Case Law Details
Elaf Tours and Travels Vs Union of India (Bombay High Court)
Conclusion: While considering a declaration seeking amnesty under the scheme; the approach should be to ensure that the scheme was successful and therefore a liberal view embedded with the principles of natural justice was called for. Thus, rejection of the declaration of assessee by the Designated Committee was not justified. Accordingly, the consequential relief was granted in terms of the scheme after giving an opportunity of hearing to assessee, who shall be informed about the date, time, and place of the hearing.
Held: Assessee carried on the business of Haj and Umrah tours/journeys to Saudi Arabia and had been facilitating Haj pilgrimage to Saudi Arabia since many years. Show cause cum demand notice was issued to assessee by the Deputy Commissioner of Central Goods and Service Tax (CGST) and Central Excise, Palghar alleging amongst others that assessee had failed to pay service tax amount of Rs.19,21,465.00 for the period from 2013-14 to 2017-18 (upto June, 2017). After the personal hearing assessee filed written submission. By the order in original, Adjudicating Authority confirmed the demand of service tax amounting to Rs.19,21,465.00 besides ordering payment of interest and imposition of penalty. In the meanwhile, Central Government introduced the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 to bring an end to pending litigations under the earlier indirect tax regime which now stood subsumed under the Goods and Services Tax (GST). The scheme was made effective from 1st September, 2019. To avail the benefits under the scheme assessee filed application (declaration) under section 125 in form SVLDRS-1 on 8th January, 2020 under the arrears category with further sub-category of appeal not filed or appeal having attained finality. However, assessee received an e-mail rejecting the declaration filed by assessee. The Court clarified that this was the broad picture that the officials should have in mind while considering a declaration seeking amnesty under the scheme; the approach should be to ensure that the scheme was successful and therefore a liberal view embedded with the principles of natural justice was called for. It was held that rejection of the declaration of assessee dated 8th January, 2020 by the Designated Committee on 14th February, 2020 was not justified. Accordingly the same was hereby set aside and quashed. Assessee was eligible to file declaration under the arrears category. Consequently, the matter was remanded back to the Designated Committee to consider the declaration of assessee on 8th January, 2020 as a valid declaration and thereafter grant consequential relief in terms of the scheme after giving an opportunity of hearing to the assessee, who should be informed about the date, time and place of hearing. Such decision should be in the form of a speaking order with due intimation to assessee.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. Heard Mr.S.M.Khan, learned counsel for the petitioners; and Mr.J.B.Mishra, learned counsel alongwith Mr.Sham Walve, learned counsel for the respondents.
2. By filing this petition under Article 226 of the Constitution of India petitioners seek quashing of order dated 14th February, 2020 passed by the respondents rejecting the application (declaration) filed by petitioner No.1 under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and further seeks a direction to the respondents to consider the said application (declaration) as a valid declaration and grant the reliefs to petitioner No.1 in terms of the aforesaid scheme.
3. Petitioner No.1 is stated to be an unregistered partnership firm comprising of petitioner Nos.2 to 4 as the partners. Petitioner No.1 carries on the business of Haj and Umrah tours/journeys to Saudi Arabia and has been facilitating Haj pilgrimage to Saudi Arabia since many years.
4. Show cause cum demand notice dated 5th April, 2019 was issued to petitioner No.1 by the Deputy Commissioner of Central Goods and Service Tax (CGST) and Central Excise, Palghar alleging amongst others that petitioner No.1 had failed to pay service tax amount of Rs.19,21,465.00 for the period from 2013-14 to 2017-18 (upto June, 2017).
5. The above show cause cum demand notice culminated in an order in original dated 9th August, 2019 passed by the Assistant Commissioner of CGST and Central Excise, Division-1, Palghar. It may be mentioned that personal hearing was granted to the petitioner on 9th May, 2019. After the personal hearing petitioner filed written submission on 16th May, 2019. By the order in original, the adjudicating authority confirmed the demand of service tax amounting to Rs.19,21,465.00 besides ordering payment of interest and imposition of penalty.
6. In the meanwhile, Central Government introduced the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (briefly “the scheme” hereinafter) as part of the Finance (No.2) Act, 2019 to bring an end to pending litigations under the earlier indirect tax regime which now stood subsumed under the Goods and Services Tax (GST). The scheme was made effective from 1st September, 2019.
7. To avail the benefits under the scheme petitioner filed application (declaration) under section 125 in form SVLDRS-1 on 8th January, 2020 under the arrears category with further sub-category of appeal not filed or appeal having attained finality. However, petitioner received an e-mail dated 14th February, 2020 from respondent No.2 rejecting the declaration filed by the petitioner.
