Court’s Decision:
The Bombay High Court dismissed the petition filed by the Petitioners, who sought to exclude Rs. 1.03 crore from the disputed tax dues in the context of the Sabka Vishwas (Legacy Dispute Resolution) Scheme. The Court found that the Petitioners failed to make the required payment within the stipulated time frame, even after being granted an extension. However, the Court provided the Petitioners an opportunity to make a fresh representation for the acceptance of the payment, which the Respondents were directed to dispose of expeditiously based on its merits.
Facts:
The Petitioners, involved in a tax dispute, were served with a notice on October 21, 2016, directing them to show cause why certain amounts should not be recovered. This led to the issuance of an Order-in-Original (O-I-O) on February 4, 2019, which demanded tax dues amounting to Rs. 4.80 crore. This included:
- Rs. 1.03 crore for CENVAT credit incorrectly availed and utilized.
- Rs. 3.68 crore as service tax, including cess.
- Rs. 8.47 lakh under reverse-charge for transportation services.
The Petitioners filed an appeal against the O-I-O, which is still pending before the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT). In the interim, the Government of India launched the Sabka Vishwas Scheme in September 2019 to resolve pending disputes. The Petitioners, in an attempt to benefit from the scheme, submitted a declaration under Form SVLDRS-1 on November 16, 2019. However, a Form SVLDRS-2 issued on December 23, 2019, showed disputed tax dues of Rs. 4.80 crore, and the Petitioners were required to deposit Rs. 38.21 lakh to avail the benefits of the scheme. Despite this, the Petitioners failed to make the payment within the prescribed 30-day period or the extended period due to the COVID-19 pandemic.
The Petitioners disputed the inclusion of Rs. 1.03 crore in the tax dues, arguing that it was a credit wrongly availed but not utilized. This dispute led them to file the present petition, seeking relief from the Court.
Issues:
The key issue before the Court was whether the Rs. 1.03 crore, which the Petitioners claimed was CENVAT credit availed but not utilized, should be excluded from the tax dues for the purpose of the Sabka Vishwas Scheme. The Court was also asked to decide whether the Petitioners were entitled to any relief given their failure to deposit the required amount within the prescribed period.
Petitioner’s Arguments:
The Petitioners argued that they had only availed CENVAT credit of Rs. 1.03 crore but had not utilized it. They contended that as per the provisions of the Sabka Vishwas Scheme, only the actual dues (i.e., the amounts that have been utilized) should be considered for determining the tax dues. They further argued that the CENVAT credit could have been reversed, and as a result, the tax dues should have been recalculated, excluding the disputed Rs. 1.03 crore. The Petitioners also expressed willingness to pay 50% of the revised tax dues after excluding this amount, consistent with the Scheme’s provisions.
Respondent’s Arguments:
The Respondents countered the Petitioners’ claims by asserting that the CENVAT credit was not only availed but also utilized. They referred to the Order-in-Original dated February 4, 2019, and argued that the inclusion of Rs. 1.03 crore in the disputed amount was correct. The Respondents contended that the Petitioners had failed to deposit the required amount within the prescribed time, and therefore, no relief should be granted to them under the Scheme.
Analysis of the Law:
The Court examined the provisions of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, particularly clauses 123 and 124, which set out the criteria for determining the tax dues for individuals seeking relief under the Scheme. According to these clauses, the tax dues to be considered for the scheme are determined based on the total amount of duty disputed in an appeal pending as of June 30, 2019.
The Court also referred to Clause 2(d) of the Scheme, which defines “amount of duty” as the total amount of service tax, excise duty, and cess payable under the indirect tax enactment. The Court analyzed whether the amount of credit availed but not utilized could be excluded from the tax dues for the purposes of the scheme.
Precedent Analysis:
The Court referenced the case of M/s. Yashi Constructions vs. Union of India (SLP No. 2070 of 2022), wherein the Supreme Court had ruled that the Court cannot extend the period for making a deposit under the Amnesty Scheme. The Court emphasized that the Petitioners had failed to comply with the Scheme’s deadlines, and therefore, the reasoning in this precedent was relevant for dismissing the current petition.
Court’s Reasoning:
The Court reasoned that the Petitioners’ argument, which was based on the premise that the CENVAT credit was not utilized, was incorrect in the context of the Scheme. The Court held that for determining the tax dues under the Sabka Vishwas Scheme, it was irrelevant whether the credit was utilized or not. The entire amount of Rs. 4.80 crore, as determined by the Designated Committee, was considered correct for the purposes of the Scheme.
The Court also pointed out that the Petitioners had ample opportunity to deposit the required amount but failed to do so within the prescribed time. Even though the Petitioners raised a dispute regarding the CENVAT credit, the Court found no legal ground to interfere with the Respondents’ decision or extend the deadline for the payment.
Conclusion:
The Court dismissed the Petition, finding no merit in the Petitioners’ claims. It held that the Petitioners had failed to meet the requirements of the Sabka Vishwas Scheme by not depositing the specified amount within the stipulated period. However, the Court provided an option for the Petitioners to make a fresh representation for the acceptance of their payment, which the Respondents were directed to address expeditiously.
Implications:
This judgment underscores the strict adherence to deadlines in availing benefits under the Sabka Vishwas Scheme. It highlights that the disputed tax dues must be considered in full, based on the total amount of duty disputed in the appeal, regardless of whether the CENVAT credit was utilized or not. The decision also clarifies that the Court cannot extend the payment deadline for availing the benefits under the Scheme. Finally, the Court’s directive for future representations reflects a balanced approach, allowing the Petitioners one last opportunity to resolve the issue in accordance with the Scheme’s objectives.