TMI Blog2023 (5) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finance Act (No. 2), 2019 posites that all persons, except those as stipulated, would be eligible to make a declaration under the Scheme. The legislative intent in enacting Chapter V of the Finance Act (No. 2), 2019 (the Scheme) was to maximize the sweep of the Scheme. It was to cover all situations where tax was payable except those cases, which were expressly excluded - Clause (c) of Section 123 of the Finance Act (No. 2), 2019, which covers cases where enquiry, investigation or audit is pending, must be interpreted bearing the aforesaid legislative scheme in mind. In terms of Clause (c), the tax dues in cases where enquiry, investigation or audit was pending against a declarant meant the amount of duty payable under any indirect tax enactment, which was quantified on or before 30.06.2019. The Bombay High Court found that there was a clear admission on the part of the petitioner and that the tax dues were quantified in terms of Section 121(r) of the Finance Act, 1994. It is also relevant to refer to the decision of the Bombay High Court in Thought Blurb v. Union of India Ors. [ 2020 (10) TMI 1135 - BOMBAY HIGH COURT] . In that case, the Bombay High Court had r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was called upon to provide the calculation sheet of the interest liability and to deposit the same so that the investigation may be concluded. Respondent no. 1 had not questioned the calculation of the service tax. It is also material to note that the impugned notice also proceeds on the basis of the dues as quantified by the petitioner. The respondents have calculated the amount of tax payable on the basis of the balance sheets of the petitioner as ₹41,46,688/-, which is materially similar to the computation as furnished by the petitioner (with the difference of ₹11/- only) - it is clear that the tax dues had been quantified as required under Section 121(r) of the Finance Act (No. 2), 2019. The impugned order rejecting the petitioner s declaration on the ground that investigation has not been concluded and hence the demand has not been estimated or concluded on or before the stipulated date is unsustainable. The Scheme does not exclude taxpayers in respect of whom investigations have not been concluded; it expressly includes taxpayers in respect of whom investigation, enquiry or audit is pending - petition allowed. - W.P.(C) 4691/2021 & CM APPL. 14460/2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending and the amount of service tax was not quantified within the meaning of Clause (r) of Section 121 of the Finance Act (No. 2), 2019. 5. The principal controversy to be addressed in the present petition is whether the amount of service tax payable by the petitioner was quantified before the stipulated date, that is, before 30.06.2019. Factual Context 6. The petitioner is engaged in the business of investment, banking, project management services etc., and at the material time was registered in respect of the said taxable services for the purpose of service tax under Chapter V of the Act. 7. By virtue of Chapter VI of the Finance Act, 2013, the Parliament introduced the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (hereafter the VCES ). Under the VCES, any eligible assessee was entitled to declare the service tax due in respect of which no notice or order of determination had been issued or made under Sections 72, 73 or 73A of Chapter V of the Act, prior to March, 2013. 8. The petitioner sought to avail the benefit of the VCES and on 24.12.2013 filed a declaration disclosing an amount of ₹36,47,132/- payable as service tax under the V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same be adjusted towards the interest payment. Further the petitioner also requested a waiver of the balance amount of interest. 13. The Parliament enacted the Finance Act (No. 2), 2019. Sections 120 to 135 (Chapter V) of the Finance Act (No. 2), 2019 introduced the Scheme. By virtue of Section 120(1) of the Finance Act (No. 2), 2019, the Scheme is called the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The said Scheme came into effect from 01.09.2019. 14. The Scheme is a comprehensive scheme, which covers various enactments as specified in Section 122 of the Finance Act (No. 2), 2019 including the Act. 15. The Central Government has framed rules in exercise of the powers under Section 132 of the Finance Act (No. 2), 2019 for carrying out the provisions of the Scheme. 16. In addition, the Central Board of Indirect Taxes and Customs (CBIC) has also issued circulars in exercise of its powers under Section 133 of the Finance Act (No. 2), 2019 for the administration of the Scheme. 17. On 26.12.2019, the petitioner filed a declaration in terms of the Scheme (application reference no. LD2612190002522) under the category, Investigation, Enquiry or Audit an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification in the official gazette, any other enactment within the scope of the Scheme. 