8. Aggrieved, present writ petition has been filed seeking the reliefs as indicated above.
9. Respondents have filed affidavit. Stand taken in the affidavit is that petitioner’s application (declaration) was rightly rejected by the Designated Committee after following the due procedure of law. Petitioner was not eligible to avail the benefits under the scheme and therefore its declaration in form SVLDRS-1 could not have been accepted under section 125(1)(c) of Chapter-V of the Finance (No.2) Act, 2019 (briefly “the Act” hereinafter). Referring to the said provision it is stated that any person who has been issued a show cause notice under the indirect tax enactment and the final hearing had taken place on or before 30th June, 2019 would not be eligible to make a declaration under the scheme. In the case of petitioner No.1 final hearing pursuant to the show-cause notice was held on 9th May, 2019. Thus, petitioner No. 1 stood ineligible to file declaration under the arrears category. Therefore, rejection of the declaration of petitioner No.1 has been justified.
10. Khan, learned counsel for the petitioners has referred to section 121(c), section 123(e), section 124(1)(c) and section 125 of the Act and contends that declaration of petitioner No.1 under the arrears category with sub-categorization of appeal not filed or appeal having attained finality was fully maintainable. Therefore, the respondents were not justified in rejecting the said declaration. Learned counsel for the petitioners has also referred to circular dated 25th September,2019 of the Central Board of Indirect Taxes and Customs. In support of his contention learned counsel for the petitioners has referred to circular dated 12th December, 2019 of the Central Board of Indirect Taxes and Customs (Board) as well as question No.8 of frequently asked questions (FAQs) prepared by the department for clarifying various aspects of the scheme. His further submission is that impugned rejection is in violation of the principles of natural justice as no notice or hearing was given to the petitioners before rejection and therefore, is required to be set aside and quashed.
11. Per contra, Mr.Mishra, learned counsel for the respondents has referred to section 125(1)(c) of Chapter-V of the Act to contend that petitioner No.1 was not eligible to file declaration under the scheme and therefore declaration of petitioner No.1 was rightly rejected. No case for interference is made out.
12. Submissions made by learned counsel for the parties have received the due consideration of the court. Also perused the materials on record.
13. Though facts are not in dispute and lies within a narrow compass, yet for a proper perspective it would be apposite to briefly restate the facts.
14. In this case, show cause cum demand notice was issued to petitioner No.1 on 5th April, 2019 alleging nonpayment of service tax dues. Thereafter, personal hearing was granted to the petitioners on 9th May, 2019. Petitioners filed their written submissions on 16th May, 2019. Adjudicating authority ultimately passed the order in original on 9th August, 2019 confirming the service tax demand amounting to Rs.19,21,465.00 for the period from 2013-14 to 2017-18 (upto June, 2017), besides ordering payment of interest and penalty.
15. This being the admitted position on facts, let us now turn to the scheme. Chapter-V of the Act comprising sections 120 to 135 contains the scheme. Section 121 is the definitions section. As per section 121(c)(i), “amount in arrears” would mean the amount of duty which is recoverable as arrears of duty under the indirect tax enactment on account of no appeal having been filed by the declarant against an order or an order in appeal before expiry of the period of time for filing appeal.
16. Section 122 says that the scheme shall be applicable amongst others to Chapter V of the Finance Act, 1994 which deals with service tax.
17. Section 123 deals with tax dues for the purposes of the scheme. As per section 123(e), where an amount in arrears relating to declarant is due, the tax dues would mean the amount in arrears.
18. Relief available under the scheme is dealt with in section 124. As per section 124(1)(c)(i), where the tax dues are relatable to an amount in arrears and the amount of duty is Rs.50 lakhs or less than 60% of the tax dues would be the relief available to a declarant.
19. Section 125 deals with eligibility to make a declaration under the scheme but contains a negative list. Any person who is not included in the negative list shall be eligible to make a declaration under the scheme. Under section 125(1) (c) a person who had been issued a show cause notice under an indirect tax enactment and the final hearing had taken place on or before 30th June, 2019 would not be eligible to make a declaration under the scheme.
20. While section 126 deals with Designated Committee, section 127 provides for issue of statement by Designated Committee.
21. Sub-section (1) of section 127 says that where the amount estimated to be payable by the declarant, as estimated by the Designated Committee, equals the amount declared by the declarant, then the Designated Committee shall issue in electronic form a statement indicating the amount payable by the declarant within the period specified. As per sub-section (2) where the amount estimated by the Designated Committee to be payable by the declarant exceeds the amount declared by the declarant, the Designated Committee shall issue in electronic form an estimate of the amount payable by the declarant within the period specified. Sub-section (3) provides that after issue of the estimate under sub-section (2), the Designated Committee shall give an opportunity of being heard to the declarant before issuing the statement indicating the amount payable by the declarant.
