Landmark Associates vs Union Of India And 5 Ors
2021 Latest Caselaw 347 Bom

                      Priya Soparkar                              1                 3 wpl 4685-20-os


                       IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                           ORDINARY ORIGINAL CIVIL JURISDICTION

Balaji G.                         WRIT PETITION (L.) NO.4685                  OF 2020
Panchal               Landmark Associates                               ... Petitioner
                           V/s.
Digitally signed by
Balaji G. Panchal     Union of India and ors.                           ... Respondents
Date: 2021.01.11                                           ---
15:48:31 +0530
                      Mr.Bharat Raichandani i/by M/s UBR Legal, Advocate for the
                      Petitioner.
                      Mr.Pradeep S. Jetly, Senior Advocate with Mr.J.B.Mishra,
                      Advocates for the Respondents.
                                                ---

                                         CORAM : UJJAL BHUYAN &
                                                 ABHAY AHUJA, JJ.

DATE : JANUARY 07, 2021.

P.C.:-

1. Heard Mr.Raichandani, learned counsel for the petitioner; and Mr.Jetly, learned senior counsel alongwith Mr.J.B.Mishra, learned counsel for the respondents.

2. By filing this petition under Article 226 of the Constitution of India, petitioner seeks quashing of order dated 24th February, 2020 passed by respondent No.6 rejecting its declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and further seeks a direction to the respondents to reconsider the said declaration as a valid declaration and thereafter, grant the consequential reliefs.

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3. Case of the petitioner is that it is a partnership firm by the name of Landmark Associates having its office at Malad (W), Mumbai. It is engaged in the business of providing construction of residential complex services to its customers. Being a service provider it was registered as such under the Finance Act, 1994.

4. It is stated that petitioner was filing its service tax returns from time to time and paying service tax dues wherever applicable.

5. Service tax department initiated investigation against the petitioner for alleged non-payment of service tax covering the period from 1st April, 2012 to 30th June, 2017. In this connection, summons were issued to the petitioner. Statement of one of the partners of the petitioner, namely, Shri Pranay Pravin Patel was recorded under section 14 of the Central Excise Act, 1944 read with section 83 of the Finance Act, 1994 on 29th May, 2018.

6. In connection with the said inquiry, office of the Commissioner, Central Goods and Services Tax (CGST), Mumbai (W) had issued intimation to the petitioner dated 27 th July, 2018 mentioning that service tax liability to the extent of Rs.250 lakhs was outstanding though an amount of Rs.35 lakhs was paid. Reference was made to the promise made by Shri Patel, the partner in his statement recorded on 29th May, 2018 that the balance amount would be paid by 15th June, 2018. After noticing that no payments were made, Priya Soparkar 3 3 wpl 4685-20-os

the authority however agreed to the request of the partner for extension of time and directed the petitioner to pay the outstanding service tax dues within the extended period i.e. by 10th August, 2018.

7. Petitioner in his letter dated 4 th September, 2018 addressed to respondent No.4 stated that petitioner had unpaid service tax liability of Rs.205 lakhs for the period in question. Though payment of Rs.60 lakhs was made, the balance amount was yet to be paid for the reasons mentioned in the said letter. Therefore, further time was sought for.

8. Respondent No.4 by his letter dated 10th September, 2018 granted further 45 days time to pay the outstanding service tax dues as a one time relaxation.

9. Petitioner has stated that by the intimation dated 14 th September, 2018, it had informed respondent No.5 about the service tax liability till June, 2017, details of which are as under:-

Financial Year       Total Service Service      Tax Service       Tax
                     Tax Payable   Paid             Payable

2013-14                  63,70,236        57,57,473        6,12,763
2014-15                  46,63,370        20,50,000       26,13,370
2015-16                  48,26,575                0       48,26,575
2016-17                  35,85,247                0       35,85,247
2017-18                     99,548                0           99,548
TOTAL                  2,62,04,144       1,44,66,641    1,17,37,503
 Priya Soparkar                          4                     3 wpl 4685-20-os

10. Thereafter, petitioner submitted the relevant documents as sought for by respondent No.5.

11. Surprisingly, office of the Commissioner, CGST, Mumbai (W) issued notice under section 87(b) of the Finance Act, 1994 to the Branch Manager, ICICI Bank, Shivam Shopping Centre, S.V.Road, Malad (W), Mumbai on 3 rd December, 2018 stating that in the course of investigation it was found that petitioner had failed to discharge its service tax liability amounting to Rs.1,07,37,503.00 for the period from 2012-13 to June, 2017 alongwith interest thereon. Therefore, the said bank account of the petitioner was attached.

