Case Law Details
Vassu Enterprises Vs Union of India (Jharkhand High Court)
Held that action of Designated Committee by first deducting the amount of deposit made by petitioners during enquiry, investigation or audit and, thereafter, extending relief to the petitioners by computing the amount of tax due on the outstanding amount, is not as per the mandate of the Scheme.
Facts-
Petitioner applied under SABKA VISHWAS (LEGACY DISPUTE RESOLUTION) SCHEME, 2019 in terms of Section 124(1)(a)(ii) (Litigation Category) on the ground that as on 30th June, 2019, show cause notice issued against the petitioner was pending adjudication. Declaration was filed by petitioner in statutory Form SVLDRS-1 in category-Litigation on 31.10.2019. However, petitioner was issued show cause notice in Form SVLDRS-2 by the Designated Committee under the Scheme, wherein petitioner was, in substance, directed to show cause as to why its declaration be not treated under category ‘Arrears’ and, accordingly, relief be not extended to the petitioner in terms of Section 124(1) (c) as opposed to the claim of relief of the petitioner u/s 124(1) (a) of the Scheme.
Conclusion-
Hon’ble Bombay High Court, in the case of Eureka Fabricators Pvt. Ltd., while interpreting the provisions of Section 124(2) of the Scheme, has clearly held that deposit towards duty paid during investigation is required to be appropriated and deducted from the tax dues after grant of relief under section 124 of the Scheme.
Even from a plain reading of Section 124(2), it would be evident that the amount of deposit made during enquiry, investigation or audit is required to be deducted after extending relief under section 124(1) of the Scheme and at the time of issuing statement indicating the amount payable by a declarant.
Even otherwise, the intent of legislature cannot be in such a way that an assesse who pays some amount either suo motu prior to demand or after demand put in worse condition than an assesse who does not pay any amount after demand and avail the benefit of the scheme.
We, accordingly, hold and declare that action of Designated Committee by first deducting the amount of deposit made by petitioners during enquiry, investigation or audit and, thereafter, extending relief to the petitioners by computing the amount of tax due on the outstanding amount, is not as per the mandate of the Scheme.
FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT
Since identical issues for determination is involved in both
these writ petitions as such both are heard together and being disposed of by this common Judgment.
2. In the writ petitions, following issues arise for adjudication:-
(i) Whether amount paid as pre-deposit and/or deposit during enquiry, investigation or audit is required to be deducted after extending the relief available to a declarant u/s 124 of SABKA VISHWAS (LEGACY DISPUTE RESOLUTION) SCHEME, 2019 (for short ‘Scheme’) , or the said amount of pre-deposit/deposit is first required to be adjusted while determining the amount of ‘tax dues’ u/s 123 of the Scheme and, thereafter, relief u/s 124 of the Scheme is to be extended to a declarant ?
(ii) Whether clause 2(iv) of Circular No. 1072/05/2019/CX dated 25.09.2019 has an effect of altering the definition of ‘tax dues’ as defined u/s 123 of the Scheme, to the extent said Circular provides that the amount of pre-deposit/deposit made by a declarant is to be first adjusted against the ‘tax dues’ of the declarant and, thereafter, benefit of relief as provided u/s 124 of the Scheme is to be extended to a declarant?
3. The brief facts of the case in [W.P.(T) No. 1405 of 2020)] is that the petitioner is a Proprietorship Firm and is engaged in the business of providing services of Cargo Handling and Supply of Tangible goods taxable under the Finance Act, 1994. On allegation of improper discharge of service tax liability, Directorate General of Central Excise Intelligence, Regional Unit, Jamshedpur (in short ‘DGCEI’) initiated enquiry/investigation against the petitioner and, during the process of such enquiry, an amount of Rs. 2,45,24,953/- was deposited by petitioner and/or recovered by the Department by issuing garnishee notices to its customers. A show cause notice dated 25th July, 2018 was issued asking the petitioner to show cause as to why service tax amounting to Rs. 4,69,12,227/- be not demanded from the petitioner under the Proviso to Section 73(1) of the Finance Act, 1994 along with interest, penalty, late fee. Further, in the show-cause notice, petitioner was directed to show cause as to why the amount paid by petitioner during investigation and/or recovered u/s 87 of the Finance Act, 1994 be not appropriated against the service tax demanded from the petitioner.
