The importance of verifying the truthfulness of the declarant's statement and the need for a liberal approach in settling legacy disputes under the Sabka Vishwas Scheme 2019.

JUDGMENT

K.R.SHRIRAM, J. - Petitioner is a member of various stock exchanges including National Stock Exchange and Bombay Stock Exchange and undertakes trading in shares, currencies and derivatives instruments as a stock broker for its clients. Petitioner discharges service tax on the brokerage / commission received from the clients towards rendition of services of stock broking services to its domestic and foreign clients. Petitioner also undertakes trading on its own account as well.

2. In 2019, Government of India introduced a scheme called "Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 (the scheme) under Chapter V of the Finance Act, 2019 (Finance Act). The scheme was applicable to various enactments as mentioned under sec. 122 of the Finance Act and that included the Finance Act 2004, Finance Act 2007, Finance Act 2015 and Finance Act 2016. Under the scheme, all persons were eligible to make a declaration to settle under the Scheme except those specifically excluded under sec. 125 of the Finance Act. As per the scheme, the eligible person would make a declaration under the scheme, which shall be considered by the designated committee under sec. 126 of the Finance Act and the designated committee would issue a statement under sec. 127 of the Finance Act. How much will be the tax due and payable under the scheme is provided for under sec. 123 of the Finance Act.

3. Petitioner had filed such declaration under the scheme. The declaration has been accepted but according to petitioner, respondents have not given credit to certain amounts which, according to petitioner, has been paid. If such credit has been given, there will be no further amount payable by petitioner and in fact there will be surplus amount with the Government, which Government need not refund by virtue of sec. 124 of the Finance Act. The amount which according to petitioner that had to be adjusted was about Rs.5,37,25,305.00.

4. Before petitioner filed the declaration under the scheme, respondent No. 5, who is Assistant Commissioner of CGST and Central Excise, by a letter dtd. 19/3/2015 had raised objections regarding non payment of service tax on brokerage received from foreign clients / foreign institutional investors for the period 1/7/2012 to 30/9/2014 and non reversal of CENVAT credit attributable to exempt activity of trading of securities, as per the provisions under Rule 6 of the Credit Rules. In response to the objections, petitioner paid tax Rs.6,86,85,255.00 (Rs.1,49,59,950.00 in cash and the balance of Rs.5,37,25,305.00 by reversal of credit in Service tax returns filed for the period April 2015 to September 2015). Thus, according to petitioner it paid tax of Rs.6,86,85,255.00 towards reversal of credit attributable to exempted services of trading of securities in terms of CENVAT credit Rules 2004. Petitioner submitted further communication dtd. 15/10/2015 to respondent No. 5 outlining the detailed working.

5. Subsequently, three show cause notices dtd. 18/3/2016, 28/4/2017 and 22/2/2019 were issued by respondent No. 5 alleging non payment of Service tax on brokerage received towards service provided to foreign clients and non reversal CENVAT credit attributable to the exempted activity of trading of securities provided by petitioner and imposition of applicable interest and penalty thereto. As per the show cause notices, petitioner was given credit for Rs.1,49,59,950.00 that was paid in cash but respondent No. 5 did not allow appropriation of the amount of Rs.5,37,25,305.00 paid by reversal of credit. Certain other demands were also raised. Petitioner responded to the show cause notices following which respondent No. 4 the Principal Commissioner of CGST and Central Excise passed an order dtd. 29/3/2019. By the said order, a portion of the demand raised in the show cause notices was set aside but other portions were upheld. In the order passed by respondent No. 4, respondent No. 4 held that petitioner failed to furnish CENVAT credit register