Assessee Eligible For SVLDRS Declaration Since The Demand Of Duty Quantified On Or Before June 30, 2019: Bombay High Court

The division bench of Justice K.R. Shriram and Justice Milind N. Jadhav has observed that the rejection of the petitioner's declaration on the ground that the final audit report was issued after June 30, 2019 was incorrect.

The petitioner/assessee is engaged in the construction of residential and commercial complexes and the rental of immovable property. The petitioner holds a Service Tax Registration Number for the construction of residential and commercial complexes and renting of immovable property, which is a taxable service under the Finance Act, 1994. In February 2018, the petitioner received a notice from the officers of CGST and Central Excise, Audit – II Commissionerate regarding Excise Audit-2000. Form ST-3 returns were filed by the petitioner for the months of April 2016 to September 2016, October 2016 to March 2017, and April 2017 to June 2017.

The GST Commissionerate carried out an audit of the records of petitioners. During the course of the audit, the petitioner was informed about outstanding service tax liability in respect of the returns filed. The petitioner was asked to pay the service tax along with interest. The petitioner accordingly paid the defaulted service tax amount. The petitioner informed the audit officers about the payment.

The petitioner received another letter from the authorities informing the petitioner that payment of service tax during the period from October 2015 to March 2017 was also delayed and the interest has not been paid. The petitioner was directed to pay interest and report compliance. It was also observed during the course of audit that the petitioner had made a short/delayed payment of service tax of Rs.49,440 for the year 2016-17 and the petitioner was called upon to pay the same along with interest for the delayed payment. The petitioner made payment on or about August 9th, 2019. The petitioner was also called upon to pay the late fee applicable on account of delayed payment, which was also paid by the petitioner.

The petitioner informed the audit department that they would like to apply for relief under the SVLDRS. After the scheme came into force with effect from 1st September 2019, petitioner filed online application Form No.1 under SVLDRS on 17th December 2019. The petitioner declared tax dues under Section 123 (c) of the Finance Act, 2019 at Rs. 1,39,74,842 and the amount payable under the scheme as per Section 121 (e) as NIL after availing relief under Section 124(1)(d) of the Act. A total of Rs. 1,14,18,634 was deducted for service tax, interest, and late fees.The department issued Form SVLDRS–2 showing the amount payable under the scheme as NIL but granting a personal hearing to the petitioner on January 30th, 2020. The petitioner attended a personal hearing and made its submissions. The department rejected the petitioner's declaration on the ground that, as per the final audit report dated November 7, 2019, the amount of tax dues was not quantified before June 30, 2019. Communications were exchanged, but to no avail. As there was no progress, the petitioner approached the court.

The department contended that the petitioner would fall under Clause (e) as an ineligible person because, in the petitioner's case, there was an audit and the amount of duty involved in the audit had not been quantified on or before June 30th, 2019.

The department relied upon the rejection letter in the petition where it was stated that the final audit report was issued on July 16th, 2019 and since that was after the cut off date of June 30th, 2019, the petitioner became ineligible to be a declarant. For the taxpayer to be ineligible under clause (e) of Section 125, twin conditions have to be met. Firstly, the declarant should have been subjected to an audit. Secondly, the amount of duty involved in the audit has not been quantified on or before the 30th day of June 2019.

The court noted that because the audit was conducted between March 29th and April 1st, 2019, these are the dates on which the amount of duty was calculated. Therefore, the amount of duty has been quantified on or before June 30th, 2019.

The court directed the department to reconsider the declaration filed by the petitioner and issue the necessary discharge certificate on Form SVLDRS in accordance with the law.

Case Title: B. Chopda Construction Private Limited V/s. Union of India and Ors.

Case No: Writ Petition No. 809 Of 2022

Dated: 11.07.2022

Counsel For Appellant: Advocate Namboodiri Prasannan

Counsel For Respondent: Advocate Dhananjay B. Deshmukh

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