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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Bhargav D. Karia, Niral R. Mehta, JJ.
Ahura Mazda Manufacturing Co.Pvt.Ltd. – Petitioner
Versus
Union Of India & Ors. – Respondents
R/Special Civil Application No. 11604 of 2020 With R/Special Civil Application No. 11043 of 2023
Decided On : 12-08-2024
Taxation - Service Tax - Finance Act, 2019 - Sections 121, 123, 125, 126, 127, 54, 73 - The court analyzed the eligibility criteria under the SVLDRS and the appropriateness of refund adjustments, emphasizing the need for quantification of dues and adherence to procedural fairness.
Fact of the Case:
The petitioner, a steel furniture manufacturer, challenged the rejection of applications under the SVLDRS for unpaid service tax and the adjustment of a refund claim against outstanding dues determined by an audit.
Finding of the Court:
The court found that the petitioner was ineligible for the SVLDRS due to pending audit quantification and that the adjustment of the refund without a show-cause notice violated principles of natural justice.
Issues: 1. Whether the petitioner is eligible to declare under SVLDRS? 2. Whether the appropriation of the refund claim was justified?
Ratio Decidendi: The court held that the petitioner was ineligible for SVLDRS as the audit was pending before the cutoff date, and the adjustment of the refund was improper without a proper adjudication process.
Result: The court quashed the orders rejecting the refund claim and remanded the matter for fresh adjudication.
JUDGMENT :
BHARGAV D. KARIA, J.
1. Heard learned advocate Mr.Prasannan Namboodiri with learned advocate Mr.Jainish Shah for the petitioner and learned advocate Mr.P.Y.Divyeshvar for the respondent nos.2 and 4.
2. Rule returnable forthwith. Learned advocate Mr.P.Y.Divyeshvar waives service of notice of rule on behalf of respondent nos.2 and 3.
3. By these petitions under Article 227 of the Constitution of India, the petitioner has challenged the following orders as under:
4. The brief facts of the case are as under:
4.1. The petitioner is a manufacturer of steel furniture and was liable for payment of excise duty as well as service tax on the services received under the reverse charge mechanism.
4.2. The petitioner was liable to pay service tax on monthly basis and was also required to be declared in periodical half yearly returns i.e. ST-3 returns.
4.3. The petitioner filed ST-3 returns for the period from April 2015 to June 2017, however the petitioner did not discharge the service tax liability either in full or in part. It is the case of the petitioner that after filing the returns, the petitioner voluntarily discharged some tax liability through various challans.
4.4. The Subka Vishvas (Legacy Dispute Resolution) Scheme (SVLDRS) came into effect from 01.07.2019 by the Finance Act No.02 of 2019 with a legislative intention to reduce the litigation of Pre-GST regime under the Excise Act and Service Tax Act and other allied indirect taxes. As per the SVLDRS, the assessee is required to ascertain the outstanding tax arrears/tax dues as per the Scheme as on 30.06.2019 and file application in Form SVLDRS-1 before the Designated Authority under the Scheme.
4.5. In the case of the petitioner an audit was carried out for the period from January 2015 to June 2017 by the Officers of the Central Excise/ Service Tax Audit department of Surat Commissionerate during the month of May 2019 and June 2019 and Final Audit Report in EA-2000 was issued on 21.08.2019 determining the service tax liability payable by the petitioner under the reverse charges mechanism in the respect of each service.
4.6. The petitioner by letter dated 19.07.2019 in reply to the initial observation raised by the Audit Group 63, Circle-11 during the course of EA-2000 audit informed to the respondent Assistant Commissioner Circle 9, Vapi that the petitioner would pay voluntarily the outstanding dues to be determined +by audit group, however in view of the SVLDRS, if the petitioners are eligible under the Scheme the petitioner would avail the benefit of the same.
4.7. After the Scheme came into the force vide notification dated 21.08.2019, the petitioner initially filed 13 declarations in form SVLDRS-1 on 23.11.2019 and on rejection of the same again filed another 28 declarations in form SVLDRS-1 on 31.12.2019. On rejection of the 28 declarations, the petitioner for the third time filed 27 online applications/ declaration in Form SVLDRS-1 on 15.01.2020 declaring a total service tax liability of Rs.34,42,240/- as 'arrears of tax' as per the ST-3 returns for the period from April 2015 to June 2015, which were shown as service tax liability by the petitioner but not paid till 30.06.2019.
4.8. The respondent no.3-Designated Committee rejected 27 declarations in Form SVLDRS-1 filed by the petitioner with remark for rejection in the said application declaration form as under:
The eligibility for SVLDRS requires that no audit quantification occurs before the cutoff date, and adjustments of refunds must follow due process.
Eligibility for the benefits of the SVLDRS Scheme is confirmed when service tax liability is quantified and admitted prior to the cut-off date, regardless of ongoing investigations.
The main legal point established in the judgment is that a declarant under the SVLDR Scheme can file a declaration under the 'arrears' category if the assessment order has already determined the tax ....
The court established that pre-deposits should be deducted only after calculating the relief under the SVLDRS, ensuring accurate determination of tax dues.
The main legal point established is that under the SVLDR Scheme, cases with finality in duty/tax dues as on the 'cut off date' are classified under the 'arrears' category, and voluntary withdrawal of....
The rejection of an application under the SVLDR Scheme without affording an opportunity to be heard violates the principles of natural justice and offends Article 14 of the Constitution of India. The....
The quantification of the amount had to be before 30th June, 2019, and the benefit of the SVLDRS scheme would be available only when the department quantifies the amount during investigation.
A person under investigation is ineligible for voluntary disclosure under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 as per Section 125(1)(f).
Taxpayers are ineligible for relief under the SVLDRS unless the duty amount has been quantified by the department, rather than the taxpayer unilaterally.
The main legal point established in the judgment is that the admission of tax dues by the petitioner and eligibility to avail benefits under the SVLDRS were in line with the legal provisions and obje....
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