4. Petitioner appeared pursuant to issuance of the show cause notice and submitted its reply and, thereafter, an Order-in-Original No. 07/S.Tax/Commr./2019 dated 11.07.2019 was passed by Respondent No.3, wherein a demand of Rs. 4,69,12,227/- towards service tax for the period January, 2013 to March, 2016 was raised against the petitioner and, further, penalty of equivalent amount u/s 78 of the Finance Act, 1994 was also imposed upon the petitioner. Further, penalty of Rs. 10,000/- u/s 77(2) of the Finance Act and Late Fee of Rs. 1,19,400/- was also ordered to be recovered from the petitioner.
5. The Parliament, in the meantime, vide Chapter V of the Finance Act, 2019 dated 1st August, 2019, incorporated therein provisions of SABKA VISHWAS (LEGACY DISPUTE RESOLUTION) SCHEME, 2019 (in short Scheme), which was notified vide Notification dated 21st August, 2019 with effect from 1st September, 2019. Pursuant to the Notification of the said Scheme, petitioner applied in terms of Section 124(1)(a)(ii) (Litigation Category) on the ground that as on 30th June, 2019, show cause notice issued against the petitioner was pending adjudication. Declaration was filed by petitioner in statutory Form SVLDRS-1 in category-Litigation on 31.10.2019. However, petitioner was issued show cause notice in Form SVLDRS-2 by the Designated Committee under the Scheme, wherein petitioner was, in substance, directed to show cause as to why its declaration be not treated under category ‘Arrears’ and, accordingly, relief be not extended to the petitioner in terms of Section 124(1) (c) as opposed to the claim of relief of the petitioner u/s 124(1) (a) of the Scheme. Petitioner submitted its reply in Form SVLDRS-2A and contended that its declaration should be treated under ‘Litigation Category’ on the ground that as on 30th June, 2019, show cause notice of the petitioner was pending adjudication and, thus, petitioner is entitled for the relief to the extent of 50% of the tax due.z
However, the Designated Committee treated the declaration of the petitioner in category ‘Arrears’ and held that petitioner is eligible for tax relief only to the extent of 40% of the tax dues. The said decision of the Designated Committee was communicated to the petitioner in Form SVLDRS-3. Although Designated Committee accepted the declaration of the petitioner in category ‘Arrears’, but while extending the benefit of tax relief to the petitioner, the Designated Committee first adjusted/reduced the amount of pre-deposit/deposit of Rs. 2,45,24,953/- from the amount of ‘tax due’ of Rs. 4,69,12,227/- and thereafter extended the benefit of tax relief of 40% on the reduced amount to the petitioner and demanded an amount of Rs. 1,34,32,364.40/- from the petitioner as being the amount payable under the Scheme. The determination made by the Designated Committee can be summarized as under:-
(i) Amount of duty/tax dues … 4,69,12,227.00/-
(ii) Amount of pre-deposit … 2,45,24,953.00/-
(iii) Balance outstanding dues … 2,23,87,274.00/-
(iv) Tax relief @ 40% of outstanding dues … 89,54,909.60/-
(v) Balance payable … 1,34,32,364.40/-
6. Taking exceptions to the aforesaid determination of amount payable of Rs. 1.34,32,364.40, present writ application has been filed by the writ petitioner primarily contending, inter alia, that even if the case of the petitioner was to be categorized under category ‘Arrears’, the amount payable under the Scheme would be Rs. 36,24,401/- and not Rs. 1,34,32,364.40/-. As per the writ petitioner, computation of the amount payable under the Scheme would be as under:-
(i) Amount of duty/tax dues … 4,69,12,227.00/-
(ii) Tax relief @ 40% of outstanding Duty/ tax dues … Rs. 1,87,64,890.80/-
(iii) Balance outstanding dues … 2,81,47,336.20/-
(iv) Less amount of pre-deposit … 2,45,24,953.00/-
(v) Balance payable … 36,24,401.00/-
7. The brief facts of the case in W.P.(T) No. 2422 of 2020 is that the petitioner is also a Proprietorship concern and is engaged in the business of providing services of Cargo Handling and Supply of Tangible goods. On allegation that petitioner was not properly discharging its service tax liability, office of DGCEI, Regional Unit, Jamshedpur initiated enquiry/ investigation proceeding against the petitioner for the period January, 2013 to March, 2016, and, it is an admitted fact that during the process of enquiry/investigation, a sum of Rs. 61,84,644/- was deposited by the petitioner. A show cause notice was issued to the petitioner dated 25th July, 2018, wherein petitioner was directed to show cause as to why service tax amounting to Rs. 2,37,48,427/- be not demanded and recovered from the petitioner along with interest and penalty. Petitioner filed its reply to the show cause notice and, thereafter, Order-in-Original No. 06/S.Tax/Commr/2019 dated 09.07.2019 was passed against the petitioner, wherein a sum of Rs. 2,37,48,427/- towards service tax liability for the period January, 2013 to March, 2016, in terms of provisions of Section 73(1), was held to be liable to be recovered from the petitioner, and, further, an amount of Rs. 61,84,644/- was directed to be appropriated against the aforesaid demand. Equivalent penalty of Rs. 2,37,48,427/- u/s 78 of the Finance Act and penalty of Rs. 10,000/- each u/s 77 and 77(2) of the Finance Act along with Late Fee of Rs. 1,36,100/- u/s 70 of the Finance Act, was also imposed upon the petitioner.
