The High Court of Gujarat has upheld the eligibility of M/S. FTA HSRP Solutions Pvt. Ltd. to avail the benefits under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS), 2009 as the service tax liabilities were already admitted and paid before the cut-off date of 15th January 2020, as required by the scheme.
The case revolved around the assessee, M/S FTA HSRP Solutions Pvt. Ltd., a private limited company providing taxable services for the installation of High-Security Registration Plates (HSRPs) on vehicles. The assessee was registered with the service tax department and later under the GST regime.
One of the key announcements in the Budget 2019 was the SVLDRS, aimed at settling legacy legal disputes related to Central Excise & Service Tax pending before various courts and tribunals. The application window for the scheme was initially open from 1st September 2019 to 31st December 2019, later extended till 15th January 2020.
The dispute arose when the assessee was issued a summons under Section 14 of the Central Excise Act, 1944 and Section 70 of the Central Goods and Services Tax (CGST) Act, 2017, for not paying service tax on royalty and ocean freight services under the reverse charge mechanism.
The assessee supplied all the required documents in response to the summons, admitted and paid the total service tax liabilities of Rs.92,12,344/- on 11th June 2018 and the issue was treated as closed by the department.
During the interregnum, the SVLDRS came into effect, providing a window to declare tax dues. The assessee filed a declaration under Section 125 of the Finance Act, 2019, online on 3rd December 2019 through SVLDRS-1, stating zero tax liability with dues amounting to Rs. 92,12,344/-, quantified and informed to the department on 21st May 2019.
However, the declaration was rejected on the ground that the tax dues were not quantified and communicated before 30th June 2019, as required by Section 125(1)(e) of the Finance Act.
The revenue, based on this finding, had rejected the SVLDRS application as well as the declaration filed by the assessee under SVLDRS.
Aggrieved by the same, the petitioner assessee approached the High Court and sought the issuance of a writ in the nature of certiorari or mandamus to quash and set aside the two rejection orders passed against them by the revenue authorities.
The petitioner, represented by Anand Nainawati contended that their tax liabilities were quantified and communicated to the department through various communications and statements before the cut-off date.
The High Court observed that the petitioner assessee had admitted and paid its service tax liabilities on 21.05.2019, well before the cut-off date of 30.06.2019. This admission was supported by documentary evidence and statements made by the assessee during the investigation process.
The court found that the department’s perception that there was no quantification of tax liability before 30th June 2019 was misconceived.
The court highlighted that the petitioner’s letter dated 21st May 2019, in response to the department’s verification, clearly admitted and quantified the outstanding tax liabilities.
The bench referred to the circular issued by the Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes & Customs, which clarified that cases under inquiry/investigation or audit, where duty demand has been quantified on or before 30.06.2019, are eligible under the SVLDRS.
The circular further clarified that the term “quantified” included written communications intimating duty demand or duty liability admitted during inquiry, investigation, or audit.
This clarification validated the petitioner’s claim that their tax liabilities were indeed quantified before the cut-off date.
The bench also highlighted that there was no discrepancy between the admitted tax liability and the amount quantified by the revenue.
Moreover, the bench cited the decision in Seventh Plane Networks Pvt. Ltd. vs. Union of India & Ors., where the Delhi High Court had emphasised a liberal interpretation of the SVLDRS, with the intention to resolve legacy disputes and allow businesses to make a fresh beginning.
In result, the division bench comprising Justice Biren Vaishnav and Justice Devan M. Desai ruled in favour of the assessee, quashing the two orders and directing the revenue authorities to accept the assessee’s declaration and close the matter.
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