24. Section 123 of the Finance Act (No. 2), 2019 defines the expression tax dues as under: 123. For the purposes of the Scheme, tax dues means (a) where (i) a single appeal arising out of an order is pending as on the 30th day of June, 2019 before the appellate forum, the total amount of duty which is being disputed in the said appeal; (ii) more than one appeal arising out of an order, one by the declarant and the other being a departmental appeal, which are pending as on the 30th day of June, 2019 before the appellate forum, the sum of the amount of duty which is being disputed by the declarant in his appeal and the amount of duty being disputed in the departmental appeal: Provided that nothing contained in the above clauses shall be applicable where such an appeal has been heard finally on or before the 30th day of June, 2019. Illustration 1: The show cause notice to a declarant was for an amount of duty of Rs. 1000 and an amount of penalty of Rs. 100. The order was for an amount of duty of Rs. 1000 and amount of penalty of Rs. 100. The declarant fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n wide terms. It encompasses dues that were mentioned in show cause notice(s) or were subject matter of disputes before various authorities. It also includes dues that were voluntarily disclosed by an assessee without the same being subject matter of any enquiry or dispute. Further, it covers arrears in respect of which there was no dispute or any pending litigation. More importantly, it also covers cases where enquiry, investigation or audit were pending but the dues had been quantified. 26. Section 125(1) of the Finance Act (No. 2), 2019 posites that all persons, except those as stipulated, would be eligible to make a declaration under the Scheme. 27. Section 125(1) of the Finance Act (No. 2), 2019 is set out below: 125. (1) All persons shall be eligible to make a declaration under this Scheme except the following, namely: (a) who have filed an appeal before the 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 caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a result of conclusion of any audit, enquiry or investigation. It must necessarily mean a case where enquiry, audit or investigation is pending but the quantification of the tax dues is ascertainable from a written communication on record. In this context, it is important to note that Clause (r) of Section 121 of the Finance Act (No. 2), 2019 does not stipulate that the written communication, in which the amount of duty payable under the indirect tax enactment is quantified, must emanate from the concerned tax department; it is equally acceptable that the said amount of tax due is mentioned in a written communication emanating from the taxpayer or even a third party subject to the same being a part of the record. 32. Having stated the above, we also find merit in the contention that the amount of tax dues mentioned in any unilateral communication sent by the assessee, which is disputed or not accepted by the Department, cannot be considered as quantification of the tax due even though it may be mentioned in a written communication forming a part of the record of the pending proceeding. It is essential that the amount as mentioned in the written communication has some credibil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efines quantified as a written communication of the amount of duty payable under the indirect tax enactment. It is clarified that such written communication will include a letter intimating duty demand; or duty liability admitted by the person during enquiry, investigation or audit; or audit report etc. 35. It is clear from paragraph 9 of the aforesaid Circular that tax dues would be quantified where the duty amount is known to the Department and the taxpayer in the form of a written communication. It is also apparent from the above that the legislative intent is to include the tax dues that were known to the Department and the taxpayers, within the cover of the Scheme, even though the enquiry, investigation or audit for final determination of the dues was pending. 36. The CBIC had also clarified aspects concerning the Scheme in the form of responses to frequently asked questions. The responses of the CBIC to question nos. 1 and 45 are relevant and the same are set out below: Q 1. Who is eligible to file declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019? Ans. Any person falling under the following categories is eligible, subject to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted by the declarant, the same did not cover the entire dues. Therefore, the object of the Scheme to put an end to the disputes would not be achieved. Accordingly, the Court repelled the contention that an admission of liability to pay some part of the dues could be considered as the amount of duty payable for the purpose of Section 121(r) of the Finance Act (No. 2), 2019. 