2025 (6) TMI 533 - HC - Service Tax

Entitlement to benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 (SVLDRS) - only ground taken by the respondents is that since the time of the scheme is over therefore the petitioner is not entitled to avail the benefit thereunder - HELD THAT - The Madras High Court Bombay High Court Gujarat High Court and Delhi High Court have held that though the notification dated 14.05.2020 extended the time limit for payment under the SVLDRS up to 30.06.2020 having regard to the prevailing COVID-19 pandemic the petitioners-assessees therein would be entitled to extension of time. In Apnaa Projects s case 2022 (9) TMI 1003 - MADRAS HIGH COURT the Madras High Court held that since the petitioner has admittedly approached the respondents and expressed its readiness to remit the amount on 31.07.2020 it is entitled to extension of time and is permitted to make the remittance along with interest @ 15% from 01.07.2020 to date of remittance that must be within a period of four weeks from the date of receipt of this order for which purpose the website shall be enabled forthwith. In Cradle Runways s case 2024 (8) TMI 155 - BOMBAY HIGH COURT the Bombay High Court held that Looking at the objective for which the SVLDR Scheme was introduced and the fact that there was a technical glitch in making the payment cannot be ignored. Furthermore Petitioner could not be said to have had any mala fide intention in delaying the payment by one day since the challan generated stated the expiry date as 1st July 2020. Petitioner was therefore under a bona fide belief that he could make the payment on 1st July 2020 which admittedly he has paid on said date. A perusal of the impugned order would indicate that the sole ground on which the case of the petitioner has been rejected by the respondents is that the scheme had come to an end. However with regard to the extension of limitation referred to herein above and the coupled with the fact that the judgments rendered by the Hon ble High Courts of Madras Bombay Gujarat and Delhi granting benefits of SVLDRS in favour of the petitioner/assessee therein on the ground of the prevailing COVID-19 pandemic even cases where payments were made subsequent to 30.06.2020 the impugned order rejecting the case of the respondents cannot sustain and deserves to be quashed and necessary directions are required to be issued to the concerned respondents to accept the payment made by the petitioner and issue discharge certificate in its favour. Therefore on the facts of the present case denying the benefits of SVLDR Scheme would not only contrary to object of the scheme but also would also be injustice to the petitioner declarant who otherwise was eligible. Whether the provisions under the Finance Bill with regard to the fixation of time limit for availing the benefit of scheme and with regard to extension of time for making payment of tax are directive in nature? - HELD THAT - This precise question has been considered by the learned Single Judge of Madras High Court in N. Sundarajan vs. Union of India Ors. 2023 (11) TMI 899 - MADRAS HIGH COURT wherein the scheme was held to be directive. Conclusion - This Court is of the considered view that the petitioner deserves to be granted another chance to make the payment after associating it so as to arrive at the amount due payable. The Annexures P-17 and P-18 i.e. demand notices 9 SVLDRS-3 Forms issued on 28.01.2020 (forming part of Annexure P-12 (Colly) 9 SVLDRS-3 Forms issued 25.02.2020 and letter Annexure P-15 whereby the respondent department has upheld its calculation are quashed and set aside - Petition allowed.

Summary

The core legal questions considered in this judgment include:

1. Whether the petitioner is entitled to the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS), despite delayed payment of tax dues beyond the prescribed deadline under Section 127(5) of the Finance Act, 2019, particularly in light of the COVID-19 pandemic.

2. Whether the time limit prescribed under Section 127(5) of the Finance Act, 2019 for payment of tax dues under the SVLDRS scheme is mandatory or directory.

3. Whether the respondents were justified in rejecting the petitioner's representations seeking extension of time for payment and in issuing demand notices for recovery of the entire tax dues with penalty and interest.

4. The applicability and effect of the extension of limitation periods granted by the Supreme Court during the COVID-19 pandemic on the deadlines under the SVLDRS scheme.

5. The proper categorization of the petitioner's declarations under the SVLDRS scheme (investigation vs. arrears) and the correct calculation of the tax liability and relief under the scheme.

6. The scope of the High Court's extraordinary writ jurisdiction under Article 226 to grant relief in cases of delay in payment under the SVLDRS scheme due to extraordinary circumstances such as the COVID-19 pandemic.