12. In the meanwhile, Central Government introduced the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (briefly "the scheme" hereinafter) vide the Finance (No.2) Act, 2019 to bring to an end pending litigations centering around central excise and service tax under the erstwhile indirect tax regime. As per the aforesaid scheme substantial benefits have been provided to the dealers making declaration under the scheme subject to eligibility.

13. In terms of the said scheme petitioner filed declaration on 31st December, 2019 under the category of "Investigation, Enquiry or Audit", within the sub-category of "Investigation By Commissionerate". Petitioner mentioned that service tax dues outstanding against it was Rs.2,62,04,144.00.

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14. However, respondent No.6 by order dated 24th February, 2020 rejected the declaration of the petitioner on the ground of ineligibility. In the remarks column it was mentioned that tax dues were not quantified as per letter No. F.No.V/CGST/Mum West/T-4/Landmark/Enquiry/14/2018 dated 5th February, 2020 from DC(Investigation), CGST, Mumbai (W).

15. Petitioner submitted letter dated 26 th February, 2020 requesting respondent No.4 to grant an opportunity of hearing to explain its eligibility under the scheme. However there was no response.

16. Aggrieved, present writ petition has been filed seeking the reliefs as indicated above.

17. Petitioner contends that it was eligible and its declaration under the mentioned category was valid. In this connection petitioner has placed reliance on the circular of the Central Board of Indirect Taxes and Customs dated 27 th August, 2019.

18. Respondents have filed affidavit in reply through Shri Yudhast Kumar, Deputy commissioner(Investigation), CGST, Mumbai (W). Stand taken in the affidavit is that during the course of investigation statement of the partner of the petitioner Shri Patel was recorded on 26 th March, 2018, wherein he admitted that petitioner had collected service tax from its clients but made short payment to the service tax Priya Soparkar 6 3 wpl 4685-20-os

department to the extent of Rs.203 lakhs till June, 2017. However, in his subsequent statement dated 29 th May, 2018 he revised the outstanding dues to Rs.250 lakhs. Subsequently, in the letters dated 31st May, 2018 and 4th September, 2018 petitioner continued to revise the outstanding service tax dues at Rs.278 lakhs and Rs.205 lakhs respectively. In such circumstances, it is contended that there was no fixed dues quantified by the petitioner who kept on changing the quantum of outstanding dues.

19. Regarding the notice issued under section 87 of the Finance Act, 1994 it is contended that the same was issued for the purpose of recovery of the tax dues and for safeguarding government revenue. It could not be construed to mean that investigation was over and that respondents had accepted the petitioner's liability at Rs.262 lakhs.

20. Regarding declaration filed by the petitioner it is stated that petitioner had filed its first declaration on 30 th December, 2019 wherein it declared outstanding service tax dues at Rs.2,26,02,083.83. However, on the very next day it filed another declaration dated 31st December, 2019 declaring outstanding service tax dues at Rs.2,62,04,144.00.

21. Be that as it may, declaration of the petitioner was rejected in accordance with merit since the tax dues were not quantified on or before 30th June, 2019. It is further stated that investigation against the petitioner is still going on as all the documents have not been submitted by the petitioner.

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22. Referring to the circular dated 27th August, 2019 of the Central Board of Indirect Taxes and Customs (briefly "the Board" hereinafter) on the basis of which the petitioner had claimed benefit, it is contended that petitioner is not eligible to any benefit under the said scheme as no communication was ever made by the respondents confirming the outstanding dues. Duty liability admitted by the petitioner during enquiry was not final as the quantum was changed repeatedly by the petitioner.

23. Regarding grant of personal hearing it is stated that in the present case hearing was not granted as the declaration itself was not admissible in the absence of quantification of service tax dues before 30th June, 2019. Since there was no provision for granting hearing to decide eligibility, Designated Committee rejected the declaration without any hearing.

