Failure to Adjust Interest Paid by NCPA is Hyper-Technical: Benefit of Amnesty Scheme cannot be Denied, rules Bombay HC [Read Order]

The Bombay High Court, has recently, in a writ petition filed before it, while ruling that the benefit of Amnesty Scheme cannot be denied, held that the failure to adjust interest paid by NCPA is hyper technical.

The aforesaid observation was made by the Bombay High Court when a writ petition was filed before it by the petitioner, National Centre for the Performing Arts, under Article 226 of the Constitution of India, being aggrieved by issuance of Form SVLDRS-3, dated 19 February 2020, by the Designated Committee ,making a demand of Rs. 37,67,015/- on the ground that the tax dues comprise of only duty amount and, therefore, only deposit of any stage is allowed under Section 124 (2) of the Finance Act, 2019 pertaining to the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS).

The relevant facts of the case were that the Petitioner was a public trust registered under the Societies Registration Act, 1860 as well as a non - profit institution registered under the Service Tax Law, since 12^th  August 2003. It was also subsequently registered under the GST Law from 1^st July 2017 and was engaged in providing various services such as holding entertainment events, renting out auditoriums, sponsorship etc., some of which were liable to service tax/GST , while some were exempt and some were partly taxable and partly exempt.

And, pursuant to the Excise Audit (EA 2000), the audit of the records of the petitioner for the financial years 2013-2014 to 2017-2018 (up to June 2017), conducted by the audit Group of the Service Tax Department during the month of November, 2018 and December, 2018, a Show Cause Notice dated 14 February 2019 was issued by the Principal Commissioner, CGST, Audit-I, Mumbai, demanding a sum of Rs. 2,93,47,926/- as service tax for alleged wrong availment of CENVAT credit by the Petitioner along with applicable interest and penalty under Section 78 of Chapter V of the Finance Act, 1994.

Subsequently, after the issuance of the Show Cause Notice, the Final Audit Report dated 5^th July 2018, was issued to Petitioner by the Deputy Commissioner, CGST, Mumbai.

Before issuance of the Show Cause Notice, during the course of pre-Show Cause Notice consultations, the petitioner had already paid the amount of Rs. 1,49,35,618/- electronically, and that out of this amount, a sum of Rs. 1,09,06,948/- was the amount of tax and a sum of Rs. 40,28,670/- was interest.

According to the Petitioner, the said amount of Rs. 40,28,670/- of interest was paid under protest, and the balance amount was paid after accepting its liability to pay the service tax for wrong availment of CENVAT credit due to bonafide error.

Also, while the Show Cause Notice was pending adjudication, the petitioner had already requested the respondent No.4, vide letter dated 26^th November 2019, as well as to the Petitioner’s jurisdictional Commissioner viz. Respondent No.3, vide letter dated 16^th  December 2019, to transfer the said sum of Rs. 40,28,670/- from the Accounting Code 00441481 (i.e., Other Receipts (Interest)), to the Accounting Code 00441480 (i.e., Tax Receipts), as the said amount was pending appropriation by the department, as the Show Cause Notice was yet not adjudicated.

Also, vide the letter dated 16^th December 2019, the Respondent No.4-E-Pay and Accounts Officer (e-PAO), requested the petitioner to take up the matter with the Jurisdictional Commissioner, and by letter dated 2^nd January 2020, the Respondent No.3-Assistant Commissioner of GST, Mumbai (South), requested the petitioner to inform the reason for change of accounting code which was purported by explanation by Petitioner vide letter dated 13^th February 2020.

And, while the Show Cause Notice and the request above by the petitioner were pending, the Government notified the SVLDR Scheme with effect from 1 November 2019 in terms of Chapter V of the Finance Act (No.2), 2019, to provide an amnesty under legacy taxes, in particular Central Excise Duty and the Service Tax, which were subsumed in GST. And, under the said scheme, tax payers could file online declaration for resolution of past disputes, initially from 1 September 2019 to 31 December 2019, which was later extended to 15 January 2020.

With the petitioner having filed its online declaration in Form SVLDRS-1 on 27^th December 2019, declaring nil amount as payable against the Service Tax of Rs. 2,93,47,926/- demanded in the Show Cause Notice, on the  basis of the computation as per the Show Cause Notice and the provision of Section 124 (1) (a) and 124 (2) of SVLDRS, the Bombay High Court Noted:

“From the above, we find that as a one- time measure for liquidation of past disputes of Central Excise and Service Tax, the SVLDR Scheme has been issued by the Central Government. The SVLDR Scheme has also been issued to ensure disclosure of unpaid taxes by an eligible person. This appears to have been necessitated as the levy of Central Excise, and Service Tax has now been subsumed in the new GST Regime.”

“From a reading of the statement of object and reasons, it is quite evident that the scheme conceived as a one- time measure, has the twin objectives of liquidation of past disputes pertaining to central excise and service tax on the one hand and disclosure of unpaid taxes on the other hand.”, Justice Abhay Ahuja and Justice Nitin Jamdar added.

“Both are equally important: amicable resolution of tax disputes and interest of revenue. As an incentive, those making the declaration and paying the declared tax verified as determined in terms of the scheme would be entitled to certain benefits in the form waiver of interest, fine, penalty and immunity from prosecution. This is the broad picture the concerned authorities are to keep in mind while dealing with a claim under the scheme.”, the High Court Bench further commented.

Thus, allowing the petitioners writ, the Bombay High court held:

“In view of the above discussion and the law laid down by three High Courts of our country including this Court, where “any amount paid” in Section 124 (2) has been interpreted to include the amount of interest that has been paid by the declarant, we have no hesitation in holding that the Designated Committee ought to have given due credit of the sum of Rs. 40,28,670/- as interest deposited by Petitioner was prior to the issuance of the Show Cause Notice.”

“In this view of the matter, Form 3 issued by the Designated Committee cannot be sustained and deserves to be set aside. We accordingly set aside the Form 2 and Form 3 issued by the Designated Committee and direct the Designated Committee to consider the declaration in SVLDRS-1 dated 27 December 2019 filed by the Petitioner in the light of the aforesaid discussion and to issue a fresh SVLDRS-3, within a period of six weeks from the date of this order, after giving an opportunity of hearing to the Petitioner”, concludingly the High Court said.

To Read the full text of the Order CLICK HERE

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