8. Petitioner, under the Scheme, filed its declaration in the category – ‘Litigation’ in Form SVLDRS-1 and petitioner was also issued show cause notice in Form SVLDRS-2A directing the petitioner to show cause as to why its declaration be not treated in the category ‘Arrears’ instead of category-‘Litigation’. In substance, petitioner was also directed to show cause as to why tax relief of 40% of the ‘tax due’ under category ‘Arrears’ be not extended to it instead of tax relief of 50% in category ‘Litigation’. Petitioner objected to the said action of the Designated Committee and contended that it was entitled to the benefit of tax relief to the extent of 50% under category ‘Litigation’ and not a tax relief of 40% against category ‘Arrears’. However, the Designated Committee, vide order dated 24.02.2020, determined tax relief to the petitioner under category ‘Arrears’ and only 40% of the ‘tax dues’ as against tax relief of 50% under category ‘Litigation’ was extended. However, in Form SVLRDS-3, although tax relief of 40% only was extended under category ‘Arrears’, but in the Form, category in which relief was extended to the petitioner was reflected as ‘Litigation’.
9. Petitioner is not aggrieved with the extension of tax relief of only 40% of the tax dues by treating its category as ‘Arrears’, but it is aggrieved by the action of the Designated Committee, wherein first the amount of pre-deposit of Rs. 61,84,644/-paid by petitioner has been reduced from the amount of tax dues and, thereafter, on the balance outstanding dues, tax relief has been extended to the petitioner. Designated Committee raised the demand under the Scheme as per the following calculations:-
(i) Amount of duty/tax dues … 2,37,48,427.00/-
(ii) Amount of pre-deposit … 61,84,644.00/-
(iii) Balance outstanding dues … 1,75,99,783.00/-
(iv) Tax relief @ 40% of outstanding dues … 70,39,913.20/-
(v) Balance payable … 1,05,59,869.80/-
10. However, as per petitioner, relief to be extended to it would be as under:-
(i) Amount of duty/tax dues … 2,37,48,427.00/-
(ii) Tax relief @ 40% of outstanding Duty/tax dues … Rs. 94,99,370.80 /-
(iii) Balance outstanding dues … 1,42,49,056.20/-
(iv) Less amount of pre-deposit … 61,84,644.00/-
(v) Balance payable … 80,64,412.20/-
11. Thus, as per the petitioner, the amount payable was only Rs. 80,64,412.20/- as against the demanded amount of Rs. 1,05,59,869.80/-, and, taking exceptions to the above, petitioner has filed the present writ application.
12. Mr. Sumeet Gadodia, leaned counsel for the petitioner while advancing arguments in both the writ petitions, has referred to the provisions of the Scheme, more particularly Section 121(c), 121(e), 123 and 124 thereof. It has been submitted that petitioners’ declarations have been admittedly accepted under the Scheme by the Designated Committee and even SVLDRS-3 has been issued to petitioners under category ‘Arrears’, but, at the time of computation of the tax relief under the Scheme, the Designated Committee, while placing reliance upon Circular dated 25.09.2019, has altered the definition of ‘tax dues’ as defined under Section 123 of the Scheme and has first reduced the amount paid by petitioners as pre-deposit/deposit and, thereafter, computed the balance outstanding dues and extended the benefit of tax relief to petitioners under ‘Arrears’ category, which is contrary to the very purpose and intent of the Scheme.