22. From a conjoint reading of sub-sections (1), (2) and (3) of section 127, the picture that emerges is that if the amount estimated by the Designated Committee is equal to the amount declared by the declarant, then the Designated Committee shall issue a statement in electronic form indicating the amount payable by the declarant. However, if the amount estimated by the Designated Committee is higher than the amount declared by the declarant, the Designated Committee shall give an opportunity of hearing to the declarant before finally determining the amount payable by the declarant.
23. Central Government has framed the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019 (briefly “the Rules” hereinafter) which has since been amended. As per Rule-3, the declaration made under sub-section (1) of section 125 would be in form SVLDRS-1. Rule-6(3) says that the form issued by the Designated Committee under sub-section (2) of section 127 shall be in form SVLDRS-2 mentioning the estimated amount payable by the declarant alongwith a notice of opportunity for personal hearing. As per sub-rule (4), if the declarant waives personal hearing and indicates agreement or disagreement with the estimate made by the Designated Committee, he may file form SVLDRS-2A. Under Rule-6(2) when the amount estimated by the Designated Committee equals the amount declared by the declarant, Designated Committee shall issue form SVLDRS-3. Discharge certificate contemplated in section 129 shall be issued in form SVLDRS-4.
24. Stand taken by the respondents to justify rejection of the declaration of petitioner No.1 is that under section 125(1) (c) the final hearing in the case of petitioner No.1 who had been issued a show cause notice had taken place on 9th May, 2019 i.e. before 30th June, 2019. Therefore, petitioner No.1 was not eligible to make the declaration.
25. It is true that petitioner No.1 had filed the declaration under arrears category with sub-categorization of appeal not filed or appeal having attained finality.
26. When we talk about arrears or arrears category under the scheme, section 123 (e) has to be read together with section 121(c)(i). A conjoint reading of the two provisions would indicate that tax dues would mean the amount in arrears which in a given case like that of petitioner No.1 would be on account of no appeal having been filed by the declarant against an order or against an order in appeal before expiry of the period for filing appeal.
27. Reverting back to the facts of the present case we find that pursuant to the show cause notice though the final hearing had taken place on 9th May, 2019 before the cut off date of 30th June, 2019, the order in original was subsequently passed on 9th August, 2019. Against this order in original no appeal was filed by petitioner No.1 who filed the declaration under the arrears category on 8th January, 2020 by which time the limitation period for filing appeal against the order in original had expired.
28. We may refer to circular dated 25th May, 2019 of the Board more particularly to paragraph 2(vii) which clarifies a situation akin to the one faced by petitioner No.1. Paragraph No.2 (vii) reads as under:-
“Section 125(1)(a) excludes cases which are under appeal and where final hearing has taken place on or before 30th June, 2019 from the purview of the Scheme. Similar exclusion has been made applicable, mutatis mutandis, under section 125(1)(c) to cases under adjudication. It is clarified that such cases, however, may still fall under the arrears category once the appellate or adjudication order, as the case may be, is passed and has attained finality or appeal period is over, and other requirements under the Scheme are fulfilled.”
29. Referring to section 125(1)(c) it was clarified by the Board that such cases may still fall under the arrears category once the appellate or adjudication order, as the case may be, is passed and has attained finality or appeal period is over and other requirements under the scheme are fulfilled.
30. This position is reiterated by the Board in the subsequent circular dated 12th December, 2019 where in paragraph No.2(viii) it has been held as under:-
“There may be cases where the show cause notice were issued on or after 01.07.2019 and such cases are also not covered under any of the categories such as an enquiry or investigation or audit and tax dues having not been quantified on or before 30.06.2019. However, such cases become eligible under ‘arrears’ category depending upon the fulfillment of other conditions such as appeal period being over or appeal having attained finality or the person giving an undertaking that he will not file any further appeal in the matter (Member’s D.O. letter F.No.267/78/19/CX8 dated 30th October, 2019). Since the main objective behind the Scheme is to liquidate the legacy cases under Central Excise and Service Tax, it would be desirable that the taxpayer in the above mentioned cases are also given an opportunity to avail its benefits. Therefore, the field formations were asked to take stock of such cases, and complete the on-going adjudication proceedings expeditiously following the due process. Further, it would also be desirable that the process of review is also carried out expeditiously in such cases so that the designated committees are able to determine the tax dues within the time stipulated under the Scheme.”
