TMI Blog2023 (1) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant to tax receipts which request was also pending when the SVLDR Scheme was notified pursuant to which the Petitioner filed a declaration in Form SVLDRS-1 to avail of the scheme. The Designated Committee has issued form SVLDRS-3 without adjusting the amount of interest as tax dues, the reason being that any amount paid referred to in Section 124(2) referred to the tax dues as contained in Section 123(b) of the Finance Act which refers to the amount of duty as defined in Section 121(d) - The SVLDR Scheme is a beneficial legislation, not only for liquidation of legacy disputes for the benefit of the tax payers but also for recovery of unpaid taxes: it is a scheme for amicable resolution of disputes and in the interest of revenue. The Statement of Objects and Reasons clearly provide that the declarant would be entitled to benefits in the form of waiver of interest, fine, penalty and also immunity from prosecution. Keeping in mind these objectives, failure to adjust interest paid by the Petitioner, appears to be hyper-technical and should not come in the way of implementation of schemes of this nature. Petitioner cannot be deprived of the benefits of this scheme just because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit institution registered under Service Tax Law since 12 August 2003 and is subsequently also registered under GST Law from 1 July 2017 and is engaged in providing various services such as holding entertainment events, renting out auditoriums, sponsorship etc., some of which services were/are liable to service tax/GST and some were exempt and some were partly taxable and partly exempt. 3. Pursuant to Excise Audit (EA 2000), audit of the records of the Petitioner for the financial years 2013-2014 to 2017-2018 (upto June 2017), conducted by the audit Group of the Service Tax Department during the month of November, 2018 and December, 2018, a Show Cause Notice dated 14 February 2019 was issued by the Principal Commissioner, CGST, Audit-I, Mumbai demanding a sum of Rs. 2,93,47,926/- as service tax for alleged wrong availment of CENVAT credit by the Petitioner alongwith applicable interest and penalty under Section 78 of Chapter V of the Finance Act, 1994. 4. After the issuance of the Show Cause Notice, Final Audit Report dated 5 July 2018 was issued to Petitioner by the Deputy Commissioner, CGST, Mumbai. 5. It is submitted that before issuance of Show Cause Notice, during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment from a date to be notified. It provides that eligible persons shall declare the tax due and pay the same in accordance with the provisions of the Scheme. It further provides for certain immunities including penalty interest or any other proceedings under the Central Excise Act, 1944 or Chapter V of the Finance Act, 1994 to those persons who pay the declared tax dues. 10. The relevant Sections of the Finance Act, 2019 which deal with SVLDRS are also set out as under:- Chapter V of the Finance dealing with the SVLDR Scheme, inter alia, provides for the relief available under the Scheme, declaration to be made under the Scheme, verification of declaration by Designated Committee, issue of statement by Designated Committee, rectification of errors, issue of Discharge Certificate by Designated Committee, power to make rules, power to issue orders, instructions, etc. The relevant sections of the Scheme are quoted as under:- 124 : -Relief available under Scheme:- (1) Subject to the conditions specified in sub-section (2) the relief available to a declarant under this Scheme shall be calculated as follows:- (a) where the tax dues are relatable to a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellate forum and such appeal has been heard finally on or before the 30th day of June, 2019; (b) who have been convicted for any offence punishable under any provision of the indirect tax enactment for the matter for which he intends to file a declaration; (c) who have been issued a show cause notice, under indirect tax enactment and the final hearing has taken place on or before the 30th day of June, 2019; (d) who have been issued a show cause notice under indirect tax enactment for an erroneous refund or refund; (e) who have been subjected to an enquiry or investigation or audit and the amount of duty involved in the said enquiry or investigation or audit has not been quantified on or before the 30th day of June, 2019; (f) 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; (g) who have filed an application in the Settlement Commission for settlement of a case; (h) persons seeking to make declarations with respect to excisable goods set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court or the High Court, then, notwithstanding anything contained in any other provisions of any law for the time being in force, such appeal or reference or reply shall be deemed to have been withdrawn. (7) Where the declarant has filed a writ petition or appeal or reference before any High Court or the Supreme Court against any order in respect of the tax dues, the declarant shall file an application before such High Court or the Supreme Court for withdrawing such writ petition, appeal or reference and after withdrawal of such writ petition, appeal or reference with the leave of the Court, he shall furnish proof of such withdrawal to the designated committee, in such manner as may be prescribed, along with the proof of payment referred to in sub-section (5). (8) On payment of the amount indicated in the statement of the designated committee and production of proof of withdrawal of appeal, wherever applicable, the designated committee shall issue a discharge certificate in electronic form, within thirty days of the said payment and production of proof. 