13. It has been argued that Section 124(2) specifically provides, inter alia, that the amount paid as pre-deposit at any stage of appellate proceedings or deposit during enquiry, investigation or audit shall be deducted while issuing statement to a declarant indicating the amount payable by it under the Scheme.
14. Referring to the Scheme, it was further contended that Section 123 of the Scheme defines the term “tax dues” and Section 123(e) provides, inter alia, that where an ‘amount in arrears’ relating to the declarant is due, ‘the amount in arrears’ would be deemed to be the ‘tax dues’ of a declarant. Further, while referring to the definition of ‘amount in arrears’ under Section 121(c), it was contended that since Orders-in-Original were passed against petitioners, amount determined in Orders-in-Original towards ‘duty’ would be the amount recoverable against the petitioners and it is the said amount which would be the ‘tax dues’ of the petitioners and, accordingly, petitioners were entitled for tax relief to the extent of 40% of the tax dues in terms of Section 124(c)(ii) of the Scheme. It was submitted that respondents, while placing reliance upon Circular dated 25.09.2019, have arbitrarily reduced the amount of deposit made by petitioners while determining the amount of tax dues and, thereafter, have extended benefit, under the Scheme, of tax relief, which is not permissible in law.
15. It has been submitted that figures generated of ‘tax dues less tax relief’ in Form SVLDRS-1 is an auto generated figure and tax liability is also determined electronically without any manual calculations by petitioners. It has been submitted that the purpose of the Scheme was to unload the baggage relating to legacy disputes and to allow the business to make a fresh beginning and since the Scheme itself was a beneficial scheme, a literal formalistic interpretation of the statute at hand is to be avoided. While placing reliance upon the decision of the Hon’ble Supreme Court in the case of Government of Kerala v. Mother Superior Adoration Convent, reported in 2021 SCC OnLine SC 151, it has been submitted that even if there was any ambiguity arising in construction of the scheme, such ambiguity must be in favour of the subject. Further, while placing reliance upon the decision of Hon’ble Delhi High Court and Bombay High Court, it was submitted that the scheme in question has been interpreted by respective High Courts in their decisions and it has been held that a liberal interpretation is to be given to the scheme. The Judgments relied upon by petitioner on the said issue are as under:-
(i) Vaishali Sharma v. Union of India, reported in 2020 SCC OnLine Del 1386 (Relevant Paragraph-11);
(ii) Code Engineers Pvt. Ltd. v. Union of India & Ors. reported in 2021 SCC OnLine Bombay 91 (Relevant Paragraphs 29 to 33, 40);
(iii) Morde Foods Pvt. Ltd. & Anr. V. Union of India &Ors., reported in 2021 SCC OnLine Bombay 320 (Relevant Paragraphs 38, 48, 49, 50, 51).
16. Learned counsel for the petitioners further relied upon the decision of Eureka Fabricators Pvt. Ltd. v. Union of India, reported in 2021 SCC OnLine Bombay 321 and have submitted that the amount of duty paid by a declarant in terms of section 124(2) of the Scheme is required to be reduced from the amount payable at the time of issuance of Statement under the Scheme after extending benefit of tax relief on the ‘tax dues’ amount. Further, while referring to the Circular dated 25.09.2019, it has been submitted that Clause 2(iv) of the Circular has altered and changed the term ‘tax dues’ as defined under Section 123 and in the said Circular, the word ‘tax dues’ has been de novo defined to be an amount of duty which is outstanding against a declarant, which is not permissible in law. It has been submitted that the Circular issued by CBIC dated 25.09.2019 has an effect of effacing the provisions of the Scheme, which is not permissible in view of several decisions of the Hon’ble Apex Court including the following decisions namely.—
(i) Securities and Advance Exchange Board of India v. Magnum Equity Services Limited, reported in (2015) 16 SCC 721.
(ii) Sandur Micro Circuits Limited v. Commissioner of Central Excise, Belgaum, reported in (2008) 14 SCC 336.
