2025 (5) TMI 73 - HC - Service Tax

Availing the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 (SVLDRS) -Failure to make payment due to technical glitches in the web portal - payment made after the prescribed cut-off date - It is the grievance of the petitioner that despite having made payment as called upon by the respondents under the SVLDRS the respondents have issued a letter as a result of which account of the petitioner at Andhra Bank Bangalore has been frozen / blocked and since the requests by the petitioner including representation submitted by it to the respondents for issuance of discharge certificate in favour of the petitioner were not complied with by the respondents petitioner is before this Court by way of the present petition. HELD THAT - As the judgment of M/s Kivi Sansho Packaging Pvt. Ltd. Vs. Union of India and others is directly and squarely applicable to the facts of the instant case particularly when the petitioner herein has made payment on 01.10.2020 itself and consequently the impugned notices / letters at Annexures B and C dated 24.02.2021 and 12.03.2021 deserve to be quashed. In the result I pass the following - Petition is hereby allowed. The impugned notices / letters at Annexures B and C dated 24.02.2021 and 12.03.2021 issued by the 2nd and 3rd respondents are hereby quashed. The concerned respondents are directed to accept payment made by the petitioner on 01.10.2020 towards SVLDRS Scheme and proceed to take necessary steps to issue the Discharge Certificate in Form SVLDRS-4 in favour of the petitioner in accordance with law within a period of four weeks from the date of receipt of a copy of this order.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

• Whether the payment made by the petitioner after the prescribed cut-off date under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) is eligible for acceptance and consequent issuance of discharge certificate in Form SVLDRS-4.
• Whether the impugned letters/notices issued by the respondents, which rejected the petitioner's request for acceptance of late payment and froze the petitioner's bank account, are liable to be quashed.
• The effect of the Supreme Court's suo motu orders extending limitation periods during the COVID-19 pandemic on the time limits prescribed under the SVLDRS scheme.
• Whether the time limits prescribed under SVLDRS are mandatory or directory, especially in the context of the COVID-19 pandemic and related governmental notifications.
• The applicability of precedents from various High Courts and the Supreme Court regarding extension of time limits and acceptance of delayed payments under SVLDRS during the pandemic.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility of Payment Made After Cut-off Date Under SVLDRS

Legal Framework and Precedents: The SVLDRS scheme, introduced by the Finance Bill, 2019, provides for settlement of legacy disputes relating to service tax and central excise by filing declarations (Form SVLDRS-1) and making payments within prescribed time limits as per Form SVLDRS-3. Notifications issued by the Central Government fix the time limits for availing the scheme and making payments. Initially, the payment deadline was extended up to 30.06.2020 by a Notification dated 14.05.2020. The Supreme Court suo motu extended limitation periods nationwide due to the COVID-19 pandemic, notably by orders dated 23.03.2020 and 10.01.2022, effectively suspending limitation from 15.03.2020 to 28.02.2022.

Several High Courts, including Madras and Bombay, have held that the time limits under SVLDRS are directory, not mandatory, especially in light of the COVID-19 pandemic and the Supreme Court's extension of limitation periods. The Madras High Court in Apnaa Projects and N. Sundararajan, and the Bombay High Court in Cradle Runways, have accepted payments made after 30.06.2020, directing issuance of discharge certificates upon payment with interest.

Court's Interpretation and Reasoning: The Court examined the petitioner's payment made on 01.10.2020, which was beyond the prescribed cut-off date of 30.06.2020. The respondents rejected the payment on the ground that it was beyond the deadline fixed by the Notification dated 14.05.2020. However, the Court considered the Supreme Court's extension of limitation period orders, which effectively suspended limitation from 15.03.2020 to 28.02.2022, and the judicial precedents granting relief to similarly situated petitioners who made payments after the cut-off date due to COVID-19 related difficulties.

