but these apply only if the declaration is validly filed. Since the petitioner was disqualified from filing the declaration, the question of relief and discharge certificate did not arise.

Application of Law to Facts and Treatment of Competing Arguments

The petitioner argued that the Scheme is beneficial and that the payment made should be accepted, considering the issue is revenue neutral and the petitioner was liable to pay tax on reverse charge basis. The petitioner also relied on circulars to assert that some latitude should be given in eligibility.

The respondents contended that the petitioner was under investigation and therefore barred from filing voluntary disclosure under Section 125(1)(f). They also submitted that the payment made prior to declaration cannot be adjusted, and the Show Cause Notice issued subsequently must be adjudicated on merits.

The Court analyzed the facts, including the summons, statements, and email communications, to establish that the petitioner was indeed under investigation prior to filing the declaration. The Court emphasized the clear statutory bar in Section 125(1)(f) and rejected the petitioner's contention that the Scheme's benefit should be granted despite the disqualification.

The Court relied on a precedent decision of the Division Bench which upheld the strict application of Section 125(1)(f) disqualifications.

Validity of Show Cause Notice and Adjudication Proceedings

The petitioner received Show Cause Notice No.40/2020-Service Tax dated 22.12.2020 for a higher amount than that paid under the SVLDRS Scheme. The respondents argued that the Show Cause Notice is valid and the petitioner must seek remedy through adjudication proceedings.

The Court held that since the petitioner was not entitled to the Scheme's benefit, the Show Cause Notice and subsequent Order-in-Original must be adjudicated on merits. The Court directed the respondents to proceed with adjudication in accordance with law.

Conclusions

1. The petitioner was disqualified from filing a declaration under the SVLDRS Scheme in Form SVLDRS-1 under the "Voluntary Disclosure" category due to ongoing investigation and summons issued prior to filing.

2. The payment of Rs. 22,08,034/- made by the petitioner on 27.12.2019 cannot be treated as fulfillment of tax liability under the Scheme, and the petitioner is not entitled to the issuance of Discharge Certificate in Form SVLDRS-4.

3. The issuance of Form SVLDRS-3 without verification was a procedural error and does not confer entitlement to the Scheme's benefits.

4. The Show Cause Notice issued subsequently is valid, and the respondents are entitled to proceed with adjudication on merits.

5. The writ petition filed by the petitioner is dismissed with no costs.

Significant Holdings

"Section 125(1)(f) bars a person from making voluntary disclosure after being subjected to an enquiry or investigation or audit."

"Merely because Form SVLDRS-3 was issued to the petitioner on 07.01.2020 ipso facto would not mean that the petitioner was entitled to have the case settled under the provisions of the aforesaid Scheme."

"Only if the application/declaration in Form SVLDRS-1 was available to the petitioner, question of issuance of discharge certificate in Form SVLDRS-4 would arise."

"The respondents are therefore directed to proceed with the adjudication of the Show Cause Notice on merits and in accordance with law."