Oral Judgment: (Ujjal Bhuyan, J.)
1. Heard Mr. Jas Sanghavi, learned counsel for the petitioners and Mr. Sham Walve along with Mr. Ram Ochani, learned counsel for the respondents.
2. By filing this petition under Article 226 of the Constitution of India, petitioners seek quashing of orders dated 12.02.2020 and 08.06.2020 rejecting the declarations of the petitioners dated 27.11.2019 and 10.01.2020 respectively under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (briefly "the scheme" hereinafter) and further seeks a direction to the respondents to reconsider the said declarations in terms of the scheme and grant the consequential reliefs. Further prayer made is for a direction to the respondents not to proceed with the show cause notice dated 30.12.2020 issued by respondent No.6.
3. Petitioner No.1 is a company incorporated under the Companies Act, 1956 and is engaged in the business of providing manpower recruitment and payroll processing services. Petitioner No.2 is a director of petitioner No.1. Being a service provider, petitioner No.1 got itself registered as a service provider under the Finance Act, 1994.
4. It is stated that because of severe financial crisis and other difficulties, petitioners could not discharge their erstwhile service tax liability and the subsequent goods and services tax (GST) liability to the tune of Rs.11.1 crores approximately till February, 2018. In this connection, two summons were issued to the petitioners both dated 30.03.2018. Responding to the summons, petitioner No.2 appeared before the Superintendent in the office of the Directorate General of Goods and Services Tax Intelligence (DGGSTI), Zonal Unit, Mumbai on 30.03.2018. On that date his statement was recorded under section 14 of the Central Excise Act, 1944 read with section 174 of the Central Goods and Services Tax Act, 2017 ( briefly "the CGST Act" hereinafter) as well as under section 70 of the said Act. Question No.5 put to petitioner No.2 was as to what was the service tax and GST liability of petitioner No.1 as on February, 2018. In his reply petitioner No.2 stated that till February, 2018 service tax liability would be Rs.6 crore approximately and GST liability would be Rs. 5.1 crore approximately, total amounting to Rs. 11.10 crores. He admitted that despite charging and collecting service tax from the clients, the same was not deposited into the government exchequer.
5. Following the above statement, several communications were exchanged between the petitioners and the Directorate General of GST Intelligence including one dated 31.08.2018 whereby the Senior Intelligence Officer referred to the statement of petitioner No.2 dated 30.03.2018 and the admission that petitioner No.1 had service tax and GST liability of Rs.11.10 crores.
6. In the meanwhile, Central Government introduced the scheme under the Finance (No.2) Act, 2019. Subsequently rules were also framed.
7. To avail the benefit under the scheme, petitioners submitted declaration in the prescribed form on 27.11.2019 under the category of "investigation, enquiry or audit" with sub-categorization of "investigation by DGGI". However, in this declaration the amount of service tax liability was shown at a lower figure of Rs. 5,16,24,145.00 with deposit of Rs. 2,97,91,340.00.
8. Petitioner was granted a personal hearing by the designated committee i.e. respondent No.4 on 30.12.2019 since a view was taken that the amount of service tax liability was not quantified before 30.06.2019 which is the cut off date under the scheme and therefore petitioners were not eligible under the said scheme. In the personal hearing, petitioners explained the discrepancy in the figure of service tax liability. It was stated that the statement dated 30.03.2018 covered the entire period of two service tax returns i.e. for the period from October 2016 to March 2017 and from April 2017 to June 2017 which worked out to Rs. 6,13,91,021.00. However, service tax liability for the month of October, 2016 amounting to Rs.99,00,911.00 had already been paid before commencement of investigation. Therefore, the figure of Rs. 5,16,24,145.00 was mentioned in the declaration dated 27.11.2019.
9. Pending the decision on the declaration dated 27.11.2019, petitioners were advised that their declaration may be rejected as the amount of service tax liability was shown as Rs. 5,16,24,145.00 whereas as per the admission of petitioner No.2 dated 30.03.2018, the service tax liability was approximately Rs.6 crore. In such circumstances, petitioners submitted another declaration in the prescribed form on 10.01.2020.
