Failure To Adjust Interest Paid By NCPA Is Hyper-Technical, Should Not Affect Sabka Vishwas Scheme: Bombay High Court

The Bombay High Court has held that failure to adjust interest paid by the National Centre for the Performing Arts (NCPA) was hyper- technical and should not come in the way of implementation of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 ( SVLDRS).

The division bench of Justice Nitin Jamdar and Justice Abhay Ahuja has observed that the object of the SVLDR Scheme should not be lost sight of, as the scheme has itself been formulated for the smooth settlement of disputes. The interpretation of the provisions should be to carry forward the object rather than to frustrate the it by giving rise to more litigation.

The petitioner/assessee is a public trust registered under the Societies Registration Act, 1860. It is a non profit institution engaged in providing various services such as holding entertainment events, renting out auditoriums, sponsorship etc., some of which services were liable to service tax/GST and some were exempt and some were partly taxable and partly exempt.

Before the issuance of Show Cause Notice, during the course of pre-Show Cause Notice consultations, Petitioner had already paid the amount electronically. The amount consisted of the tax and interest.

The petitioner contended that the amount of interest was paid under protest and the balance amount was paid after accepting its liability to pay the service tax for wrong availment of CENVAT credit due to bonafide error.

The petitioner filed Form SVLDRS-2A with the Designated Committee explaining as to why Petitioner was entitled to the deduction paid by petitioner under Accounting Code 00441481 (i.e. ‘Other Receipts (Interest)’) under Section 124(2) of SVLDRS.

The Designated Committee did not accept Petitioner’s arguments and issued Form SVLDRS-3 dated 19 February 2020 with a final amount payable by the Petitioner as Rs. 37,67,015/- on the basis that sum of Rs. 40,28,670/- paid by Petitioner was not eligible for deduction under Section 124(2).

The petitioner was aggrieved that despite the language in Section 124(2) of the Finance Act, 2019, which refers to “any amount paid” as deposit or pre-deposit to be deducted when issuing the statement indicating the amount payable by the declarant, the Designated Committee has gone ahead and not given credit for the amount of interest already paid by Petitioner prior to the issuance of Show Cause Notice by the department.

The department contended that the amount of interest in respect of which deduction is sought by Petitioner does not form part of the service tax payments. Therefore, the Designated Committee has rightly not considered it while issuing Form-3.

The court held that since the government has allowed waiver of entire interest payable in terms of Central Excise / Service Tax Act it would be illogical to provide for deduction of interest paid from the principal amount of duty / tax required to be paid. The phrase “any amount paid” in Section 124(2) does not discriminate between the amount of tax, duty or interest or penalty and would include the same, considering the beneficent nature of the legislation.

"Where “any amount paid” in Section 124 (2) has been interpreted to include the amount of interest that has been paid by the declarant, we have no hesitation in holding that the Designated Committee ought to have given due credit of the sum of Rs. 40,28,670/- as interest deposited by Petitioner was prior to the issuance of the Show Cause Notice," the court said.

The court set aside the Form 3 issued by the Designated Committee and directed the Designated Committee to consider the declaration in SVLDRS-1 dated 27 December 2019 filed by the Petitioner in, within a period of six weeks after giving an opportunity of hearing to the Petitioner.

Case Title: National Centre for the Performing Arts Versus Union of India

Case No. - Writ Petition No. 2784 Of 2021

Citation: 2023 LiveLaw (Bom) 50

Date: 13.01.2023

Counsel For Petitioner: Advocate Chirag Shetty

Counsel For Respondent: Advocate Vijay Kantharia

Click Here To Read The Order