SVLDR Scheme: Court Ruling Supports Taxpayer's Eligibility Despite Post-Cutoff Quantification.
22 November 2024
Financial Audit >> COMPLIANCES
In this case of Kuber Health Food & Allied Services Pvt. Ltd, Mumbai v/s The Union of India, Ministry of Finance, Department of Revenue, New Delhi & Others, the Petitioner challenged the rejection of its application under the *Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019* (SVLDR Scheme) by the Respondents, on the grounds that the quantification of the tax demand was made after the cut-off date of 30 June 2019. The dispute centers around the eligibility of the Petitioner to avail the benefits of the Scheme based on the timeline of tax liability quantification and whether such rejection was justifiable.
Background and Facts of the Case:
The Petitioner, registered under the Finance Act, 1994, was liable to pay service tax for the services rendered in "Outdoor Catering Services" and "Manpower Supply Services". During an investigation initiated by the Respondents in April 2018, the Petitioner was asked to provide documents, and their authorized representatives' statements were recorded.
On 16 April 2019, the Petitioner admitted its service tax liability for the period 2013-2018, amounting to Rs. 1,39,58,752 for the years 2014-2017. A payment of Rs. 20,08,662 was made for the 2013-2014 period, while the balance remained unsettled. In August 2019, the SVLDR Scheme was introduced to resolve pending tax disputes, but it set a crucial cut-off: tax liability must be quantified on or before 30 June 2019 for taxpayers to benefit from the Scheme.
However, the Petitioner’s application was rejected when they mentioned a higher disputed amount of Rs. 1,50,37,871, based on the show cause notice issued on 16 October 2019. The Respondents argued that since the amount was quantified post-30 June 2019, the Petitioner was not eligible for the Scheme.
Petitioner’s Argument:
The Petitioner’s counsel contended that the actual quantification of liability, amounting to Rs. 1,39,58,752, was admitted during the investigation before 30 June 2019. They further argued that the higher figure mentioned in the SVLDR application was included out of caution and did not affect the eligibility, as no financial refund was sought for the difference. The Petitioner emphasized that the quantification made during the investigation should be sufficient to qualify for the Scheme, given that the main aim of the Scheme was to reduce litigation.
Respondent’s Argument:
On the other hand, the Respondents’ legal counsel stated that since the figure of Rs. 1,50,37,871 was derived from the show cause notice issued post-30 June 2019, the Petitioner was ineligible for the SVLDR Scheme, as per the specific provisions in Section 125 of the Scheme. This provision excludes cases where the tax liability had not been quantified before the deadline.
Court’s Observations and Decision:
The Court acknowledged the facts, particularly that the Petitioner had admitted its tax liability amounting to Rs. 1,39,58,752 in the investigation before 30 June 2019. Although the Petitioner included a higher figure in the SVLDR application (Rs. 1,50,37,871) based on the show cause notice, the Court determined that this did not affect the eligibility criteria.
Section 121(r) of the SVLDR Scheme defines "quantified" as a written communication of the tax liability. The Court concluded that the Petitioner’s admission during the investigation, prior to the cut-off date, qualified as “quantification” under the Scheme, as it involved a clear acknowledgment of the tax dues.
Further, the Court referred to the clarification issued by the Ministry of Finance on 27 August 2019, which explicitly stated that an admission of duty during investigation or audit, even before the cut-off date, would be considered a valid quantification. In line with this, the Court found the rejection of the Petitioner’s application unwarranted and cited precedents from other similar cases where the rejection of applications on such grounds was deemed unjustified.
Legal Precedents and the Scheme’s Intent:
The Court also referenced decisions from co-ordinate benches, including those from *Sabareesh Pallikere* and *Unify Facility Management Pvt. Ltd.*, where similar situations had arisen. In those cases, the Court had ruled that the Scheme’s intent was to encourage taxpayers to settle disputes, and the precise quantification of the tax amount was not as critical as the fact that the liability had been acknowledged before the stipulated deadline. As long as the figures were reasonable, discrepancies in the amount should not disqualify the petitioner from the benefits of the Scheme.
Conclusion:
In conclusion, the Court quashed the Respondents’ rejection of the Petitioner’s application and directed the authorities to accept the application under the SVLDR Scheme. The Respondents were ordered to notify the Petitioner of any outstanding amounts under the Scheme and issue a final certificate once the payment, if any, was made. The petition was allowed with no cost imposed.
This case underscores the flexibility of the SVLDR Scheme in dealing with tax disputes and emphasizes the broader goal of the Scheme — to reduce litigation and encourage taxpayers to settle their dues without excessive formalities. By interpreting the rules in a manner that focuses on the intention to resolve disputes, the Court ensured that the Petitioner, who had acted in good faith, was not penalized for minor discrepancies in the figures disclosed.