Court’s Decision
The Himachal Pradesh High Court dismissed East Bourne Hotels’ writ petition seeking extension of the last date for payment under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The Court held that the statutory timelines under Section 127(5) of the Finance Act, 2019 for depositing tax dues are mandatory and not directory, and thus, non-payment within the stipulated period disqualifies a declarant from claiming relief under the scheme, even citing COVID-19 financial hardship.
Facts
East Bourne Hotels, engaged in the hospitality business, was under investigation for non-payment of service tax from 2011-2016. It filed nine declarations under the Sabka Vishwas Scheme in December 2019, initially categorised under “investigation” which provided for 70% relief. However, the authorities changed the category to “arrears”, reducing the relief to 50% and raising the dues to Rs. 29,48,623, payable by 30.06.2020. The petitioner, citing closure during the COVID lockdown and financial hardship, sought an extension till 30.06.2021, but the department issued recovery notices, leading to the writ petition seeking extension and recalculation.
Issues
- Whether the timelines under Section 127(5) of the Finance Act, 2019 for payment under the Sabka Vishwas Scheme are directory or mandatory.
- Whether the petitioner was entitled to an extension due to COVID-19-related financial hardship.
- Whether the categorisation change from “investigation” to “arrears” by the department was justified.
Petitioner’s Arguments
The petitioner argued:
- The timelines under Section 127(5) should be construed as directory in nature, allowing flexibility in exceptional circumstances like the COVID-19 pandemic.
- Their hotel operations were completely shut due to COVID-19 from March 2020, making payment by the due date impossible.
- The categorisation as “arrears” was incorrect as the amounts paid earlier were under compulsion during the investigation and should not have been treated as pre-deposit.
- They cited decisions of the Madras, Bombay, Gujarat, and Delhi High Courts granting extensions under similar circumstances, relying on Apnaa Projects, N. Sundararajan, and Cradle Runways cases to support extension with interest.
Respondent’s Arguments
The respondents contended:
- The statutory scheme and the Finance Act, 2019 prescribed a strict timeline for payment under the scheme.
- The petitioner’s inability to pay within the stipulated period disentitled it from the scheme’s benefits.
- The change in categorisation was consistent with legal provisions, and the petitioner was required to pay under the revised demand, failing which, recovery was initiated.
Analysis of the Law
The Court analysed:
- Section 127(5) of the Finance Act, 2019, and relevant notifications and circulars issued under the Sabka Vishwas Scheme.
- The COVID-19 extension orders by the Supreme Court were for limitation periods under procedural laws, not for statutory timelines under beneficial schemes.
- Precedents from other High Courts granting limited relief but underscoring the condition of payment with interest where delays were condoned due to COVID-19.
- The nature of the Sabka Vishwas Scheme as a complete code with no provision for condonation of delay in payment.
Precedent Analysis
The Court referred to:
- Apnaa Projects Pvt Ltd v. Joint Commissioner GST: Madras High Court allowed payment beyond the due date with interest under exceptional circumstances.
- N. Sundararajan v. Union of India: Relief granted by permitting payment with interest, acknowledging pandemic hardship.
- Cradle Runways Pvt Ltd v. Union of India and Sky Industries Ltd v. State of Gujarat: Contextually allowed delayed payments under SVLDRS with interest, interpreting timelines in a liberal manner.
However, the Court distinguished these cases, noting that they did not lay down a binding principle allowing extension under all circumstances, particularly where statutory provisions clearly limit payment timelines under the scheme.
Court’s Reasoning
The Court held:
- The Sabka Vishwas Scheme timelines are mandatory, forming the scheme’s backbone for conditional relief to taxpayers.
- COVID-19-related hardships do not override the express statutory conditions of the scheme, as extending the timelines would alter the scheme’s structure.
- The change in categorisation was a departmental discretion under the scheme.
- While sympathetic to the petitioner’s financial difficulties, the Court could not override statutory limits where the legislature’s intention was explicit.
Conclusion
The Himachal Pradesh High Court dismissed the writ petition, upholding the demand raised and the department’s action, reiterating:
“The timelines under the Sabka Vishwas Scheme are mandatory, and payment beyond the prescribed date disentitles the declarant from relief under the scheme.”
Implications
- Reinforces the binding nature of timelines under government amnesty and dispute resolution schemes.
- Clarifies that COVID-19 hardship cannot override clear statutory deadlines in conditional statutory schemes.
- Signals the importance of timely compliance to avail benefits under amnesty schemes, even in exceptional circumstances.
Short Note on Cases Referred
- Apnaa Projects Pvt Ltd: Extension granted with interest under exceptional pandemic hardship.
- N. Sundararajan v. Union of India: Allowed payment with interest acknowledging lockdown difficulties.
- Cradle Runways Pvt Ltd v. Union of India: Liberal interpretation under pandemic circumstances.
- However, these cases were distinguished, reaffirming that deadlines under the scheme remain mandatory unless explicitly provided otherwise.
FAQs
1. Are payment timelines under the Sabka Vishwas Scheme flexible due to COVID-19 hardships?
No, the timelines are mandatory, and relief cannot be claimed for payment made beyond the prescribed period under the scheme.
2. Can High Courts extend the payment deadlines under the Sabka Vishwas Scheme?
Courts generally cannot extend statutory payment deadlines under the scheme unless the law specifically permits.
3. What happens if payment is not made within the prescribed period under the Sabka Vishwas Scheme?
Non-payment within the deadline disentitles the declarant from receiving the benefits under the scheme, and recovery actions may proceed.