128. Rectification of errors. Within thirty days of the date of issue of a statement indicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tee and its rules of procedure an d functioning; (c) the form and manner of estimation of amount payable by the declarant and the procedure relating thereto; (d) the form and manner of making the payment by the declarant and the intimation regarding the withdrawal of appeal; (e) the form and manner of the discharge certificate which may be granted to the declarant; (f) the manner in which the instructions may be issued and published; (g) any other matter which is to be, or may be, prescribed, or in respect of which provision is to be made, by rules. (3) The Central Government shall cause every rule made under this Scheme to be laid, as soon as may be after it is made, before each House of Parliament, while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of June, 2019; or (d) a voluntary disclosure. Rule-4. Auto acknowledgment -On receipt of declaration, an auto acknowledgment bearing a unique reference number shall be generated by the system. Rule-6. Verification by designated committee and issue of estimate, etc.- (1) The declaration made under section 125, except when it relates to a case of voluntary disclosure of an amount of duty shall be verified by the designated committee based on the particulars furnished by the declarant as well as the records available with the Department. (2) The statement under sub-sections (1) and (4) of section 127, as the case may be, shall be issued by the designated committee electronically, on or before the 31st day of May, 2020 in Form SVLDRS-3 setting forth therein the particulars of the amount payable: Provided that no such statement shall be issued in a case where the amount payable, as determined by the designated committee is nil and there is no appeal pending in a High Court or the Supreme Court. (3) Where the amount estimated to be payable by the declarant exceeds the amount declared by the declarant, then, the designated committee shall issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase where Form SVLDRS-3 has not been issued by the designated committee by virtue of the proviso to sub-rule (2) of rule 6, the discharge certificate shall be issued within thirty days of the filing of declaration referred to in sub-rule (1) of rule 3. 11. From the above, we find that as a one time measure for liquidation of past disputes of Central Excise and Service Tax, the SVLDR Scheme has been issued by the Central Government. The SVLDR Scheme has also been issued to ensure disclosure of unpaid taxes by an eligible person. This appears to have been necessitated as the levy of Central Excise and Service Tax has now been subsumed in the new GST Regime. From a reading of the statement of object and reasons, it is quite evident that the scheme conceived as a one time measure, has the twin objectives of liquidation of past disputes pertaining to central excise and service tax on the one hand and disclosure of unpaid taxes on the other hand. Both are equally important : amicable resolution of tax disputes and interest of revenue. As an incentive, those making the declaration and paying the declared tax verified as determined in terms of the scheme would be entitled to certain be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 40,28,670/- paid by Petitioner under Accounting Code 00441481 (i.e. Other Receipts (Interest) ) under Section 124(2) of SVLDRS and that if such deduction is allowed, Petitioner is not required to pay the sum of Rs. 37,67,015/- estimated by the Designated Committee as payable by Petitioner and Petitioner also sought a personal hearing before the Designated Committee. 16. A Personal hearing was granted to Petitioner on 19 February 2020 when Petitioner reiterated its stand. However, the Designated Committee did not accept Petitioner s arguments and issued Form SVLDRS-3 dated 19 February 2020 with a final amount payable by the Petitioner as Rs. 37,67,015/- on the basis that sum of Rs. 40,28,670/- paid by Petitioner was not eligible for deduction under Section 124(2) as in the opinion of the Designated Committee, deduction under that Section is only allowable for payments of tax under Accounting Code No.00441480 for Tax Receipts , which was a amount aggregating to Rs. 1,09,06,948/- and not for payments aggregating to Rs. 40,28,670/- made under the Accounting Code No. 00441481 for Other Receipts (Interest) from out of the total amount aggregating to Rs. 1,49,35,618/- paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- 121. In this Scheme, unless the context otherwise requires,- .. . . (d) amount of duty means the amount of central excise duty, the service tax and the cess payable under the indirect tax enactment; 21. Learned Counsel submits that Section 124(1)(a) also refers to tax dues and not to the interest that would be adjusted under the SVLDRS. Referring to Section 124(2), learned Counsel for the Respondents relies upon the following paragraphs of the Respondent s affidavit-in-reply, to make his point:- 11. I say that the Tax dues, as explained above, is only duty demanded in show cause notice and does not include interest at all. The contention of the Petitioner to include the interest as paid under the head of duty is illogical and beyond the purview of the Scheme. 