Issue-wise Detailed Analysis:

1. Entitlement to Benefit under SVLDRS Scheme Despite Delayed Payment

The legal framework governing the SVLDRS scheme is contained in the Finance (No. 2) Act, 2019 and the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019. Section 127(5) of the Finance Act, 2019 mandates that the declarant shall pay the amount indicated in the statement issued by the designated committee on or before 30th June 2020. Failure to pay within this time results in the declaration lapsing and the declarant losing the benefit of the scheme.

The petitioner filed declarations within the prescribed filing period and was initially eligible for relief under the scheme. However, due to the COVID-19 pandemic and resultant lockdown, the petitioner was unable to pay the dues by 30.06.2020. The petitioner contended that the pandemic caused an extraordinary financial hardship, warranting extension of time to pay the dues.

The respondents rejected the petitioner's representations for extension, asserting that the scheme's timelines had expired and no further extension was permissible.

The Court examined multiple High Court judgments (Madras, Bombay, Gujarat, Delhi) which had considered similar facts and held that the COVID-19 pandemic constituted sufficient cause to grant extension of time beyond 30.06.2020 for payment under the SVLDRS scheme. These judgments emphasized the scheme's object of amicable resolution of legacy disputes and revenue interest, supporting a liberal and purposive interpretation favoring taxpayers facing genuine hardship.

In particular, the Madras High Court in Apnaa Projects and N. Sundaranjan's cases held that the time limit for payment under the scheme should be construed liberally in light of the pandemic and extension notifications issued by the government. The Bombay High Court in Cradle Runways and related cases also recognized the scheme's directory nature and the legitimacy of payments made after the original deadline due to pandemic-related difficulties.

The Court also noted that the Supreme Court had suo motu extended limitation periods in all judicial and quasi-judicial proceedings from 15.03.2020 to 28.02.2022, which would logically encompass deadlines under statutory schemes like SVLDRS.

Accordingly, the Court found that the petitioner's delayed payment due to the pandemic was a bona fide and justifiable cause, entitling the petitioner to the benefit of the scheme subject to payment of interest for the delayed period.

2. Nature of Time Limit under Section 127(5) of Finance Act, 2019

The Court analyzed whether the time limit prescribed under Section 127(5) for payment of dues under the SVLDRS scheme is mandatory or directory. This issue was pivotal because a mandatory time limit would preclude any extension or condonation of delay, whereas a directory time limit would permit flexible interpretation in exceptional circumstances.

The Court relied heavily on the reasoning in the Madras High Court's decision in N. Sundaranjan, which held that the provisions regarding fixation of time limit for availing the scheme and making payment are directory in nature. The rationale was that the Central Government was delegated power to fix and extend time limits through notifications, indicating a legislative intent for flexibility.

The Court further observed that the scheme's object to amicably resolve legacy tax disputes and reduce litigation costs supports a purposive and liberal construction of the time limits. The delegation to the government to extend deadlines in response to prevailing conditions (such as the COVID-19 pandemic) underscores the directory character of the provisions.

Moreover, the Supreme Court's suo motu extension of limitation periods during the pandemic reinforced the view that strict adherence to original deadlines would cause injustice and defeat the scheme's objectives.

Therefore, the Court concluded that the time limits under the SVLDRS scheme are directory and can be extended in appropriate cases, especially in extraordinary circumstances like the pandemic.

3. Correct Categorization and Calculation of Tax Liability under SVLDRS

The petitioner had filed nine declarations under the category of investigation, which under Section 124(1)(d) of the Finance Act, 2019, entitles the declarant to relief of 70% or 50% depending on the amount of due tax. However, the respondents re-categorized the petitioner's case as arrears and issued SVLDRS-3 Forms demanding a higher amount (Rs. 37,87,874/-) than the petitioner's calculation (Rs. 12,79,421/-).

The petitioner contended that the amount already deposited (Rs. 41,80,756/-) included penalty and was paid under directions of the respondents, not voluntarily, and thus should be deducted from the net payable amount after relief. The petitioner requested revision of the SVLDRS-3 forms accordingly.

The respondents rejected the request, maintaining that the calculations were correct as per law and refused to extend the payment deadline.

The Court found merit in the petitioner's contention that the re-categorization and calculation were erroneous and that the petitioner should be given an opportunity to be heard and to present its case on the correct liability and relief under the scheme. The Court quashed the demand notices and SVLDRS-3 forms and directed the respondents to re-calculate the liability after associating the petitioner.

