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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, Amit Mahajan, JJ.
Hans Uttam Finance Limited – Appellant
Versus
Principal Commissioner of Central Excise, Goods And Service Tax, Delhi South Commissionerate – Respondent
W.P.(C) 4691 of 2021 & CM APPL. 14460 of 2021
Decided On : 15-05-2023
Sabka Vishwas - Legacy Dispute Resolution - Finance Act, 1994 - Section 73(1), Section 75, Section 76, Section 77, Section 78(1) - Section 120 to 135 of the Finance Act (No.2), 2019 - The court addressed the controversy of whether the amount of service tax payable by the petitioner was quantified before the stipulated date of 30.06.2019 under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The court interpreted the Scheme and relevant sections of the Finance Act, 1994 to determine the eligibility of the petitioner to avail the benefits of the Scheme. The court emphasized the wide definition of 'tax dues' and the legislative intent to maximize the sweep of the Scheme, covering all situations where tax was payable except those cases expressly excluded. The court also highlighted the definition of 'quantified' and the requirement for a written communication of the amount of duty payable under the indirect tax enactment. The court referred to circulars issued by the Central Board of Indirect Taxes and Customs (CBIC) to explain the provisions of the Scheme and clarified that tax dues would be quantified where the duty amount is known to both the Department and the taxpayer in the form of a written communication. The court emphasized that 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 the Scheme, provided that the said dues are not disputed by the Department and that the Department is proceeding on the basis of such quantification. The court also referred to relevant case law to support its interpretation of the Scheme and the relevant legal provisions.
Fact of the Case:
The petitioner, engaged in various services, sought to avail the benefit of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) by declaring an amount payable as service tax. However, the benefit was denied due to failure to pay the balance amount within the stipulated period. Subsequently, an investigation was conducted, and the petitioner provided details and made payments towards the outstanding service tax. The petitioner also filed a declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, which was rejected on the ground that the investigation had not been concluded and the demand had not been estimated or concluded before the stipulated date. The petitioner challenged this rejection.
Finding of the Court:
The court found that the tax dues had been quantified as required under the Scheme, and the rejection of the petitioner's declaration was unsustainable. The court emphasized that 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. The court directed the respondents to process the petitioner's declaration in accordance with the Scheme and set aside the impugned notice issued to the petitioner.
Issues: The principal controversy addressed in the present petition was whether the amount of service tax payable by the petitioner was quantified before the stipulated date of 30.06.2019 under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
Ratio Decidendi: The court interpreted the Scheme and relevant sections of the Finance Act, 1994 to determine the eligibility of the petitioner to avail the benefits of the Scheme. The court emphasized the wide definition of 'tax dues' and the legislative intent to maximize the sweep of the Scheme, covering all situations where tax was payable except those cases expressly excluded. The court also highlighted the definition of 'quantified' and the requirement for a written communication of the amount of duty payable under the indirect tax enactment. The court referred to circulars issued by the Central Board of Indirect Taxes and Customs (CBIC) to explain the provisions of the Scheme and clarified that tax dues would be quantified where the duty amount is known to both the Department and the taxpayer in the form of a written communication. The court emphasized that 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 the Scheme, provided that the said dues are not disputed by the Department and that the Department is proceeding on the basis of such quantification.
Final Decision: The petition was allowed, and the respondents were directed to process the petitioner's declaration in accordance with the Scheme. The impugned notice issued to the petitioner was also set aside.
JUDGMENT
Vibhu Bakhru, J. The petitioner has filed the present petition impugning an order dated 02.03.2020 (hereafter `the impugned order'), whereby its declaration dated 26.12.2019 under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (hereafter `the Scheme') was rejected. The petitioner also impugns a demand-cum-show cause notice dated 30.12.2020 (hereafter `the impugned notice') issued by the Principal Commissioner of Central Excise, Goods & Service Tax (respondent no.2) under Section 73(1) of the Finance Act, 1994 (hereafter `the Act').
2. By the impugned notice, the petitioner was called upon to show cause as to why: (i) service tax amounting to Rs.3,75,957/-, which was payable for the period of 2014-15 to 2017-18 (upto 30.06.2017) under the proviso to Section 73(1) of the Act should not be recovered by appropriating the said amount from the amounts paid by the petitioner on 10.04.2017 and 06.02.2019; (ii) interest amounting to Rs.34,87,497/- on delayed payment of service tax for the period of 2007-08 to 2016-17 not be recovered under the provisions of Section 75 of the Act; (iii) penalty under Section 76 of the Act not be levied; (iv) penalty under Section 77 of the Act along with cess not be imposed for contravention of various provisions of the Act and for not filing the service tax returns for the relevant period; and (v) penalty under Section 78(1) of the Act not be imposed for willful suppression of facts and contravention of various statutory provisions with an intent to evade payment of service tax.
3. It is the petitioner's case that it is entitled to the benefit of the Scheme since it had made a declaration under Section 125 of the Finance Act (No.2), 2019 (declaration as contemplated under the Scheme).
4. According to the respondents, the petitioner is not entitled to the benefit of the Scheme as at the material time, the investigation concerning the petitioner was 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 Rs.36,47,132/- payable as service tax under the VCES. The petitioner also paid a sum of Rs.18,50,000/- prior to 31.12.2013. It was required to pay the balance amount on or before 30.06.2014. However, the petitioner failed to pay the said amount within the stipulated period. It claims that it was facing a financial crisis and therefore, was unable to make the said payment. Consequently, the concerned authority rejected the petitioner's declaration under the VCES by a letter dated 22.09.2015.
9. On 10.12.2015, the Anti Invasion Branch of the erstwhile Service Tax Delhi-I Commissionerate conducted a search of the petitioner's premises. The petitioner states that during the search, a director of the petitioner admitted to the tax dues amounting to Rs.36,47,132/- and stated that the outstanding service tax for the period up to November, 2015 was around Rs.30,00,000/-.
10. By a letter dated 05.01.2016, respondent no.2 asked the petit
The main legal point established in the judgment is that the tax dues under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 can be considered quantified based on an admission of the liabil....
The admission of duty liability before the cut-off date constituted quantification under the Sabka Vishwas Scheme, making the declaration valid.
Eligibility under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 is contingent upon the quantification of duty demand on or before the 30th day of June, 2019, and the admission of tax lia....
The admission and quantification of tax liability by the declarant before the cut-off date of 30.06.2019 makes them eligible to file a declaration under the Sabka Vishwas Scheme, 2019.
The court emphasized that tax dues as quantified in any communication from the taxpayer would qualify as 'tax dues' if there is no dispute regarding the same, and that the Scheme covers cases where i....
The admission of tax liability by the declarant before the cut-off date is crucial for eligibility under the Sabka Vishwas Scheme. Written communication of the amount of duty payable and the opportun....
Taxpayers are ineligible for relief under the SVLDRS unless the duty amount has been quantified by the department, rather than the taxpayer unilaterally.
The court established that quantification of tax dues before the cut-off date is sufficient for eligibility under the Sabka Vishwas Scheme, necessitating a liberal interpretation of the scheme's prov....
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