The High Court (HC) of Bombay has held that the declarant making a voluntary disclosure is ineligible for applying under the Sabka Vishwas (Legacy Dispute) Resolution Scheme, 2019 (SVLDR) under section 125 of the Finance Act of 2019.
Mindset Estate Pvt. Ltd.Petitioner is a private limited company. It had entered into a leave and license agreement with another entity for 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 the conduct of audit for Service Tax for the period 2012-2013 to 2016 – 2017.
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 the settlement of legacy disputes in respect of payment of Service Tax amongst others.
The Petitioner submitted a declaration as per Form SVLDRS-1, which came to be rejected by the impugned communication dated 13 December 2019. Petitioner has challenged the rejection of Petitioner’s declaration dated 30 December 2019 for availing benefit of the SVLDR Scheme.
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 a declaration under the Scheme under Section 125 of the Finance Act, 2019.
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.
Since Section 125(1)(e) (Clause(f)) refers to the subject 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, or 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”.
It explains that the audit would commence when a written intimation regarding the conduct of the audit is received. The written intimations which Petitioner received on 5 September 2017 and 7 November 2017; are for the commencement of the audit. Therefore, Petitioner would fall within the ambit of Section 125 (1)(e).
It was submitted that the notice dated 5 September 2017 refers to the conduct of the 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.
A two-member bench comprising Justice Nitin Jamdar and Justice Abhay Ahuja observed that the Scheme is clear that the declarant making a 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 an audit commenced earlier on 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. The petition was dismissed.
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