24. In the above circumstances, respondents seek dismissal of the writ petition.

25. Petitioner has filed rejoinder affidavit reiterating the contentions made in the writ petition. In addition, petitioner has relied upon certain judgments passed by this court. Further reference has been made to section 87(b) of the Finance Act, 1994 whereafter petitioner contends that a notice under the said section can only be issued for recovery of an amount which has been found to be due from a Priya Soparkar 8 3 wpl 4685-20-os

person. Therefore, when the respondents had issued notice dated 4th December, 2018 under section 87(b) of the Finance Act, 1994, it is an acknowledgment of the fact that the outstanding dues of the petitioner had crystallized whereafter the recovery proceedings were initiated.

26. Learned counsel for the parties have made elaborate submissions more or less identical to the pleadings before us. Therefore, it may not be necessary to extensively refer to the arguments made by learned counsel for the parties. However, the submissions so made have been given due consideration.

27. Issue raised in the present writ petition i.e. eligibility of the petitioner or maintainability of its declaration to avail the benefits of the scheme under the category of investigation, enquiry or audit on the ground that quantification of the service tax dues of the petitioner for the related period was not quantified on or before 30 th June, 2019 is no longer res-integra.

28. In Thought Blurb Vs. Union of India, 2020-TIOL- 1813-HC-MUM-ST, this court faced with a similar issue referred to the circular dated 27th August, 2019 of the Central Board of Indirect Taxes and Customs (briefly "the Board" hereinafter) whereafter it was held as under :-

"47. Reverting back to the circular dated 27th August, 2019 of the Board, it is seen that certain clarifications were issued on various issues in the context of the Priya Soparkar 9 3 wpl 4685-20-os

scheme and the rules made thereunder. As per paragraph 10(g) of the said circular, the following issue was clarified in the context of the various provisions of the Finance (No.2) Act 2019 and the Rules made thereunder :-

Cases under an enquiry, investigation or audit where the duty demand has been quantified on or before the 30th day of June, 2019 are eligible under the scheme. Section 2(r) defines "quantified" as a written communication of the amount of duty payable under the indirect tax enactment. It is clarified that such written communication will include a letter intimating duty demand; or duty liability admitted by the person during enquiry, investigation or audit; or audit report etc.

48. Thus as per the above clarification, written communication in terms of section 121(r) will include a letter intimating duty demand or duty liability admitted by the person during enquiry, investigation or audit etc. This has been also explained in the form of frequently asked questions (FAQs) prepared by the department on 24 th December, 2019.

49. Reverting back to the facts of the present case, we find that on the one hand there is a letter of respondent No.3 to the petitioner quantifying the service tax liability for the period 1st April, 2016 to 31st March, 2017 at Rs.47,44,937.00 which quantification is before the cut off date of 30th June, 2019 and on the other hand for the second period i.e. from 1st April, 2017 to 30th June, 2017 there is a letter dated 18th June, 2019 of the petitioner addressed to respondent No.3 admitting service tax liability for an amount of Rs.10,74,011.00 Priya Soparkar 10 3 wpl 4685-20-os

which again is before the cut off date of 30th June, 2019. Thus, petitioner's tax dues were quantified on or before 30th June, 2019.

50. In that view of the matter, we have no hesitation to hold that petitioner was eligible to file the application (declaration) as per the scheme under the category of enquiry or investigation or audit whose tax dues stood quantified on or before 30th June, 2019."

29. Subsequently, in M/s G.R.Palle Electricals Vs. Union of India, 2020-TIOL-2031-HC-MUM-ST, this court held as follows:-

"27. We have already noticed that proprietor of the petitioner in his statement recorded on 11.01.2018 by the investigating authority admitted the service tax liability of Rs.60 lakhs (approximately) to be outstanding for the period from 2015- 2016 to June, 2017. This was corroborated by the departmental authority in the letter dated 24.01.2018 which we have already noted and discussed. Therefore, present is a case where there is acknowledgment by the petitioner of the duty liability as well as by the department in its communication to the petitioner. Thus, it can be said that in the case of the petitioner the amount of duty involved had been quantified on or before 30.06.2019. In such circumstances, rejection of the application (declaration) of the petitioner on the ground of being ineligible with the remark that investigation was still going on and the duty amount was pending for quantification would not be justified.