(iii) Pahwa Chemicals (P) Ltd. v. Commissioner of Central Excise, New Delhi, reported in (2005) 2 SCC 720.
(iv) State of Haryana and Others v. Hindustan Construction Company Limited, reported in (2017) 9 SCC 463.
17. Per contra, Mr. Amit Kumar and Mr. P.A.S. Pati, Advocates appearing for the Revenue, placed reliance upon Clause 2(iv) of the Circular dated 25.09.2019 including its Illustration and have stated that ‘tax dues’ would mean the amount of duty which is outstanding against a declarant. It has been submitted that in the Circular, detailed illustration has been given as to how the amount of ‘tax dues’ is to be determined and the Circular itself provides that if there is a confirmed duty demand against taxpayer of Rs. 1.00 Crore and if he has already paid Rs. 60.00 Lakh, then the amount of ‘tax dues’ of the said dealer would be Rs. 40.00 Lakh in terms of Section 123(1)(e) of the Scheme and, consequently, the said dealer would be entitled for relief of an appropriate percentage as provided under Section 124(1)(c) only on the amount of Rs. 40.00 Lakh and not on Rs. 1.00 Crore. Further, while placing reliance upon definition of the term ‘amount in arrears’, as defined under Section 121(c) of the Scheme, it has been contended that the ‘amount in arrears’ means the amount of duty which is recoverable as ‘arrears of duty’ and, thus, if a dealer has already paid certain amount either as pre-deposit and/or during investigation etc., the said amount is no longer recoverable as ‘arrears of duty’. Thus, it has been contended that Designated Committee has rightly followed the Circular dated 25.09.2019 and has determined the amount payable by extending relief to the petitioners at the required percentage of the outstanding amount which was recoverable from them towards duty at the time of acceptance of their declarations.
18. Amit Kumar, Counsel appearing for the Revenue, in support of his contentions, has placed reliance upon the Judgment of Allahabad High Court in the case of M/s. Samtel Avionics Limited vs. Union of India & 2 others, reported in 2020-VIL-710-ALH-ST to contend, inter alia, that Hon’ble Allahabad High Court has interpreted the term ‘recoverable’ to mean the outstanding amount of duty payable by a declarant, and has contended that Designated Committee has rightly determined the amount payable by petitioners. However, he fairly conceded that said Judgment of Hon’ble Allahabad High Court has been stayed by Hon’ble Supreme Court vide its order dated 20th April, 2021 passed in Special Leave to Appeal (Civil) No. 1839 of 2021.
19. We have heard learned counsel for the parties and have carefully gone through the provisions of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. We deem it appropriate to quote relevant provisions of the Scheme for better appreciation of the case, which are as under:-
“Section 121 (c) “amount in arrears” means the amount of duty which is recoverable as arrears of duty under the indirect tax enactment, on account of –
(i) 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; or
(ii) An order in appeal relating to the declarant attaining finality; or
(iii) the declarant having filed a return under the indirect tax enactment on or before the 30th day of June, 2019, wherein he has admitted a tax liability but not paid it.”
“123. For the purposes of the Scheme, “tax dues” means—
(a) xxx xxx xxx
(b) xxx xxx xxx
(c) xxx xxx xxx
(d) xxx xxx xxx
(e) where an amount in arrears relating to the declarant is due, the amount in arrears.”
“124 (1) Subject to the conditions specified in sub-section (2), the relief available to a declarant under this Scheme shall be calculated as follows:-
(a) xxx xxx xxx
(b) xxx xxx xxx
(c) where the tax dues are relatable to an amount in arrears and,-
(i) the amount of duty is, rupees fifty lakhs or less, then, sixty per cent. of the tax dues;
(ii) the amount of duty is more than rupees fifty lakhs, then, forty per cent. of the tax dues;
(iii) in a return under the indirect tax enactment, wherein the declarant has indicated an amount of duty as payable but not paid it and the duty amount indicated is.–
(A) Rupees fifty lakhs or less, then, sixty per cent. of the tax dues;
(B) Amount indicated is more than rupees fifty lakhs, then, forty per cent. Of the tax dues;”
“124 (2) The relief calculated under sub-section (1) shall be subject to the condition that any amount paid as pre-deposit at any stage of appellate proceedings under the indirect tax enactment or as deposit during enquiry, investigation or audit, shall be deducted when issuing the statement indicating the amount payable by the declarant.