31. Thus the Board clarified that since the main objective behind the scheme is to liquidate the legacy cases under central excise and service tax, it would be desirable that the tax payer is given an opportunity to avail its benefit.
32. Question No.8 of the frequently asked questions FAQs prepared by the department pertaining to the scheme is quite instructive. Question No.8 reads as under :-
“Q.8 I have been issued a SCN and the final hearing has taken place on or before 30.06.2019. Am I eligible for the Scheme?”
33. Answer given to the above question is as under :-
“Ans. You are not eligible to make a declaration under the Litigation category. However, once the order is passed you can file a declaration under the Arrears category provided the appeal period is over or you give an undertaking to the department that you will not file any appeal in the matter. The will also be subject to the completion of due process of review of the order by the department.”
34. As per the answer given above by the department itself, in a case where show cause notice was issued and final hearing had taken place on or before 30th June, 2019, the declarant would not be eligible to make a declaration under the litigation category but once the order is passed the declarant can file a declaration under the arrears category provided no appeal against the order is filed or the appeal period is over.
35. In our view the above clarification of the department itself clinches the issue.
36. However, there is one more aspect to the matter which we would like to highlight. The rejection order is devoid of any reason and was not preceded by any notice or hearing. In this connection we may advert to what we have held in Thought Blurb Vs. Union of India, decided on 27th October, 2020, which we extract hereunder:-
“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.”
37. In Thought Blurb (supra), we had extensively quoted the speech of the Hon’ble Finance Minister, Government of India while proposing the scheme, statement of object and reasons with respect to the scheme and the circular of the Board dated 27th August, 2019. Thereafter, we had highlighted the twin objectives of the scheme i.e. liquidation of legacy disputes pertaining to central excise and service tax on the one hand and disclosure of unpaid taxes on the other hand. We also highlighted that the primary focus of the scheme is to unlock the baggage of pending litigations from the pre-GST regime so that business can move on and the administrative machinery can also fully focus in the smooth implementation of GST. This is the broad picture which the officials should have in mind while considering a declaration seeking amnesty under the scheme; the approach should be to ensure that the scheme is successful and therefore a liberal view embedded with the principles of natural justice is called for. We reproduce below the relevant paragraphs:
“52. We have one more reason to take such a view. As has rightly been declared by the Hon’ble Finance Minister and what is clearly deducible from the statement of object and reasons, the scheme is a one time measure for liquidation of past disputes of central excise and service tax as well as to ensure disclosure of unpaid taxes by a person eligible to make a declaration. The basic thrust of the scheme is to unload the baggage of pending litigations centering around service tax and excise duty. Therefore the focus is to unload this baggage of pre-GST regime and allow business to move ahead. We are thus in complete agreement with the views expressed by the Delhi High Court in Vaishali Sharma Vs. Union of India, MANU/DE/1529/2020 that a liberal interpretation has to be given to the scheme as its intent is to unload the baggage relating to legacy disputes under central excise and service tax and to allow the business to make a fresh beginning.
53. * * * * * * * * * *
54. As discussed above, though the scheme has the twin objectives of liquidation of past disputes pertaining to central excise and service tax on the one hand and disclosure of unpaid taxes on the other hand, the primary focus as succinctly put across by the Hon’ble Finance Minister in her budget speech is to unload the baggage of pending litigations in respect of service tax and central excise from pre-GST regime so that the business can move on. This was also the view expressed by the Board in the circular dated 27th August, 2019 wherein all the officers and staff working under the Board were called upon to partner with trade and industry to make the scheme a grand success which in turn will enable the administrative machinery to fully focus in the smooth implementation of GST. This is the broad picture which the officials must have in mind while considering an application (declaration) seeking amnesty under the scheme. The approach should be to ensure that the scheme is successful and therefore, a liberal view embedded with the principles of natural justice is called for.”
38. Thus, having regard to the discussions made above, we hold that rejection of the declaration of the petitioner dated 8th January, 2020 by the Designated Committee on 14th February, 2020 is not justified. Accordingly the same is hereby set aside and quashed. We further hold that petitioner No.1 is eligible to file declaration under the arrears category. Consequently, the matter is remanded back to the Designated Committee to consider the declaration of petitioner No.1 dated 8th January, 2020 as a valid declaration and thereafter grant consequential relief in terms of the scheme after giving an opportunity of hearing to the petitioners, who shall be informed about the date, time and place of hearing. Such decision shall be in the form of a speaking order with due intimation to the petitioner.
39. Writ petition is allowed as above. However, there shall be no order as to costs.
40. This order will be digitally signed by the Private Secretary/Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.
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