The Division Bench of the Delhi High Court in the case of Ideal Broadcasting India Pvt. Ltd vs Union of India & Ors. consisting of Justices Yashwant Varma and Dharmesh Sharma held that in terms of Section 121 (r) of the Finance Act, 2019, the term “quantified” refers to a written communication of the amount of tax owed under indirect tax laws. Only the tax department has the authority to determine the amount, and not the taxpayer themselves. So, the taxpayer cannot take advantage of the Scheme unless the tax department determines the amount owed.
Facts:
The petitioner received a service tax assessment for commission income from outside India and was ordered to pay a total demand of Rs. 1,00,89,786/- along with interest and penalty. They had the right to file an appeal within two months, but a new Sabka Vishwas scheme was announced before the deadline. The scheme became operational on 21.08.2019 and applied to disputes from 01.09.2019 onwards. The company initially complained that the SVLDR Scheme only applied to cases where appeals were pending or had been decided before June 30, 2019.
The company wanted to take advantage of the scheme, but had filed an appeal on August 16, 2019, which excluded them from the scheme. They filed a writ petition, and an order was passed for the issue to be examined. Respondent no. 2 issued a circular on October 29, 2019, allowing the company to file a declaration under the scheme if they withdrew their appeal and provided an undertaking to the department.
Procedural History:
The petitioner’s complaints were resolved, and their writ petition was dismissed on December 3, 2019. The petitioner company withdrew their appeal on January 27, 2020, after submitting a form declaring their tax dues under litigation on December 30, 2019. They argued that their case did not fall under the definition of amounts in arrears because they filed their appeal after July 1, 2019, but before the deadline for filing appeals had passed.
The petitioner company has approached the court for the second time, stating that the respondents have issued Form SVLDRS-2 objecting to the classification of tax dues under litigation and seeking to classify them under the arrears category. After a hearing, the respondents passed an order declaring Form SVLDRS-3, which is being challenged for incorrectly classifying tax dues as amount in arrear instead of litigation. The petitioner claimed a rebate of up to 50% of tax dues under litigation, but the respondents have wrongly allowed a lesser rebate slab by treating the case under litigation. The tax dues have been quantified at Rs. 41,30,697.
Observations of the Court:
The Bench observed at the outset that the petition lacked any merit, and the reasons were not far to seek. The SVLDR Scheme was introduced by Respondent No. 2, which sets out the general objectives of the notification of the Scheme and also clarifies some related issues. Reference was made to the relevant passage from the provisions of the SVLDR Scheme included in Chapter V of the Finance Act 2019, which sets out the conditions for eligibility under the Scheme. A careful reading of the above provision revealed that the Scheme had given all persons the right to file a return in the absence of legal proceedings in respect of any duties/taxes before the “cut-off date”, i.e., 07/01/2019. Section 123 of the Scheme defines the meaning of the term “tax duties”. A careful reading of the above definition clearly indicated that there must have been some quantifiable amount of debt outstanding against the taxpayer at the “cut-off date”, and the above definition also covers the term “amount in arrears” within its competence.
It noted that careful perusal of the section 124(1) (a) & (c) showed that the relief provided in the SVLDR Scheme can be divided into two categories - litigation and arrears. The litigation category involves disputed or potentially disputed duties, while the arrears category involves duties that are not in dispute or have been finalized. The scheme applies to cases where there is some level of finality in the duty or tax dues as of the “cut-off date”.
It further noted that the SVLDR Scheme came into effect on 01.09.2019. However, it did not apply to the petitioner who had filed an appeal against the imposition of duty/tax after the cut-off date. The issue was addressed through an interim order and a circular was issued on 29.10.2019. The petitioner then submitted a declaration and withdrew their appeal on 27.01.2020. The petitioner chose to use the SVLDR Scheme and agreed to withdraw their appeal but made a mistake in filing the declaration. So, they could not claim they were forced to withdraw the appeal or challenge the consideration of their case under the “arrears” category. The petitioner knew the respondent’s stance on their tax liabilities and made a well-informed decision to withdraw the appeal. This resulted in the order becoming an “amount in arrears”.
So, the interpretation of Section 123(a)(1) and Section 124(1)(a) of the Scheme showed that if an appeal was withdrawn and a declaration was filed after 01.07.2019, the case would be considered under the “arrears” category. This was evidenced by the fact that the petitioner accepted the Department's calculation and paid the amount owed without protest, resulting in a Discharge Certificate being issued. If the demand for duty had not been finalized or had not been admitted by the declarant, it shall fall under the “litigation” category, but if it had been finalized, it shall fall under the “arrears” category. The petitioner’s claim of undue prejudice was unfounded as the penalty imposed had also been wiped out.
Before closing this petition, the Bench found it important to note that in the case of Nidhi Gupta v. Union of India, the SVLDR Scheme, 2019 was examined and it was observed that Circular No. 1072/05/2019.CX dated 25.09.2019 allowed taxpayers to file a declaration under the Scheme by giving an undertaking that they would not file an appeal. This circular was found to be in compliance with Rule 3 of the Scheme-2019 under the Finance Act, 2019. Moreover, as held in Karan Singh v. Designated Committee Sabka Vikas Legacy Dispute Resolution Scheme that the word “quantified” means a written communication of the amount of duty payable under indirect tax enactment and that a unilateral quantification by the petitioner does not render the assessee eligible to avail the benefit of the Scheme since it was the prerogative of the Department to quantify the amount and not the assessee.
Judgment:
The Bench did not find any merit in this writ petition and dismissed it accordingly.
Case: Ideal Broadcasting India Pvt. Ltd vs Union of India & Ors.
Citation: W.P.(C) 3739/2020 & CM APPL. 13407/2020
Bench: Hon’ble Mr. Justice Yashwant Varma, Hon’ble Mr. Justice Dharmesh Sharma
For Petitioner: Ms. Kavita Jha, Mr. Shammi Kapoor, Mr. Vishal Kumar and Ms. Prachi Jain, Adv.
For Respondents: Mr. Harpreet Singh, Senior Standing counsel with Ms. Suhani Mathur and Mr. Jatin Kumar Gaur, Advs. for R-2 & 3 Mr. Harish Vaidyanathan Shankar, CGSC, Mr. Srish Kumar Mishra and Mr. Alexander Mathai Paikaday, Adv.
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