10. Be that as it may, by a written communication dated 12.02.2020 respondent No.4 rejected the declaration of the petitioners dated 27.11.2019 on the ground that quantification of service tax liability was not made final by 30.06.2019. On similar ground, the second declaration dated 10.01.2020 was also rejected by respondent No.4 on 08.06.2020.
11. Aggrieved, present writ petition has been filed seeking the reliefs as indicated above.
12. Respondent Nos. 2, 3 and 4 have filed a common affidavit. Firstly, it has been explained as to why rejection order dated 12.02.2020 had to be issued in physical form as it is stated that there was some technical issue in the portal of the scheme which necessitated issuing of order in physical form. It is stated that verification regarding the outstanding service tax dues of the petitioners were sought for from the Directorate General of GST Intelligence which was an internal communication between two different wings of the department. As per verification report of the Directorate General of GST Intelligence, service tax amount had not been quantified before 30.06.2019 which is the cut off date under the scheme. Therefore, petitioners were not eligible under the scheme. After giving an opportunity of hearing to the petitioners, the declarations were rejected. However, it has been pointed out that in the first declaration dated 27.11.2019, petitioners had declared service tax dues of Rs. 5,16,24,145.00 with deposit of Rs. 2,97,91,340.00. But in their second declaration dated 10.01.2020, petitioners had declared service tax dues of Rs. 6,13,91,021.00 with deposit of Rs. 2,97,91,340.00. Thus, in a span of only 43 days, there was vast discrepancy in the service tax liability disclosed by the petitioners in the two declarations i.e. Rs. 5,16,24,145.00 and Rs. 6,13,91,021.00. Therefore, the declarations were inconsistant. Referring to section 124(1)(d) of the Finance (No.2) Act, 2019, respondents have justified rejection of the declarations of the petitioners.
13. Petitioners have filed rejoinder affidavit controverting the averments made by the respondent Nos. 2, 3 and 4 in the reply affidavit and reiterating the averments made in the writ petition. Regarding discrepancies in the quantum of service tax liability in the two declarations, it is stated that petitioner No.2 in his statement dated 30.03.2018 had admitted the arrears of service tax and based on this admission, show cause notice dated 30.12.2020 has been issued wherein the amount of tax dues of the petitioners has been quantified at Rs. 6,13,91,021.00 which is the exact amount admitted by the petitioner No.2 in his statement dated 30.03.2018.
14. In the course of the hearing, Mr. Sanghavi, learned counsel for the petitioners submitted that there was no malafide intention of the petitioners to show the liability on the lower side while filing the first declaration. It was on account of deduction of the deposit made by the petitioners for which the lesser figure was shown. However, he submits that for the purpose of the scheme, the second declaration of the petitioner dated 10.01.2020 should be considered as the declaration of the petitioner in place of the first declaration.
15. Submissions made by the learned counsel for the parties are on pleaded lines. Therefore, a detailed reference to the same is considered not necessary. However, the submissions so made have received the due consideration of the Court.
16. Issue raised in the present writ petition i.e. eligibility of the petitioners or maintainability of the declaration to avail the benefits of the scheme under the category of investigation, enquiry or audit on the ground that service tax dues of the petitioners for the related period was not quantified on or before 30th June, 2019 is no longer res-integra.
17. In Thought Blurb Vs. Union of India (2020-TIOL-1813-HC-MUM-ST), this court faced with a similar issue referred to provisions of the Finance (No.2) Act, 2019 and 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 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 24th 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 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.”
18. 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 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].”
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“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.”
19. 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:-
“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. 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 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.
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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 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.”
20. 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. For eligibility under the scheme, the quantification need not be on completion of investigation by issuing show-cause notice or the amount that may be determined upon adjudication.
