Case Law Details
Bhoomi Developers Vs Union Of India & Ors. (High Court Bombay)
Issue raised in the present writ petition i.e. eligibility of the petitioner or maintainability of its declaration to avail the benefits of the scheme under the category of investigation, enquiry or audit on the ground that amount of the service tax dues of the petitioner for the related period was not quantified on or before 30th June, 2019 is no longer res-integra.
All that would be required for being eligible under the above category is a written communication which will mean a written communication of the amount of duty payable including a letter intimating duty demand or duty liability admitted by the person concerned during enquiry, investigation or audit.
In so far the present case is concerned, if we look at Exh.C letter dated 24.06.2019, we find that there is a clear acknowledgment by the petitioner that the total outstanding service tax dues was 20,88,947.00 which admission is prior to the cut off date of 30.06.2019. That being the position, it cannot be said that service tax dues were not quantified on or before 30.06.2019 (quantification as per the scheme).
That apart, in Thought Blurb (supra) we have held that when there is a provision for granting personal hearing in a case where the declarant disputes the estimated amount, it would be in complete defiance of logic and contrary to the very object of the scheme to reject a declaration on the ground of being ineligible without giving a chance to the declarant to explain as to why its declaration should be accepted and relief under the scheme be extended to him.
Thus, on a thorough consideration of the matter, we set aside the order dated 15.02.2020 and remand the matter back to respondent 3, 4 and 5 to consider the declaration of the petitioner dated 30.12.2019 in terms of the scheme as a valid declaration under the category of investigation, enquiry and audit and thereafter grant the consequential relief(s) to the petitioner. While doing so, respondents shall provide an opportunity of hearing to the petitioner and thereafter pass a speaking order with due intimation to the petitioner. The above exercise shall be carried out within a period of six weeks from the date of receipt of a copy of this order.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Heard Ms. Dipali Kamble, learned counsel for the petitioner and Mr. Sham Walve along with Ms. Sangeeta Yadav, learned counsel for the respondents.
2. By filing this petition under Article 226 of the Constitution of India, petitioner seeks quashing of the decision of the respondents dated 02.2020 rejecting the declaration of the petitioner dated 30.12.2019 filed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (briefly “the scheme” hereinafter) and further seeks a direction to the respondents to consider afresh the said declaration and thereafter grant the reliefs to the petitioner.
3. Case of the petitioner is that it is a partnership firm engaged in the business of providing construction services and works contract to customers. Being a service provider it was registered as such under the Finance Act, 1994.
4. Respondent No.3 had initiated enquiry against the petitioner for alleged short payment of service tax for the period from April 2014 to March 2017. In this connection, petitioner received letters from the respondents. Responding to such letters, petitioner wrote letter dated 24.06.2019 to the Superintendent, Central Excise and Goods and Services Tax (GST), Palghar stating that out of the total liability of Rs.20,88,947.00 towards service tax dues, it had already made payment of Rs.18,21,95 8.00, further stating that the remaining dues would be paid as early as possible.
5. In the meanwhile, Central Government introduced the scheme through the Finance (No.2) Act, 2019 to bring to an end pending litigations pertaining to central excise and services tax under the erstwhile indirect tax regime which stood subsumed under GST.
6. To avail the benefit under the scheme, petitioner filed declaration on 30.12.2019 under the category of “investigation, enquiry or audit” with sub-categorization of “investigation by commissionerate”. Amount of service tax dues was mentioned as Rs.20,88,947.00. Petitioner also disclosed pre-deposit of Rs.18,21,95 8.00. According to the petitioner, tax dues payable by it after availing the tax relief under the scheme would be nil.
7. On 15.02.2020 petitioner found that respondents had rejected petitioner’s declaration on the ground of ineligibility with the remark “amount not quantified”.
8. Aggrieved, present writ petition has been filed seeking the reliefs as indicated above.
9. Respondent Nos.3 and 5 have filed a common reply affidavit. Stand taken is that investigation into the allegation of short payment of service tax by the petitioner was going on and the amount of duty involved had not been quantified on or before 30.06.2019. Reference has been made to section 125(1)(e) of the Finance (No.2) Act, 2019 to contend that a person who has been subjected to an enquiry or investigation or audit and the amount of duty involved in the said enquiry or investigation or audit had not been quantified on or before 30.06.2019 would not be eligible to make the declaration under the said category. Therefore, the action of the designated committee in rejecting the declaration of the petitioner has been justified on the ground that investigation is pending and the amount of service tax payable had not been quantified on or before 30.06 .2019.