40. In Karan Singh v. Designated Committee Sabka Vishwas Legacy Dispute Resolution Scheme Anr. (supra) the Court found merit in the submission of the Revenue that unilateral quantification by the petitioner by writing letters and communications, would not render him eligible for the benefits of the Scheme. Undeniably, a unilateral submission which is not accepted by the Department cannot be considered as quantification of tax. For the purpose of Section 121(r) of the Finance Act (No. 2), 2019, it is necessary that the taxpayer and the Department are in some sense ad idem as to the amount of duty payable. As explained by the CBIC in its Circular dated 27.08.2019, the relief under the Scheme is limited to the duty amount which is already known to both the Department and the taxpayer in the form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n we get funds we shall pay the same. 43. The Bombay High Court found that there was a clear admission on the part of the petitioner and that the tax dues were quantified in terms of Section 121(r) of the Finance Act, 1994. It is also relevant to refer to the decision of the Bombay High Court in Thought Blurb v. Union of India Ors.: 2020 SCC OnLine Bom 1909. In that case, the Bombay High Court had referred to the Circular dated 27.08.2019 and held that, in terms of the letters written by the petitioner / taxpayer, the tax dues were quantified before the relevant date. The relevant extract of the said decision is set out below: 47. Reverting back to the circular dated 27th August, 2019 of the Board, it is seen that certain clarifications were issued on various issues in the context of the scheme and the rules made thereunder. As per paragraph 10(g) of the said circular, the following issue was clarified in the context of the various provisions of the Finance (No. 2) Act 2019 and the Rules made thereunder :- (g) Cases under an enquiry, investigation or audit where the duty demand has been quantified on or before the 30th day of June, 2019 are eligible under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned during inquiry, investigation or audit. For eligibility under the scheme, the quantification need not be on completion of investigation by issuing show-cause notice or the amount that may be determined upon adjudication. 45. We are in respectful agreement with the aforesaid view of the Bombay High Court. It is not necessary that the tax dues be finally quantified by the Department. An admission of the liability in any written communication or in a statement recorded by the Department is required to be accepted as tax dues, for the purpose of Section 123(c) read with Section 121(r) of the Finance Act (No. 2), 2019. However, it is essential that the said dues are not disputed by the Department and that the Department is proceeding on the basis of such quantification. Clearly, in cases where the Department is not in agreement with the amount of tax as mentioned by the taxpayer in any communication, the dues as quantified in such communication(s) cannot be accepted as quantified for the purpose of the Scheme. However, a written communication or a statement by the Department, determining the amount of duty, is not necessary for a taxpayer to be eligible to make a decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 50. Thereafter, by a letter dated 05.01.2016, the office of respondent no. 2 called upon the petitioner to deposit a sum of ₹30,00,000/- including interest and also furnish certain details including copies of the challan evidencing payment of ₹30,00,000/-, copies of the returns for the Financial Years 2010-11 to 2015-16, copies of the balance sheets, statement of reconciliation of service tax liability with the balance sheets, details of interest, and a copy of the CENVAT register for the period of 2010-11 to 2014-15. 51. Thereafter, by a letter dated 08.02.2016, the Assistant Commissioner of Service Tax, Division-I, called upon the petitioner to discharge the tax dues along with applicable interest and penalty within a period of three days, failing which, action would be initiated against the petitioner. 52. There is no dispute that the petitioner has furnished the requisite details as required. It is material to note that by a letter dated 22.02.2019, the petitioner forwarded copies of the challans dated 22.02.2019 evidencing payment of ₹1,00,000/- as part payment of the service tax outstanding for the period of 2010-11 to 2016-17. The petitioner also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner sent a letter dated 15.07.2019, once again enclosing therewith the service tax reconciliation statement and the service tax interest calculation sheet. The petitioner further requested that the interest accrued on the outstanding amount up to the completion of the VCES period be waived. 56. It is relevant to note that the respondents had never disputed or doubted the statements submitted by the petitioner. On the contrary, it is apparent that the respondents had accepted the said statements. As noticed above, by the letter dated 03.06.2019, the petitioner was called upon to provide the calculation sheet of the interest liability and to deposit the same so that the investigation may be concluded. Respondent no. 1 had not questioned the calculation of the service tax. 57. It is also material to note that the impugned notice also proceeds on the basis of the dues as quantified by the petitioner. The respondents have calculated the amount of tax payable on the basis of the balance sheets of the petitioner as ₹41,46,688/-, which is materially similar to the computation as furnished by the petitioner (with the difference of ₹11/- only). 58. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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