The Court held that the time limits under SVLDRS are directory, given the Central Government's delegated power to extend deadlines in response to prevailing circumstances such as the pandemic. The Court reasoned that strict adherence to cut-off dates without considering pandemic-related hardships would defeat the scheme's objective of amicable resolution of legacy tax disputes and revenue realization.

Key Evidence and Findings: The petitioner submitted Form SVLDRS-1 and was issued Form SVLDRS-3 demanding payment. Payment was attempted earlier but failed due to technical glitches, and was ultimately made on 01.10.2020. Despite this, respondents froze the petitioner's bank account and refused to issue Form SVLDRS-4. The Court relied on the petitioner's payment records, representations made, and the Supreme Court's limitation extension orders.

Application of Law to Facts: Applying the Supreme Court's limitation extension orders and the principle that SVLDRS time limits are directory, the Court found that the petitioner's payment on 01.10.2020 should be accepted. The pandemic and technical difficulties justified extension of time beyond the prescribed cut-off.

Treatment of Competing Arguments: The respondents argued that the payment deadline was absolute and the petitioner's payment after 30.06.2020 was not eligible for scheme benefits. They relied on judgments that did not consider the COVID-19 limitation extensions. The Court distinguished those judgments, holding that they lacked consideration of pandemic-related extensions and thus were not applicable.

Conclusion: The Court concluded that the petitioner's payment made on 01.10.2020 was valid under the SVLDRS scheme, and the respondents were bound to accept it and issue the discharge certificate.

Issue 2: Quashing of Impugned Letters and Freezing of Bank Account

Legal Framework and Precedents: The impugned letters dated 24.02.2021 and 12.03.2021, issued by the respondents, rejected the petitioner's request for issuance of discharge certificate and resulted in freezing of the petitioner's bank account. Precedents from Madras and Bombay High Courts have quashed similar adverse communications where payments were made post cut-off but within the extended limitation period.

Court's Interpretation and Reasoning: The Court found these communications to be contrary to the principles established by the Supreme Court's limitation extensions and the judicial trend favoring acceptance of late payments due to pandemic hardships. The freezing of the bank account was an undue hardship given the petitioner's bona fide compliance.

Key Evidence and Findings: The petitioner's representations and payment details, along with the impugned letters, were examined. The Court noted the absence of any statutory bar to accepting payments made after 30.06.2020 in light of the pandemic.

Application of Law to Facts: The Court applied the principle of equity and the pandemic-related relaxation of limitation to hold that the impugned letters were unsustainable and liable to be quashed.

Treatment of Competing Arguments: The respondents contended that the letters were justified as per the scheme's prescribed deadlines. The Court rejected this, emphasizing the overriding effect of the Supreme Court's orders and the directory nature of the time limits.

Conclusion: The impugned letters were quashed, and the respondents were directed to lift restrictions and proceed with issuance of discharge certificate.

Issue 3: Effect of Supreme Court's Extension of Limitation Periods During COVID-19

Legal Framework and Precedents: The Supreme Court's suo motu orders dated 23.03.2020 and 10.01.2022 extended the period of limitation in all judicial and quasi-judicial proceedings from 15.03.2020 till 28.02.2022. These orders are binding on all courts and authorities under Articles 141 and 142 of the Constitution.

Court's Interpretation and Reasoning: The Court held that these orders effectively suspended the time limits prescribed under the SVLDRS scheme, which are procedural in nature. Consequently, payments made within this extended period must be treated as timely for all practical purposes.

Key Evidence and Findings: The Court relied on the text of the Supreme Court orders and the fact that the Central Government issued several notifications extending deadlines under the SVLDRS scheme in response to the pandemic.

Application of Law to Facts: Applying the Supreme Court's orders, the petitioner's payment on 01.10.2020 falls within the extended limitation period and is therefore valid.

Treatment of Competing Arguments: Respondents argued that the SVLDRS scheme deadlines are statutory and cannot be overridden by limitation extensions. The Court rejected this, noting the scheme's provisions are directory and the Supreme Court's orders have overriding effect.