21. In so far the present case is concerned, there is no dispute that petitioner No.2 in his statement made before the Directorate General of GST Intelligence on 30.03.2018 had admitted service tax liability to the extent of Rs. 6 crore approximately. This was accepted by the respondents and in the subsequent communications issued to the petitioners on 31.08.2018 as well as on 16.05.2019 respondents had relied upon and referred to the admission of petitioner No.2 to the extent of service tax liability of Rs. 6 crore. To remove any doubt on this count, we find that after rejection of the two declarations of the petitioners, respondent No.6 has issued show cause cum demand notice dated 30.12.2020 alleging amongst others that petitioners have defaulted in payment of service tax to the extent of Rs. 6,13,91,021.00 for the period from 2013-14 to 2017-18 (upto June, 2017) which is the exact figure of service tax liability disclosed by the petitioners in the second declaration dated 10.01.2020.
22. Though petitioners had made a mistake in not disclosing this figure of Rs. 6,13,91,021.00 in the first declaration, the situation was rectified by filing the second declaration before rejection of the first declaration disclosing the aforesaid figure. We find that the second declaration was filed on 10.01.2020 whereas the first declaration was rejected on 12.02.2020.
23. In such circumstances, we are of the view that the quantum of service tax liability of the petitioner was the amount of service tax liability of the petitioners quantified in terms of the scheme on admission of the petitioners prior to the cut off date of 30.06.2019 i.e. Rs. 6 crores approximately which roughly corresponds to the declared figure of Rs. 6,13,91,021.00 in the second declaration. In such circumstances, rejection of the second declaration of the petitioners on the ground of ineligibility is not justified.
24. At this stage, we may refer to our decision in the case of Sabareesh Pallikere Vs. Jurisdictional Designated Committee, Thane Commissionerate (Civil Writ Petition (st) No. 5510 of 2020 decided on 11.02.2021)wherein we have held as under:-
"In so far the present case is concerned, we may refer to the first statement of the petitioner recorded on 06.07.2018. In this statement, he categorically admitted that the total service tax liability of the petitioner for the period 2013-14 to 2017-18 (upto June, 2017) would be around Rs.1.93 crores. While petitioner did not give the exact figure of total service tax dues, he nonetheless admitted such dues to be around Rs.1.93 crores which was subsequently enhanced in his statement dated 25.09.2019 to Rs.2,08,29,640.00. From a conjoint reading of section 121(r) of the Finance (No.2) Act, 2019, circular of the Board dated 27.08.2019 and answers to question Nos. 3 and 45 of the Frequently Asked Questions, a view can legitimately be taken that the requirement under the scheme is admission of tax liability by the declarant during inquiry, investigation or audit report. It is not necessary that the figures on such admission should have mathematical precision or should be exactly the same as the subsequent quantification by the authorities in the form of show-cause notice etc. post 30.06.2019. The object of the scheme is to encourage persons to go for settlement who had bonafidely declared outstanding tax dues prior to the cut off date of 30.06.2019. The fact that there could be discrepancy in the figure of tax dues admitted by the person concerned prior to 30.06.2019 and subsequently quantified by the departmental authorities would not be material to determine eligibility in terms of the scheme under the category of inquiry, investigation or audit. What is relevant is admission of tax dues or duty liability by the declarant before the cut off date. Of course the figure or quantum admitted must have some resemblance to the actual dues. In our view, petitioner had fulfilled the said requirement and therefore he was eligible to make the declaration in terms of the scheme under the aforesaid category. Rejection of his declaration therefore on the ground of ineligibility is not justified."
25. That apart, in Thought Blurb (supra) 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 it. 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
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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) 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.” 26. Thus, on a thorough consideration of the matter, we set aside the order dated 08.06.2020 and remand the matter back to respondent No.4 to consider the declaration of the petitioners dated 10.01.2020 afresh as a valid declaration in terms of the scheme under the category of investigation, enquiry and audit and thereafter grant the consequential relief(s) to the petitioners. While doing so, respondent No.1 shall provide an opportunity of hearing to the petitioners and thereafter pass a speaking order with due communication to the petitioners. 27. The above exercise shall be carried out within a period of eight weeks from the date of receipt of a copy of this order. 28. Writ petition is accordingly allowed to the extent indicated above. However, there shall be no order as to cost. 29. In view of the disposal of the writ petition, interim application (l) No. 867 of 2021 does not survive and the same is disposed of accordingly.