10. While learned counsel for the petitioner has referred to Exh.C letter dated 24.06.2019 whereby petitioner had admitted total liability of service tax at Rs.20,88,947.00 and thus being eligible to file the declaration under the category of enquiry, investigation or audit, Mr. Sham Walve, learned counsel for the respondents however submits that there was no quantification of dues on or before 30.06.2019 rendering the petitioner ineligible to file declaration under section 125(1)(e) of the Finance (No.2) Act, 2019.
11. Submissions made by learned counsel for the parties have been duly considered.
12. Issue raised in the present writ petition i.e. eligibility of the petitioner or maintainability of its declaration to avail the benefits of the scheme under the category of investigation, enquiry or audit on the ground that amount of the service tax dues of the petitioner for the related period was not quantified on or before 30th June, 2019 is no longer res-integra. In Thought Blurb Vs. Union of India, 2020-TIOL-1813-HC-MUM-ST, this court faced with a similar issue referred to the circular dated 27th August, 2019 of the Central Board of Indirect Taxes and Customs (briefly “the Board” hereinafter) whereafter it was held as under :-
“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 :-
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 scheme. Section 2(r) defines “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.
48. Thus as per the above clarification, written communication in terms of section 121(r) will include a letter intimating duty demand or duty liability admitted by the person during enquiry, investigation or audit etc. This has been also explained in the form of frequently asked questions (FAQs) prepared by the department on 24th December, 2019.
49. Reverting back to the facts of the present case, we find that on the one hand there is a letter of respondent No.3 to the petitioner quantifying the service tax liability for the period 1 st April, 2016 to 31st March, 2017 at Rs.47,44,93 7.00 which quantification is before the cut off date of 30th June, 2019 and on the other hand for the second period e. from 1st April, 2017 to 30th June, 2017 there is a letter dated 18th June, 2019 of the petitioner addressed to respondent No.3 admitting service tax liability for an amount of Rs.10,74,011.00 which again is before the cut off date of 30th June, 2019. Thus, petitioner’s tax dues were quantified on or before 30th June, 2019.
50. In that view of the matter, we have no hesitation to hold that petitioner was eligible to file the application (declaration) as per the scheme under the category of enquiry or investigation or audit whose tax dues stood quantified on or before 30th June, 2019.”
14. Subsequently, in M/s G.R. Palle Electricals Vs. Union of India, 2020-TIOL-2031 -HC-MUM-ST, this court held as follows:-
“27. We have already noticed that proprietor of the petitioner in his statement recorded on 11.01 .2018 by the investigating authority admitted the service tax liability of Rs.60 lakhs (approximately) to be outstanding for the period from 2015-2016 to June, 2017. This was corroborated by the departmental authority in the letter dated 24.01.2018 which we have already noted and discussed. Therefore, present is a case where there is acknowledgment by the petitioner of the duty liability as well as by the department in its communication to the petitioner. Thus, it can be said that in the case of the petitioner the amount of duty involved had been quantified on or before 30.06.2019. In such circumstances, rejection of the application (declaration) of the petitioner on the ground of being ineligible with the remark that investigation was still going on and the duty amount was pending for quantification would not be justified.
28. This position has also been explained by the department itself in the form of frequently asked questions (FAQs). Question Nos.3 and 45 and the answers provided thereto are relevant and those are reproduced hereunder :-
“Q3. If an enquiry or investigation or audit has started but the tax dues have not been quantified whether the person is eligible to opt for the Scheme?
Ans. No. If an audit, enquiry or investigation has started, and the amount of duty/duty payable has not been quantified on or before 30th June, 2019, the person shall not be eligible to opt for the Scheme under the enquiry or investigation or audit category. ‘Quantified’ means a written communication of the amount of duty payable under the indirect tax enactment [Section 121(r)]. 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. [Para 10(g) of Circular No 1071/4/2019- CX dated 27th August, 2019].”