28. This position has also been explained by the department itself in the form of Priya Soparkar 11 3 wpl 4685-20-os

frequently asked questions (FAQs).

Question Nos.3 and 45 and the answers provided thereto are relevant and those are reproduced hereunder :-

"Q3. If an enquiry or investigation or audit has started but the tax dues have not been quantified whether the person is eligible to opt for the Scheme?

Ans. No. If an audit, enquiry or investigation has started, and the amount of duty/duty payable has not been quantified on or before 30th June, 2019, the person shall not be eligible to opt for the Scheme under the enquiry or investigation or audit category. 'Quantified' means a written communication of the amount of duty payable under the indirect tax enactment [Section 121(r)]. Such written communication will include a letter intimating duty demand; or duty liability admitted by the person during enquiry, investigation or audit; or audit report etc. [Para 10(g) of Circular No 1071/4/2019-CX dated 27th August, 2019]."

* * * * "Q45. With respect to cases under enquiry, investigation or audit what is meant by 'written communication' quantifying demand ?

Ans. Written communication will include a letter intimating duty/tax demand or duty/tax liability admitted by the person during enquiry, investigation or audit or audit report etc."

30. Finally in Saksham Facility Private Limited Vs. Union of India, 2020-TIOL-2108-HC-MUM-ST, where a similar issue had cropped up, this court reiterated the above position and held as under :-

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"22.3. Clause (g) of paragraph 10 makes it abundantly clear that cases under an enquiry, investigation or audit where the duty demand had been quantified on or before 30.06.2019 would be eligible under the scheme. The word "quantified" has been defined under the scheme as a written communication of the amount of duty payable under the indirect tax enactment. In such circumstances, Board clarified that such written communication would include a letter intimating duty demand or duty liability admitted by the person during enquiry, investigation or audit etc.

23. Reverting back to the facts of the present case we find that there is clear admission / acknowledgment by the petitioner about the service tax liability. The acknowledgment is dated 27.06.2019 i.e., before 30.06.2019 both in the form of letter by the petitioner as well as statement of its Director, Shri. Sanjay R. Shirke. In fact, on a pointed query by the Senior Intelligence Officer as to whether petitioner accepted and admitted the revised service tax liability of Rs.2,47,32,456.00, the Director in his statement had clearly admitted and accepted the said amount as the service tax liability for the period from 2015-16 upto June, 2017 with further clarification that an amount of Rs.1,20,60,000.00 was already paid.

* * * * * * * *

26. Following the above it is evident that the word 'quantified' under the scheme would mean a written communication of the amount of duty payable which will include a letter intimating duty demand or duty liability admitted by the person concerned during enquiry, investigation or audit or audit report and not necessarily Priya Soparkar 13 3 wpl 4685-20-os

the amount crystalized following adjudication. Thus, petitioner was eligible to file the declaration in terms of the scheme under the category of enquiry or investigation or audit as its service tax dues stood quantified before 30.06.2019."

31. From the above it is evident that all that would be required for being eligible under the above category is a written communication which will mean a written communication of the amount of duty payable including a letter intimating duty demand or duty liability admitted by the person concerned during inquiry, investigation or audit.

32. In so far the present case is concerned, it is evident hat petitioner had given details of its outstanding service tax liability upto June, 2018 vide its intimation dated 14 th September, 2018 addressed to respondent No.5. The notice issued by the office of the Commissioner, CGST, Mumbai (W) under section 87(b) of the Finance Act, 1994 on 3rd December, 2018 also indicates that petitioner had failed to discharage its service tax liability due to the government amounting to Rs.1,07,37,503.00 for the related period which amount is slightly lesser than the amount quantified by the petitioner in its intimation dated 14th September, 2018.

33. The two dates i.e. 14th September, 2018 in so far the intimation is concerned and 3 rd December, 2018 in so far the notice under section 87(b) of the Finance Act, 1994 is concerned are prior to the cut off date of 30 th June, 2019. Therefore, having regard to the above, it can safely be said Priya Soparkar 14 3 wpl 4685-20-os

that the respondents were not justified in rejecting the declaration of the petitioner on the ground of ineligibility.

