TMI Blog2023 (5) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner was neither issued any notice nor afforded any opportunity to be heard by the designated committee before its application was rejected. The rejection of the petitioner s application was communicated online and the only reason stated for rejection discernable from the remarks is: incomplete and selective declaration . There is no dispute that the petitioner had deposited the entire duty in respect of the four audit objections: the amount of ₹3,16,946/- on account of the alleged wrongful availment of cess; short payment of service tax of ₹92,385/- ascertained on reconciliation; wrongful availment of the Cenvat Credit amounting to ₹8,05,654/- on certain services rent a cab, medical insurance and hotel accommodation; and alleged wrongful availment of the Cenvat Credit amounting to ₹82,81,915/- proportionate to exempted income. In terms of the SVLDR Scheme, the petitioner was entitled to waiver of the interest and penalty on deposit of the tax dues. Undisputedly, the petitioner had deposited the tax dues prior to 31.03.2019. Thus, there was no amount payable after the tax relief - The only controversy is that the petitioner had declared the duty a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om today - petition allowed. - W.P.(C) 3624/2021 - - - Dated:- 22-5-2023 - HON BLE MR JUSTICE VIBHU BAKHRU AND HON BLE MR JUSTICE AMIT MAHAJAN Advocates who appeared in this case: For the Petitioner : Mr Raman Kapur, Senior Advocate with Mr Varun Kapur, Advocate. For the Respondents : Mr Vivek Goyal, CGSC with Mr Abhishek Khanna, Mr Gokul Sharma and Ms Aneeta Goyal, Advocates. Mr Harpreet Singh, Senior Standing Counsel for R-2 with Ms Suhani Mathur, Advocate. JUDGMENT VIBHU BAKHRU, J 1. The petitioner has filed the present petition under Article 226 of the Constitution of India impugning the decision of the concerned authority to reject the petitioner s application under the Sabka Vishwas ( Legacy Dispute Resolution ) Scheme, 2019 (hereafter the SVLDR Scheme ). The petitioner had filed the said application online in the prescribed format Form SVLDRS-I. The said application was rejected and the ground for rejection along with the remarks were communicated online. The petitioner s application was rejected on the ground of ineligibility with the remarks, incomplete and selective declaration . 2. According to the respondents, the designat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he audit, certain objections were raised. This included the objection regarding wrongful availment of the Cenvat Credit on exempted income being the grants-in-aid received from the Ministry of Commerce and the Ministry of Textiles. According to respondent no. 2, the proportionate amount of the Cenvat Credit amounting to ₹82,81,915/- was required to be reversed. In addition, the respondents also found that the petitioner had wrongly availed cesses amounting to ₹3,16,946/-, which were reversed but the interest and penalty amounting to ₹83,231/- remained outstanding. In addition, respondent no. 2 also found that the petitioner had short-paid service tax to the extent of ₹92,385/-. The same was deposited but the interest and penalty on the said amount remained outstanding. Further, the petitioner had also availed the Cenvat Credit amounting to ₹8,05,654/- on rent a cab, medical insurance and hotel accommodation. The same had been reversed but interest and penalty remained outstanding. 7. On 07.06.2019, respondent no. 2 sent a letter calling upon the petitioner to deposit ₹83,231/- as interest in respect of the wrongful availment of cess; ₹36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te notified by the Central Government. The SVLDR Scheme came into effect from 01.09.2019. 11. The petitioner responded to the letters dated 01.08.2019 and 23.09.2019 sent by the respondents by stating that the petitioner intended to submit an application under the SVLDR Scheme for waiver of interest and penalty and requesting the respondents to hold all action until the order was passed under the SVLDR Scheme. Analysis 12. The only question to be considered is whether the designated authority was justified in rejecting the petitioner s application on the ground that the amount of ₹82,81,915/-, as mentioned by the petitioner, did not cover the entire details of the duty and the amount deposited by the petitioner. 13. At this stage, it would be relevant to consider the legislative intent in introducing the SVLDR Scheme. The Ministry of Finance s Press Release dated 22.08.2019 explains the objective of the SVLDR Scheme in the following words: The objective of the Scheme is to free as large a segment of the taxpayers from the legacy taxes as possible, the relief given thereunder is substantial. The Scheme is especially tailored to free the large number of sma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 18. Section 125(2) of the Act provides that the declaration would be made in an electronic form as may be prescribed. 19. Section 126(1) of the Act prescribes that the designated committee would verify the correctness of the declaration made in the said manner as may be prescribed. Section 127 of the Act expressly provides that where the amount estimated to be payable by the declarant is equal to the amount payable as estimated by the designated committee, the designated committee would issue a statement indicating the amount payable by the declarant. However, in cases where the amount payable as estimated by the designated committee exceeded the amount declared by the declarant, the designated committee was required to communicate the estimated amount payable by the taxpayer within thirty days of the receipt of the declaration. Sub-section (3) of Section 127 of the Act expressly provided that the designated committee shall give an opportunity of being heard to the declarant if he so desires before issuing the statement of the amount payable by the declarant. Section 127 of the Act is relevant and is reproduced for ready reference: 127. Issue of statement by designate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 20. It is apparent from the above that the procedure as contemplated under Section 127 of the Act conformed to the principles of natural justice and included an opportunity of affording the declarant an opportunity to be heard where there was a difference in the amount as computed by the declarant and the designated committee. 21. The Central Government also framed the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019 (hereafter the Rules ) in exercise of powers under Section 132 of the Act. The said Rules were notified on 21.08.2019. Rule 6 of the Rules contained provisions regarding verification of the declaration by the designated committee. Rule 6 of the Rules is set out below: 6. Verification by designated committee and issue of estimate, etc.- (1) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that Rule 6(3) of the Rules also mandated that an opportunity to be heard be afforded to the declarant in case the amount of duty estimated by the declarant fell short of the estimate made by the designated committee. 23. In this case, the petitioner was neither issued any notice nor afforded any opportunity to be heard by the designated committee before its application was rejected. The rejection of the petitioner s application was communicated online and the only reason stated for rejection discernable from the remarks is: incomplete and selective declaration . 24. It is relevant to note that there is no dispute that the petitioner had deposited the entire duty in respect of the four audit objections: the amount of ₹3,16,946/- on account of the alleged wrongful availment of cess; short payment of service tax of ₹92,385/- ascertained on reconciliation; wrongful availment of the Cenvat Credit amounting to ₹8,05,654/- on certain services rent a cab, medical insurance and hotel accommodation; and alleged wrongful availment of the Cenvat Credit amounting to ₹82,81,915/- proportionate to exempted income. In terms of the SVLDR Scheme, the petitioner wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eject an application (declaration) on the ground of being ineligible without giving a chance to the declarant to explain as to why his application (declaration) should be accepted and relief under the scheme should be extended to him. Summary rejection of an application without affording any opportunity of hearing to the declarant would be in violation of the principles of natural justice. Rejection of application (declaration) will lead to adverse civil consequences for the declarant as he would have to face the consequences of enquiry or investigation or audit. As has been held by us in Capgemini Technology Services India Limited (supra) it is axiomatic that when a person is visited by adverse civil consequences, principles of natural justice like notice and hearing would have to be complied with. Non-compliance to the principles of natural justice would impeach the decision-making process rendering the decision invalid in law. 26. We concur with the aforesaid view. In the present case, the petitioner s application has been rejected in violation of the principles of natural justice. As noted above, the petitioner had already deposited the tax dues. It had also made a request ..... 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