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“Q45.With respect to cases under enquiry, investigation or audit what is meant by ‘written communication’ quantifying demand ?
Ans. Written communication will include a letter intimating duty/tax demand or duty/tax liability admitted by the person during enquiry, investigation or audit or audit report etc.”
15. Finally in Saksham Facility Private Limited Vs. Union of India, 2020-TIOL-2108-HC-MUM-ST, where a similar issue had cropped up, this court reiterated the above position and held as under :-
“22.3. Clause (g) of paragraph 10 makes it abundantly clear that cases under an enquiry, investigation or audit where the duty demand had been quantified on or before 30.06.2019 would be eligible under the scheme. The word “quantified” has been defined under the scheme as a written communication of the amount of duty payable under the indirect tax enactment. In such circumstances, Board clarified that such written communication would include a letter intimating duty demand or duty liability admitted by the person during enquiry, investigation or audit etc.
23. Reverting back to the facts of the present case we find that there is clear admission / acknowledgment by the petitioner about the service tax liability. The acknowledgment is dated 27.06.2019 i.e., before 30.06.2019 both in the form of letter by the petitioner as well as statement of its Director, Shri. Sanjay R. Shirke. In fact, on a pointed query by the Senior Intelligence Officer as to whether petitioner accepted and admitted the revised service tax liability of Rs.2,47,32,456.00, the Director in his statement had clearly admitted and accepted the said amount as the service tax liability for the period from 2015-16 upto June, 2017 with further clarification that an amount of Rs.1,20,60,000.00 was already paid.
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26. Following the above it is evident that the word ‘quantified’ under the scheme would mean a written communication of the amount of duty payable which will include a letter intimating duty demand or duty liability admitted by the person concerned during enquiry, investigation or audit or audit report and not necessarily the amount crystalized following adjudication. Thus, petitioner was eligible to file the declaration in terms of the scheme under the category of enquiry or investigation or audit as its service tax dues stood quantified before 30.06.2019.”
16. From the above it is evident that all that would be required for being eligible under the above category is a written communication which will mean a written communication of the amount of duty payable including a letter intimating duty demand or duty liability admitted by the person concerned during enquiry, investigation or audit.
17. In so far the present case is concerned, if we look at Exh.C letter dated 24.06.2019, we find that there is a clear acknowledgment by the petitioner that the total outstanding service tax dues was 20,88,947.00 which admission is prior to the cut off date of 30.06.2019. That being the position, it cannot be said that service tax dues were not quantified on or before 30.06.2019 (quantification as per the scheme).
18. That apart, in Thought Blurb (supra) we have held that when there is a provision for granting personal hearing in a case where the declarant disputes the estimated amount, it would be in complete defiance of logic and contrary to the very object of the scheme to reject a declaration on the ground of being ineligible without giving a chance to the declarant to explain as to why its declaration should be accepted and relief under the scheme be extended to him. It was held as under :-
“51. We have already discussed that under sub sections (2) and (3) of section 127 in a case where the amount estimated by the Designated Committee exceeds the amount declared by the declarant, then an intimation has to be given to the declarant in the specified form about the estimate determined by the Designated Committee which is required to be paid by the declarant. However, before insisting on payment of the excess amount or the higher amount the Designated Committee is required to give an opportunity of hearing to the declarant. In a situation when the amount estimated by the Designated Committee is in excess of the amount declared by the declarant an opportunity of hearing is required to be given by the Designated Committee to the declarant, then it would be in complete defiance of logic and contrary to the very object of the scheme to outrightly reject 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.”
19. Thus, on a thorough consideration of the matter, we set aside the order dated 15.02.2020 and remand the matter back to respondent 3, 4 and 5 to consider the declaration of the petitioner dated 30.12.2019 in terms of the scheme as a valid declaration under the category of investigation, enquiry and audit and thereafter grant the consequential relief(s) to the petitioner. While doing so, respondents shall provide an opportunity of hearing to the petitioner and thereafter pass a speaking order with due intimation to the petitioner. The above exercise shall be carried out within a period of six weeks from the date of receipt of a copy of this order.
20.Writ petition is accordingly allowed. However, there shall be no order as to cost.