Provided that if the amount of pre-deposit or deposit already paid by the declarant exceeds the amount payable by the declarant, as indicated in the statement issued by the designated committee, the declarant shall not be entitled to any refund”
20. It is an admitted fact that declarations of the petitioners have been accepted by the Designated Committee and Form SVLDRS-3 has been issued to them and the only dispute pertains to the amount payable by the declarants. Petitioner-Aloke Dutta contends that the Designated Authority has determined a sum of Rs. 1,34,32,364.40/- as payable by the petitioner, whereas, as per the Scheme, it is only liable to pay an amount of Rs. 36,22,401/-. Similarly, in the case of M/s. Vassu Enterprises, the amount payable has been determined as Rs. 1,05,59,869.80/-, whereas, as per the petitioner, the amount payable is only Rs. 80,64,412.20/-.
21. Admittedly, there is no dispute with respect to the amount determined in the Order-in-Original and/or the amount of deposit/pre-deposit made by petitioners, but the only dispute in the instant cases, is with respect to computation of the amount payable by the declarants. As per petitioners, ‘amount of arrears’ means the ‘amount of duty’ which is reflected as recoverable in the Orders-in-Original, being the ‘tax dues’ amount, and, accordingly, relief under Section 124(1)(c)(ii) is to be granted on the said amount; whereas, as per the Revenue, the amount recoverable under the Orders-in-Original is the ‘amount of duty demanded less the amount already paid by petitioners’, and, accordingly, benefit of tax relief has to be granted on the net outstanding amount.
22. In our opinion, if the interpretation given by the Revenue of the word ‘recoverable’ u/s 121(c) is accepted, the same would lead to an incongruous interpretation leading to absurdity which is to be avoided. Admittedly, in both the cases, show cause notice has been issued to petitioners under section 73(1) of the Finance Act, 1994, wherein the total amount of duty recoverable from petitioners has been reflected, and, further, in the show cause notice, petitioners have been directed to show cause as to why the amount of pre-deposit/deposit made by petitioners be not adjusted from the amount of duty recoverable from the petitioners. Thereafter, Orders-in-Original have been passed and even in the Orders-in-Original, the amount of duty shown as recoverable is the amount of duty evaded by the petitioners and, further, in the Orders-in-Original, it has been stated that the amount of deposit made by the petitioners would be adjusted/appropriated from the amount of duty.
23. Thus, both, in the Show Cause Notices and/or in the Orders-in-Original, the amount shown as recoverable towards duty is the amount of duty determined as leviable upon the petitioners.
24. Section 73(1) of the Finance Act, under which, show-cause notices have been issued, would be relevant for adjudicating the issue in dispute. Said provision is extracted herein-under:-
“Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded.
73. (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:
Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of –
(a) Fraud; or
(b) Collusion; or
(c) willful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter or of the rules made there-under with intent to evade payment of service tax,
by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words “one year”, the words “five years” had been substituted.
Explanation.—Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or five years, as the case may be.”
25. A bare reading of aforesaid provisions would reveal that show cause notice is to be issued for recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded. Admittedly, in the case of petitioners, show cause notices were issued for recovery of service tax not paid of the amount reflected in the show cause notices. Even Orders-in-Original clearly reflected the amount of recoverable service tax not paid by petitioners, which were, admittedly Rs. 4,69,12,227/- and Rs. 2,37,48,427/- and it is the said amount which was adjudicated as recoverable towards ‘arrears of duty’ against the petitioners. There is difference between the terms ‘amount recoverable towards arrears of duty’ and ‘amount outstanding towards arrears of duty’, whereas, in the case of petitioners, amount recoverable towards arrears of duty were Rs. 4,69,12,227/- and Rs.2,37,48,427/- respectively, and, amounts outstanding towards arrears of duty were Rs. 2,23,87,274/- and Rs. 1,75,99,783/- respectively.