4. Effect of Supreme Court's Extension of Limitation Periods and Pandemic Relief

The Court extensively referred to the Supreme Court's suo motu orders extending limitation periods from 15.03.2020 to 28.02.2022 in all judicial and quasi-judicial proceedings due to the COVID-19 pandemic. These orders were binding on all courts and authorities and effectively suspended statutory and contractual deadlines during this period.

The Court held that these extensions logically apply to the deadlines under the SVLDRS scheme, including the payment deadline under Section 127(5). The pandemic thus constituted a sufficient cause for extension, and the petitioner's inability to pay by the original deadline was excusable.

The Court also noted that various High Courts had relied on these Supreme Court orders to grant relief to taxpayers who missed SVLDRS deadlines due to the pandemic, reinforcing the principle of equity and justice in extraordinary times.

5. Scope of High Court's Writ Jurisdiction to Grant Relief

The Court recognized that while the scheme and statutory provisions do not expressly empower the authorities to condone delay, the High Court under its extraordinary writ jurisdiction under Article 226 of the Constitution can pass orders necessary to remedy injustice and do complete justice.

The Court cited several decisions including the Delhi High Court's ruling in IA Housing and the Supreme Court's decision in Dal Chandra Rastogi, which upheld the power of courts to grant relief in cases of delayed payment under tax amnesty schemes due to genuine hardship.

The Court emphasized that no prejudice would be caused to the revenue by allowing the petitioner to pay with interest and receive discharge under the scheme, and such relief furthers the scheme's objectives of reducing litigation and generating revenue.

Treatment of Competing Arguments

The respondents argued that the scheme's deadlines are mandatory and that failure to pay by the prescribed date results in forfeiture of benefits. They contended that the government had extended deadlines only up to 30.06.2020 and that payments beyond this date could not be accepted.

The Court rejected this strict interpretation in light of the pandemic, the Supreme Court's extension of limitation, and the directory nature of the provisions. The Court also found the respondents' refusal to consider the petitioner's representations and re-calculate liability unreasonable and contrary to the scheme's objectives.

Conclusions

The Court concluded that:

• The petitioner was eligible for the SVLDRS scheme and had filed declarations within the prescribed filing period.
• The time limits for payment under the scheme are directory, not mandatory, and can be extended in exceptional circumstances such as the COVID-19 pandemic.
• The Supreme Court's extension of limitation periods applies to the deadlines under the SVLDRS scheme.
• The petitioner's delayed payment due to the pandemic was a bona fide cause warranting acceptance of payment with interest and issuance of discharge certificate.
• The respondents erred in re-categorizing the petitioner's declarations and calculating a higher tax liability without due opportunity to the petitioner.
• The impugned demand notices and SVLDRS-3 forms are quashed, and the respondents are directed to re-calculate the petitioner's liability after affording an opportunity to present its case.
• The respondents are directed to accept the petitioner's payment and issue discharge certificate under the scheme.

Significant Holdings and Core Principles Established:

"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. If it is mandatory, there will not be any delegation with regard to the Central Government to fix the time limit for availing the scheme and payment of tax. Since there is delegation with regard to the Central Government, it will only be directory in nature and that is the reason why the Central Government depends upon the situation prevailing in the country and extended the time limit from time to time."

"The objective of the SVLDR scheme is to bring about expeditious and effective resolution of old disputes and recoveries of old outstanding dues of the Government and reduction of administrative costs. Both amicable resolution of tax disputes and interest of revenue are equally important. The concerned authorities are to keep this broad picture in mind while dealing with a claim under the scheme."

"The High Court under its extraordinary writ jurisdiction can pass any order necessary to remedy injustice and do complete justice, including condoning delay in payment under tax amnesty schemes in extraordinary circumstances such as the COVID-19 pandemic."

"The Supreme Court's suo motu extension of limitation periods from 15.03.2020 to 28.02.2022 applies to statutory deadlines under schemes like SVLDRS, and the pandemic constitutes sufficient cause for extension of time."

"Denial of the benefits of the SVLDR scheme to a bona fide declarant due to delay caused by the pandemic would be contrary to the object of the scheme and amount to an injustice."

"The respondents are directed to re-calculate the correct liability of the petitioner under the amnesty scheme after associating and affording an opportunity to the petitioner to present its case."

"The impugned demand notices and SVLDRS-3 forms are quashed and set aside, and the respondents are directed to accept the payment made by the petitioner and issue discharge certificate in its favour."