12. I further say and submit that as per Section 124 (2), the scheme allows adjustment of sums already paid as under:- a. Amount paid as pre-deposit at any stage of appellate proceedings. b. Deposit during inquiry, investigation or audit. Hence, the elements for pre-deposit and deposit has to be common i.e. it cannot be a situation that for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal amount of duty/tax required to be paid 22. On this basis, learned Counsel submits that Petitioner has not made out any case for exercise of its extraordinary jurisdiction and prays that the Petition be dismissed. 23. We have heard Mr. Chirag Shetty, the learned Counsel for the Petitioner and Mr. Vijay Kantharia, learned Counsel for the Respondents and with their able assistance, we have perused the papers and proceedings in the matter and also considered the rival contentions. 24. The Punjab and Haryana High Court in the case of Schlumberger Solutions Pvt. Ltd. (supra) has while considering an almost identical fact situation has interpreted Section 124 (2) of the Finance Act as under:- A bare reading of Section 124 (2) reveals that the relief calculated under Section 124(1) is subject to the condition that any amount paid during the enquiry, investigation or audit has to be deducted when issuing the statement indicating the amount payable by the declarant. The bare provision talks of 'any amount paid', the same does not distinguish between the amounts paid under different heads. It clearly envisages two kinds of deductions firstly any pre-deposit mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions: firstly, that any pre-deposit made at the stage of appellate proceedings under an indirect tax enactment be given credit to or secondly, any deposit made during enquiry, investigation or audit, be deducted when finalising the computation. (ii) In the present case, the amount was not remitted towards pre-deposit. It was remitted during investigation and even prior to issuance of show cause notice and thus is, in my view, covered by the second limb of Section 124(2). (iii) The rejection of the petitioner s computation is on the ground that the amount of Rs.16.58 lakhs accounted by the Department under a different accounting head. However, the fact that it has, in fact, been remitted and isavailable to the credit of the petitioner, is not denied. In such circumstances, the objection raised by the Revenue appears to be hyper-technical to say the least. (iv) Accounting methodology cannot, and must not dictate or stand in the way of substantive relief that is otherwise available to an assessee. Accounting standards and methods are only formulated to aid proper recording of transactions and have limited relevance in deciding upon a substantive issue, such as the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin two weeks of the passing of the order. 18. The respondent No.3 i.e. the Designated Committee shall issue the discharge certificate in Form SVLDRS-4 to the petitioners in the above terms after giving due consideration to the amounts of Rs.50,00,000.00, Rs.5,17,877.00, Rs.18,00,000.00 deposited by the petitioner as pre-deposit and deposit; and Rs.55,56,045.00 deposited by the petitioner under order of this court within a period of 4 weeks from the receipt of a copy of this order. Respondents shall refund the sum of Rs.45,60,438.00 to the petitioner within a period of 4 weeks after issuance of the SVLDRS-4 forum. (emphasis supplied) 27. It is not in dispute that the Petitioner has, prior to the issuance of the show cause notice, paid an amount of Rs.1,49,35,618/- electronically out of which a sum of Rs.1,09,06,948/- was deposited under the Accounting Code 00441480 as tax receipts and Rs.40,28,670/- was deposited under Accounting Code 00441481 towards interest under other receipts. That, during the pendency of the show cause notice, Petitioner had also requested for change of Accounting Code in respect of the interest amount to the Accounting Code relevant to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be penalized for depositing the amount under different head. Once the provision speaks of any amount paid without distinguishing between the heads of tax or between tax, interest or penalty, in our view, the provision mandates the deduction of the amounts deposited prior to issuance of the show cause notice. As rightly observed by the Madras High Court in M/s Vamsee Overseas Marine Private Limited (supra) the object of the scheme should not be lost sight of, as the scheme has itself been formulated for the smooth settlement of disputes. The interpretation of the provisions thereof should be to carry forward the object rather than to frustrate the same giving rise to more litigation. In our view, had the Designated Committee taken a pragmatic view, more so, in the light of the law settled by atleast three High Courts, this litigation was clearly avoidable. 29. Therefore, the issue is not whether the elements of predeposit and deposit are common but the issue is whether interest component deposited by the Petitioner can be treated to be any amount paid . With respect to submissions with regard to Section 121(u) of the Finance Act and Section 35F of the Central Excise Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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