Person Making 'Voluntary Disclosure' After Subjected To Audit Is Ineligible To Avail Benefit Of SVLDRS, 2019: Rajasthan High Court

The division bench of Acting Chief Justice Manindra Mohan Shrivastava and Justice Madan Gopal Vyas has observed that the petitioner fell within the mischief under Section 125(1)(f) of the Finance (No.2) Act, 2019 and was thus not entitled to avail the benefit of the SVLDRS, 2019 by submitting a declaration. The petitioner suppressed the most material fact of its having been subjected to audit proceedings vide intimation dated 28.11.2019 while submitting its declaration on 31.12.2019. It was to mislead the authorities by withholding relevant information, upon disclosure of which its declaration was not liable to be proceeded further. The petitioner, by suppression, procured benefit by way of the issuance of a discharge certificate.

The petitioner/assessee was involved in construction activities bearing Service Tax Registration and filed an online application to avail the benefit of SVLDRS before the authorities on December 31, 2019. The respondents/department also issued the discharge certificate or full and final settlement tax dues under Section 127 of the Finance (No. 2) Act of 2019 read with Rule 9 of the Scheme of 2019. The respondent issued 3 ARN numbers to the petitioner.

Before submitting the application under "Voluntary Disclosure", a letter was issued intimating the initiation of proceedings for conducting a Service Tax Audit by the Assistant Commissioner, Audit Circle, Jodhpur. Though the petitioner requested the authority about the fact of it having availed the benefit under SVLDRS, the proceedings continued, which required the petitioner to submit the required records to the audit team.

The petitioner requested the designated Committee constituted under the Scheme of 2019 to give an opportunity of hearing before passing any adverse order, but it was not afforded.

The audit proceedings eventually resulted in the issuance of an Internal Audit Report against the petitioner for the same period for which the petitioner had filed an application under the SVLDRS, followed by a show cause notice.

The petitioner, anticipating adverse action against it in view of pending audit proceedings, had requested the department to afford it an opportunity of hearing. However, opportunity was also not granted and a decision was taken to reject the declarations, holding the petitioner ineligible to seek the benefit of SVLDRS. Therefore, respondents' actions were vitiated due to a violation of the principles of natural justice.

The petitioner contended that the petitioner was not only entitled to the benefit of the SVLDRS on the basis of the declaration made by it but a discharge certificate was also issued in its favour on 07.02.2020. The audit proceedings initiated vide Letter dated 28.11.2019, Internal Audit Report dated 08.01.2021 and Show Cause Notice dated 08.01.2021 were not maintainable against the petitioner. The proceedings, audit report, and show cause notice are also liable to be quashed.

The department contended that the petitioner had applied for the benefit of the Scheme of 2019 under 'Voluntary Disclosure' on 31.12.2019. However, before that, audit proceedings were initiated via a Letter dated 28.11.2019 requiring the petitioner to provide necessary documents to conduct the audit of the petitioner-firm. Thus, the audit enquiry was taken up by the department prior to the filing of the SVLDRS application dated December 31, 2019. The petitioner avoided furnishing necessary documents and information so as to delay the audit and avoid completion of audit proceedings and the audit report.

The court noted that as per Section 129 (2)(C) of the Finance (No.2) Act, in a case of "Voluntary Disclosure", where any material particular furnished in the declaration is subsequently found to be false, within a period of one year of the issue of the discharge certificate, it shall be presumed as if the declaration was never made and proceedings under the applicable Indirect Tax enactment shall be instituted.

The court ruled that the authorities rightly concluded that the declaration filed by the petitioner under the category of "Voluntary Disclosure" appears to have been filed wrongly as the audit had already been initiated. Resultantly, SVLDRS applications were cancelled.

Case Title: Malik Builders Versus UOI

Citation : 2022 LiveLaw (Raj) 228

Case No: D.B. Civil Writ Petition No. 7527/2021

Date: 30/08/2022

Counsel For Petitioner: Advocate Jagat Tatia

Counsel For Respondent: Advocates Rajvendra Saraswat, Vipul Singhvi

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