26. The impugned Circular No.1072/05/2019/CX dated 25.09.2019 has an effect of altering the definition of ‘amount in arrears’ as defined under section 121(c) of the Scheme. Admittedly, section 121(c) of the Scheme uses the term ‘recoverable’ as opposed to the term ‘outstanding’ and to this extent, impugned Circular is contrary to the Scheme itself. Hon’ble Apex Court, in its Judgment rendered in the case of Securities and Advance Exchange Board of India (supra) has held that ‘clarificatory circular is for the purpose of elaborating the existing provision and removing ambiguities, without altering the effect of the said provision’. Further, Hon’ble Supreme Court, in the case of Pahwa Chemicals (P) Ltd. (supra) has clearly held that ‘Board has no power to issue instructions or orders contrary to the provisions of the Act or in derogation of the provisions of the Act.’ That apart, if the term ‘recoverable’ is understood as ‘outstanding’, the same would lead to incongruous interpretation leading to absurdity. Reference in this regard may be made to provisions of Section 123(b) of the Scheme, which defines ‘tax dues’ where show cause notice has been received by a declarant on or before 30th June, 2019 to mean the amount of duty stated to be payable by the declarant in the said notice. Admittedly, in the show cause notices issued to petitioners, the amount reflected as payable was the amount of service tax not paid by them. If petitioners would have filed appeal against the Orders-in-original disputing the amount payable as determined in the said Orders-in-original being the amount of ‘service tax not paid’ by petitioners, the petitioners would have been extended relief u/s 124(1)(a) being equivalent to the amount of duty disputed by petitioners in the said appeal, i.e. the amount of service tax determined. Merely because petitioners, instead of filing appeal, have claimed benefit under the Scheme, the amount of service tax payable and/or recoverable from the petitioners cannot be reduced with the amount of deposit/pre-deposit by treating the said amount as the amount only outstanding against the petitioners.
27. The Scheme is, admittedly, a beneficial legislation, and, both, the Hon’ble High Court of Delhi and Hon’ble High Court of Bombay, in their Judgments rendered in the cases of ‘Code Engineers Pvt. Ltd. (supra) and Morde Foods Pvt. Ltd. & Anr. (supra), have unequivocally held that ‘literal interpretation is to be given to the Scheme’. That apart, Hon’ble Bombay High Court, in the case of ‘Eureka Fabricators Pvt. Ltd.’ (supra), while interpreting the provisions of Section 124(2) of the Scheme, has clearly held that deposit towards duty paid during investigation is required to be appropriated and deducted from the tax dues after grant of relief under section 124 of the Scheme. We are in agreement with the aforesaid authoritative pronouncements of respective High Courts.
28. Even from a plain reading of Section 124(2), it would be evident that the amount of deposit made during enquiry, investigation or audit is required to be deducted after extending relief under section 124(1) of the Scheme and at the time of issuing statement indicating the amount payable by a declarant.
Even otherwise, the intent of legislature cannot be in such a way that an assesse who pays some amount either suo motu prior to demand or after demand put in worse condition than an assesse who does not pay any amount after demand and avail the benefit of the scheme because admittedly; if the contention of the revenue is accepted then if an assesse is having liability of 1 crore rupees and he does not pay any amount then he will get benefit of 40% as per the scheme and he will have to pay 60 lacs. However, if an assesse who is having a demand of 1 crore and during course of investigation or otherwise he pays an amount of 30 lacs then if 40% will be deducted from 70 lacs than he would be in worse position than an assesse who does not pay any amount pursuant to demand. This can never be the intent of the scheme.
29. We, accordingly, hold and declare that action of Designated Committee by first deducting the amount of deposit made by petitioners during enquiry, investigation or audit and, thereafter, extending relief to the petitioners by computing the amount of tax due on the outstanding amount, is not as per the mandate of the Scheme. Further, clause 2 (iv) of Circular No.1072/05/2019/CX dated 25.09.2019, to the extent it provides that tax relief is to be granted on the outstanding duty amount, as against the amount of duty recoverable, has an effect of altering the effect of the Scheme itself and cannot be given effect to. We, accordingly, direct the Designated Committee to re-compute the amount payable by petitioners under the scheme in view of the observations made hereinabove, and, to issue revised SVLDRS-3 Form to the petitioners within a period of four weeks from the date of this order. Further, petitioners are directed to deposit the amount payable as determined by Designated Committee within a further period of two weeks from the date of receipt of SVLDRS-3, and, on payment of the said amount by petitioners, declarations filed by petitioners would be deemed to have been satisfied.
30. With the aforesaid observations and directions, both writ applications are allowed in the manner indicated hereinabove.
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