Declarant subjected to audit as on 30th June 2019 is ineligible to avail benefit of SVLDR Scheme

Mindset Estate Pvt. Ltd. Vs Union of India (Bombay High Court)

Bombay High Court held that declarant making voluntary disclosure for availing benefit of SVLDR Scheme is ineligible for applying under the scheme if it was subjected to audit as on 30th June 2019.

Facts-

The Petitioner submitted declaration as per Form SVLDRS-1, which came to be rejected by the impugned communication dated 13 December 2019. In the remark column of Form SVLDRS-1 was stated that the Audit Commissionerate has reported vide their letter dated 1 January 2020 that audit of the Petitioner was started on 11 December 2019 and party has filed declaration on 13 February 2019 i.e. after start of audit and is accordingly not a voluntary disclosure.

Being aggrieved by this Petitioner is before us. Petitioner has challenged the rejection of Petitioner’s declaration dated 30 December 2019 for availing benefit of SVLDR Scheme.

Conclusion-

The Scheme is clear that the declarant making voluntary disclosure, is ineligible for applying under the scheme, if it was subjected to audit as of 30 June 2019. Since it is demonstrated that the Petitioner was subjected to audit commenced earlier to 30 June 2019 the Petitioner was within the class declarants excluded from the Scheme, as referred to under Section 125 of the Act of 2019. There is no challenge to the audit proceedings before us. It is not possible for us to give a declaration in this Petition that the audit proceedings had deemed to have lapsed on 30 June 2019 as such a declaration is outside the scope of this proceeding, even assuming that such declaration can be given.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

Petitioner is a private limited company. It had entered into a leave and license agreement with another entity for a premises constructed by the Petitioner. Certain proceedings took place between the Petitioner and the lessee. A letter came to be issued to the Petitioner by the Respondents – Authorities intimating regarding conduct of audit for Service Tax for the period 2012-2013 to 2016­2017.

2. Under the Finance Act, 2019 a scheme known as Sabka Vishwas (Legacy Dispute) Resolution Scheme, 2019 (“SVLDR Scheme”) was introduced in the year 2019. The scheme provided for settlement of legacy disputes in respect of payment of Service Tax amongst others.

3. The Petitioner submitted declaration as per Form SVLDRS-1, which came to be rejected by the impugned communication dated 13 December 2019. In the remark column of Form SVLDRS-1 was stated that the Audit Commissionerate has reported vide their letter dated 1 January 2020 that audit of the Petitioner was started on 11 December 2019 and party has filed declaration on 13 February 2019 i.e. after start of audit and is accordingly not a voluntary disclosure.

4. Being aggrieved by this Petitioner is before us. Petitioner has challenged the rejection of Petitioner’s declaration dated 30 December 2019 for availing benefit of SVLDR Scheme.

5. We have heard Mr. Sriram Sridharan, learned Counsel for the Petitioner and Ms. Neeta Masurkar, learned Counsel for the Respondents.

6. The question that arises for consideration is whether Respondents were right in rejecting Petitioner’s declaration on the ground that Petitioner was subjected to audit as on the relevant date and therefore falls in the class of declarants who were ineligible to make declaration under the Scheme under Section 125 of the Finance Act, 2019.

7. Learned Counsel for the Petitioner has relied upon the decisions of the Division Bench of this Court in the case of New India Civil Erectors Pvt. Ltd Vs.Union of India 2021 (48) G.S.T.L. 17 (Bom.), which is followed in the case of UCC Infrastructure Pvt. Ltd. Vs. Union of India 2022 (65) G.S.T.L 294 (Bom.) and in the case of Access Platform Equipment Ltd. Vs. Union of India WP 1247 of 2020 to contend that even in the category of declarants making declaration for voluntary disclosure, which is referred to under Section 125 (1)(f), a stipulation of pendency of enquiry, investigation and audit as of 30 June 2019 is necessary. If no enquiry, investigation and audit is pending as on 30 June 2019, then such declarant cannot be considered as ineligible under Section 125. There is no dispute about this proposition before us. The contention of the Respondents is that as of 30 June 2019, Petitioner was subjected to audit.

8. This would lead us to examine two communications i.e. communication dated 5 September 2019, which forms an annexure to communication dated 7 November 2017, both addressed to the Petitioner. The title of the communication is “Intimation for conducting Service Tax audit”. The communication dated 5 September 2017 stated that the internal audit group has been deputed to conduct the audit of Petitioner’s concerned in terms of Rules 5A of the Service Tax Rules, 1994 and Petitioner was called upon to submit certain documents and reply. Reminder was sent to the Petitioner on 7 November 2017 that reply is not filed by the Petitioner.

9. Since Section 125(1)(e) (Interpreted to be applicable to Clause (f) as well) refers to subjected to audit as of 30 June 2019, the phrase “audit” will have to be understood. Under Section 129 of the Act of 2019, the phrases employed under the scheme under Chapter-V (scheme of 2019) have been defined. Section 121 (g) defines “audit” to mean any scrutiny, verification, checks carried out under indirect tax enactment. Section 121 (g) lays down “audit” means any scrutiny, verification and checks carried out under the indirect tax enactment, other than an enquiry or investigation, and will commence when a written intimation from the central excise officer regarding conducting of audit is received”. More pertinently, it explains that audit would commence, when a written intimation regarding conduct of the audit is received. The written intimations which Petitioner received on 5 September 2017 and 7 November 2017; are for commencement of audit. Therefore, Petitioner would clearly fall within the ambit of Section 125 (1)(e).

10. The contention of the learned Counsel for the Petitioner is that after the intimation was sent to the Petitioner as of 5 September 2017 and 7 November 2017 nothing further was communicated to the Petitioner and the Petitioner was under belief that the audit proceedings have been dropped and should be considered as lapsed. Learned Counsel submitted that the notice dated 5 September 2017 refers to conduct of audit in terms of Rule 5A of Service Tax Rules, 1994 which lays down a particular procedure and stipulates that it should be conducted expeditiously. Learned Counsel for the Respondents contends that this aspect is not relevant as there is no challenge to the audit proceedings on the ground of delay in completion. Learned Counsel for the Respondents pointed out that as the Petitioner did not cooperate and therefore, there was no further communication, the audit proceedings were completed on 16 December 2019.

11 .Even proceedings on the basis that the provisions of the Scheme are to be liberally interpreted, clear stipulations thereunder cannot be ignored and overridden.

12. The Scheme is clear that the declarant making voluntary disclosure, is ineligible for applying under the scheme, if it was subjected to audit as of 30 June 2019. Since it is demonstrated that the Petitioner was subjected to audit commenced earlier to 30 June 2019 the Petitioner was within the class declarants excluded from the Scheme, as referred to under Section 125 of the Act of 2019. There is no challenge to the audit proceedings before us. It is not possible for us to give a declaration in this Petition that the audit proceedings had deemed to have lapsed on 30 June 2019 as such a declaration is outside the scope of this proceeding, even assuming that such declaration can be given.

13. There is therefore no error committed by the Respondents in rejecting the Petitioner’s declaration.

14. Writ Petition is dismissed.