34. That apart, we find that in the impugned rejection order respondents have relied upon letter No.F.No.V/CGST/Mum West/T-4/Landmark/Enquiry/14/2018 dated 5 th February, 2020 issued by Deputy Commissioner (Investigation), CGST, Mumbai (W), copy of which has been annexed to the reply affidavit as Ex.C as per which letter the tax dues of Rs.2,26,02,083.83 and Rs.2,62,04,144.00 were not finalized by the service tax department as on 30 th June, 2019. Therefore, the view was taken that the declarant was not eligible under the scheme. We have already discussed in the cases alluded to hereinabove that considering the Board's circular dated 27th August, 2019 and the frequently asked questions (FAQs) prepared by the department, the above view is not correct because the quantification is for the purpose of eligibility under the scheme and not for the prupose of investigation into alleged tax evasion, and therefore finalisation of tax dues by the department is not necessary.

35. But there is one more aspect which we feel needs to be pointed out. While rejecting the declaration of the petitioner respondents have placed reliance on the letter dated 5 th February, 2020. But copy of the same was not furnished to the petitioner. Suffice it to say that it is a settled proposition that when an authority relies upon a document to take a decision which is adverse or prejudicial to a party, principles Priya Soparkar 15 3 wpl 4685-20-os

of natural justice demands that copy of such document or the essence thereof should be furnished to the affected party before the decision is taken so that the affected party can properly defend its case.

36. That apart, in Thought Blurb we have held that when there is a provision for granting personal hearing in a case where the declarant disputes the estimated amount, it would be in complete defiance of logic and contrary to the very object of the scheme to reject a declaration on the ground of being ineligible without giving a chance to the declarant to explain as to why its declaration should be accepted and relief under the scheme be extended to him. It was held as under :-

"51. We have already discussed that under sub sections (2) and (3) of section 127 in a case where the amount estimated by the Designated Committee exceeds the amount declared by the declarant, then an intimation has to be given to the declarant in the specified form about the estimate determined by the Designated Committee which is required to be paid by the declarant. However, before insisting on payment of the excess amount or the higher amount the Designated Committee is required to give an opportunity of hearing to the declarant. In a situation when the amount estimated by the Designated Committee is in excess of the amount declared by the declarant an opportunity of hearing is required to be given by the Designated Committee to the declarant, then it would be in complete defiance of logic and contrary to the very object of the scheme to outrightly reject an application (declaration) on the ground of being ineligible without giving a chance to the declarant to explain as to why his application (declaration) Priya Soparkar 16 3 wpl 4685-20-os

should be accepted and relief under the scheme should be extended to him. Summary rejection of an application without affording any opportunity of hearing to the declarant would be in violation of the principles of natural justice. Rejection of application (declaration) will lead to adverse civil consequences for the declarant as he would have to face the consequences of enquiry or investigation or audit. As has been held by us in Capgemini Technology Services India Limited (supra) it is axiomatic that when a person is visited by adverse civil consequences, principles of natural justice like notice and hearing would have to be complied with. Non-compliance to the principles of natural justice would impeach the decision making process rendering the decision invalid in law."

37. Thus, on a thorough consideration of the matter, we set aside the order dated 24th February, 2020 and remand the matter back to respondent No.6 to consider the declaration of the petitioner in terms of the scheme as a valid declaration under the category of investigation, enquiry and audit and thereafter grant the consequential reliefs to the petitioner. While doing so the respondents shall provide an opportunity of hearing to the petitioner and thereafter, pass a speaking order with due communication to the petitioner. The above exercise shall be carried out within a period of six weeks from the date of receipt of a copy of this order.

38. Writ petition is accordingly allowed to the above extent. However, there shall be no order as to costs.

39. This order will be digitally signed by the Private Secretary/Personal Assistant of this Court. All concerned will Priya Soparkar 17 3 wpl 4685-20-os

act on production by fax or email of a digitally signed copy of this order.

(ABHAY AHUJA, J.)                    (UJJAL BHUYAN, J.)
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