A division bench of the Bombay High Court has ruled that the declarant under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 shall be heard while deciding the eligibility criteria under the Scheme.
The Petitioner, Magnum Management & Services Pvt.Ltd, is engaged in the business of providing skilled, semi-skilled and unskilled manpower for security services, management services and is a registered service provider under the Finance Act, 1994. On 25.12.2019, the petitioner filed a declaration under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 under the category of ‘voluntary disclosure’ declaring the amount of service tax payable for the financial year 2016-17. The said declaration was rejected stating ineligibility under section 125(1)(f)(i) read with section 121(m) of the Finance (No. 2) Act , 2019. Upon further enquiry, the reason for ineligibility was said to be the issuance of a letter by the Assistant Commissioner, Division-I, CGST & CX, Belapur Commissionerate dated 24.07.2019, calling for the petitioner to explain the difference in figures noted in the service tax and income returns for the year 2015-16 and for production of specified documents. Though the petitioner filed a representation before the Assistant Commissioner, CGST & CX,Belapur Commissionerate requesting the authorities to withdraw the rejection order, no overt steps were taken in this regard and therefore the petitioner moved the High Court under Art 226. The show cause cum demand notice, issued by the Joint Commissioner of CGST & CX, Belapur Commissionerate during the pendency of the writ petition was also challenged by preferring an amendment to the writ.
According to the Petitioner, the impugned rejection order was violative of natural justice principles, as the petitioner was not afforded an opportunity to be heard and further no reasons were assigned for such rejection of the declaration. The petitioner also contended that it was inappropriate to reject the declaration for the period 2016-17 on the ground that the investigation presently underway may incorporate the period2016-17 in future.
The respondent, on the other hand contended that the rejection order was justified as the petitioner is ineligible to file declaration under the category of ‘voluntary disclosure’ in the light of section 121(m)and section 125(1)(e) of the Finance (No. 2) Act, 2019. It was also contended that under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, there is no provision mandating to provide opportunity of personal hearing prior to rejection. The said scheme requires to provide opportunity of personal hearing only in case where the where the amount estimated by the designated committee is in excess of the amount declared by the declarant. Further, according to the respondents, the records of the petitioner for 5 years from 2015-16, which includes the period for which the declaration has been filed, may be examined by the respondent under Section 73(1) of the Finance Act, 1994. Hence, the proceedings underway may incorporate 2016-17, the year for which the declaration has been filed, thereby rendering the petitioner ineligible.
The two-judge bench consisting Justice Ujjal Bhuyan and Justice Milind N Jadhav considering the various provisions of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 held that “for determining eligibility under the category of ‘voluntary disclosure’, a great deal of discretion is vested on the designated committee, who has to decide eligibility on a case to case basis. Needless to say, when a discretion is conferred upon an authority to decide an issue which has civil consequences upon the party concerned, such discretion has to be exercised in a just, fair and reasonable manner complying with the principles of natural justice. Thus, while deciding eligibility, the designated committee is required to consider all relevant materials and also hear the concerned declarant.”
The Court relied on the ruling in Thought Blurb Vs. Union of India (2020 SCC OnLine Bom 1909), wherein it was held that rejection of a declaration without affording any opportunity of hearing to the declarant would be in violation of the principles of natural justice impeaching the decision-making process thus rendering the decision invalid in law.
Accordingly, the rejection order was set aside with a direction to the designated committee to decide afresh the declaration of the petitioner in terms of the scheme under the category of ‘voluntary disclosure’ after giving due opportunity of hearing, within a period of 8 weeks from the receipt of copy of the order. The respondents were further directed not to proceed on the show cause cum demand notice in question, unless a decision as directed above is taken by the designated committee.
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