Case Law Details
Honest Facility & Anr. Vs Union of India & Ors. (Bombay High Court)
Bombay high court remands matter back to Designated committee as designated committee passed final order in form SVLDRS-3 contravening the principles of natural justice as final order issued before granting opportunity of hearing.
Summary of Judgement
Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (‘SVLDRS’) – Deposit of ` 50,00,000 made by assessee towards Service Tax liability pursuant to show cause notice – Petitioner applied for adjournment in Form SVLDRS-2A and in response thereto Form SVLDRS-2B issued with error showing hearing to be held on 9-3-2021 but on 7-3-2020 itself impugned order Form SVLDRS-3 passed -No proof of notice served to petitioner- Form SVLDRS-3 passed contravening principles of natural justice and breach of procedure under scheme of rules especially when error not attributable to petitioner – Matter restored before Designated Committee for, hearing petitioners and verification of records and to issue a revised Form SVLDRS-3, on verification of factual position of payment of ` 50,00,000 towards liability under show cause notice – Section 124 of Finance (No. 2) Act, 2019. [paras 9 to 12]
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. The petitioners are before this court taking exception to Form No.SVLDRS-3 dated 07/03/2020 (Exh.M) issued by the respondent no.6 – the Designated Committee – since the same does not take into account payment of Rs.50,00,000/- towards service tax dues, during the course of proceedings ensued on show-cause notice.
2. A few relevant facts would be appropriate to be referred to that petitioner no.1, at the relevant time, had been registered with the respondents under Service Tax Rules, 1994. On investigation, a show-cause notice had been issued to the petitioners for service tax dues to the URS tune of Rs.1,03,98,605/- for the period from 01/04/2007 to 31/03/2012 payable on the security services rendered with interest and penalty. During the proceedings, the petitioners had informed the respondents its intention to settle the matter by filing an application before the Settlement Committee under section 32E(1) of Central Excise Act, 1944, by which time, the petitioners claim to have deposited Rs.40,00,000/-towards the service tax dues and subsequently had even paid an additional amount of Rs.10,00,000/-, aggregating to Rs.50,00,000/-.
3. In the meanwhile, Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (for short, ‘SVLDRS’) came into force under the Finance Act, 2019. The Government of India had also framed Sabka Vishwas (Legacy Dispute Resolution) Rules, 2019.
4. Learned Counsel Mr.Shreyas Shrivastava for petitioners purports to take us through the SVLDR scheme as contained in Finance Act, 2019 from section 121 onwards. He submits that petitioners’ tax dues pursuant to section 123 are Rs.1,03,98,603/-. He purports to draw attention to section 124 whereunder it has been provided that the relief shall be calculated taking into account the amount paid as pre-deposit during the proceedings and shall be deducted when issuing the statement indicating the amount payable. It is submitted that the petitioners are not ineligible declarants and that its case is fully covered under section 124 read with circular dated 12/12/2019 clarifying in paragraph 2(ii), inter alia, that in the situation as involved in the petitioners’ case, deposits made during the pendency of the adjudication proceedings are to be appropriated towards the revenue and shall be deductible / adjusted while issuing the statement in Form SVLDR-3 under the scheme.
5. It is contended that it is not the case that the petitioners have not paid the amount of Rs.50,00,000/-. There is material evidencing such payment been made by the petitioners towards its service tax dues demanded under the show-cause notice. When such a huge amount has already been pre-deposited, while estimating amount, the same ought to have been taken in to account and deducted from the estimated payable amount. Under the SVLDR scheme, the petitioners would be liable to pay towards discharge of its service tax liability a sum of Rs.1,99,302/- only, taking into account already deposited sum of Rs,50,00,000/-.
6. Yet on 28/02/2020 Form SVLDRS-2 had been issued for Rs.51,99,302/- stating that if the petitioners do not agree with the estimated amount payable, the petitioners would appear for personal hearing on 02/03/2020. The petitioners had also responded to SVLDRS-2 stating that it does not agree with the amount calculated by the Designated Committee since having already deposited Rs.50,00,000/-which are supported by the copies of challan and would be shown and produced during the personal hearing. The petitioners, on 02/03/2020, requested to re-schedule the date of hearing to 05/03/2020 issuing Form SVLDRS-2A. According to the petitioners, there had been response to SVLDRS-2A in Form SVLDRS-2B intimating hearing being scheduled on 09/03/2020 and straightaway Form SVLDRS-3 was issued showing amount payable by the petitioners to be Rs.51,99,302/-, without considering the pre-deposit of Rs.50,00,000/-.
7. The response to aforesaid on behalf of the revenue is that as a part of procedure to ascertain correctness of payment / pre-deposit, verification report was called for from jurisdictional division office and the report is to the effect that though the payments were reflected in the system, it could not be co-related to the payment towards the demanded amount under show-cause notice or whether the same was made in the course of other payments. It is further referred to that the Designated Committee, after going through the facts of the case in detail, on the basis of verification report, felt the need to carry out further verification of pre-deposit claim and accordingly Form SVLDRS-2 was issued on 28/02/2020 fixing hearing on 02/03/2020. However, the petitioners failed to avail of the opportunity. It is contended that while granting second personal hearing, typographical / clerical error crept in SVLDRS-2B and as such, it is not a case that the course of natural justice is not followed. The Designated Committee had no control over the technical features of the system.
8. It has been contended that SVLDR scheme has been online and automated scheme requiring minimal human intervention leaving very little scope for discretion and the Board Circular dated 27/08/2019 has been referred to. Since both the taxpayer as well as the department are aware of the duty amount in the form of show-cause notice / order of determination or a written communication, it is not intended to be adjucatory in nature.
9. From aforesaid, fairly clear position emerges that petitioners’ claim of having deposited a sum of Rs.50,00,000/- towards service tax liability pursuant to show-cause notice is not denied; and it is required to be ascertained as to whether the payment claimed by the petitioners is towards said liability and as such, hearing was necessary, a room for which is given in the scheme, particularly under section 127. According to the petitioners, they had applied for adjournment in Form SVLDRS-2A and in response even Form SVLDRS-2B had been assigned for such purpose. The revenue as well, as a matter of fact, has referred to that Form SVLDRS-2B had been issued, albeit, there has been typographical / clerical error in the same. It is not denied that on 03/03/2020, the petitioners had requested for hearing on 05/03/2020 and in response thereto, found Form SVLDRS-2B had been issued with error showing hearing to be held on 09/03/2021 but on 07/03/2020 itself impugned order Form SVLDRS-3 has been passed.
10. Overall, it emerges that hearing could not take place while the Designated Committee felt it necessary to ascertain and verify veracity of the claim of the petitioners of having paid amount of Rs.50,00,000/-. towards service tax liability under the show-cause notice. In the circumstances, impugned Form SVLDRS-3 ought not to have been issued contravening principles of natural justice and breach of procedure under the scheme of the rules.
11. It is a peculiar case wherein personal hearing under the scheme could not take place for the errors which are not attributable to the petitioners, resulting in an order running adverse to petitioners’ interest where they have claimed that more than 90% chunk of the amount payable had already been deposited. Thus, this is a case wherein it would not be improper to intervene in the matter and set aside the impugned Form SVLDRS-3.
12. As such, the writ petition is allowed in terms of prayer clause ‘a’ restoring the matter before the Designated Committee for, hearing the petitioners and verification of records and issue a revised Form SVLDRS-3, on verification of factual position of payment of Rs.50,00,000/- towards liability under the show-cause notice.
13. The petition is accordingly disposed of.
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