Conclusion: The limitation extensions apply to SVLDRS deadlines, validating the petitioner's late payment.

Issue 4: Mandatory vs. Directory Nature of SVLDRS Time Limits

Legal Framework and Precedents: The Finance Bill, 2019, and subsequent notifications delegate to the Central Government the power to fix and extend time limits for availing the scheme and making payments. Judicial precedents (Madras High Court in N. Sundararajan and Apnaa Projects) have held these time limits to be directory, not mandatory.

Court's Interpretation and Reasoning: The Court reasoned that if the time limits were mandatory, the Central Government would not have been empowered to extend them. The delegation of power to extend deadlines indicates a directory nature, allowing flexibility in exceptional circumstances like the pandemic.

Key Evidence and Findings: Notifications extending deadlines and Supreme Court limitation orders were considered. The Court also noted the hardship faced by taxpayers during the pandemic.

Application of Law to Facts: The petitioner's payment, though late as per original deadlines, is valid due to the directory nature of time limits and pandemic-related extensions.

Treatment of Competing Arguments: Respondents emphasized strict compliance with deadlines. The Court disagreed, emphasizing the scheme's objective and pandemic realities.

Conclusion: SVLDRS time limits are directory, allowing acceptance of late payments under pandemic conditions.

Issue 5: Applicability of Precedents and Treatment of Respondents' Reliance on Earlier Judgments

Legal Framework and Precedents: The Court reviewed various judgments relied upon by both parties. It noted that some judgments cited by respondents did not consider the Supreme Court's limitation extension orders or pandemic context, thus lacking applicability.

Court's Interpretation and Reasoning: The Court distinguished those judgments, holding that they cannot be relied upon against the petitioner. It gave precedence to judgments from Madras and Bombay High Courts and the Supreme Court's limitation orders, which specifically address pandemic-related extensions.

Key Evidence and Findings: The Court analyzed the factual matrix and judicial reasoning in the cited cases.

Application of Law to Facts: The Court applied the more recent and contextually relevant precedents favoring acceptance of late payments under SVLDRS during the pandemic.

Treatment of Competing Arguments: Respondents' reliance on earlier judgments was rejected due to non-consideration of pandemic-related extensions.

Conclusion: The Court followed the line of authority permitting acceptance of late payments under SVLDRS due to COVID-19 related extensions.

3. SIGNIFICANT HOLDINGS

The Court's crucial legal reasoning includes the following verbatim excerpts:

"The impugned Endorsement issued by the 3rd respondent deserves to be quashed and necessary directions are to be issued to the concerned respondents to accept the payment made by the petitioner and issue a discharge certificate in Form SVLDRS-4 within a stipulated timeframe."

"The provisions under the Finance Bill, with regard to the fixation of time limit for availing the scheme and with regard to the extension of time for making payment of tax, is directory in nature."

"The Supreme Court, suo motu, vide order dated 23.03.2020, had extended the mandatory provisions of limitation under various Acts due to the reason of COVID pandemic from 01.03.2020 to 28.02.2022."

"The effect of the COVID-19 pandemic and the orders of the Apex Court extending period of limitation have not been considered in the said judgments and consequently, no reliance can be placed upon the said judgments by the respondents in support of their defence."

Core principles established:

• Time limits under SVLDRS are directory, not mandatory, and can be extended in exceptional circumstances such as the COVID-19 pandemic.
• The Supreme Court's suo motu extension of limitation periods applies to SVLDRS deadlines, validating payments made within the extended period.
• Technical glitches and pandemic hardships justify acceptance of late payments under SVLDRS.
• Communications rejecting late payments and freezing accounts without considering pandemic-related extensions are liable to be quashed.

Final determinations:

• The petitioner's payment made on 01.10.2020 is valid and must be accepted under the SVLDRS scheme.
• The impugned letters/notices dated 24.02.2021 and 12.03.2021 are quashed.
• The respondents are directed to issue the discharge certificate in Form SVLDRS-4 within four weeks of receipt of the Court's order.