Facts of the Case

  1. The petitioner, Srinivas V., approached the Karnataka High Court under Article 226 of the Constitution of India.
  2. On 12 September 2018, the respondents issued a notice intimating the petitioner that he was due in a sum of Rs. 10,83,127.
  3. The same notice also quantified a sum of Rs. 99,00,000 towards service tax payable by the petitioner.
  4. At that stage, further investigation was stated to be still in progress.
  5. The demand was reiterated by the respondents through a subsequent final reminder dated 15 November 2018.
  6. Thereafter, a show cause notice dated 9 December 2019 was issued calling upon the petitioner to pay Rs. 95,94,517 towards shortfall in service tax.
  7. The show cause notice also required the petitioner to show cause why Rs. 57,02,485, already paid by him, should not be appropriated towards the amount demanded.
  8. On 12 December 2019, the petitioner submitted a declaration seeking benefit under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
  9. The petitioner sought waiver/benefit concerning the sum of Rs. 95,94,517, taking into account Rs. 57,02,485 already paid.
  10. The petitioner’s case was that Rs. 99,00,000 had already been quantified by the respondents before the cut-off date of 30 June 2019.
  11. The petitioner further pointed out that the later show cause notice demand of Rs. 95,94,517 was lower than the earlier quantified amount of Rs. 99,00,000.
  12. Despite these circumstances, the petitioner’s claim for benefit under the SVLDRS Scheme was rejected.
  13. The respondents also proceeded to pass the impugned adjudication order confirming duty demand with interest and penalty as demanded in the show cause notice.
  14. Aggrieved by rejection of the Scheme benefit and the consequential orders, the petitioner approached the High Court.

Issues Involved

The principal issues before the Karnataka High Court were:

  1. Whether quantification of service tax liability by the Revenue itself before 30 June 2019 satisfied the requirement for eligibility under the SVLDRS Scheme.
  2. Whether pendency of further enquiry, investigation or audit as on 30 June 2019 could defeat eligibility where the duty liability had already been quantified before the cut-off date.
  3. Whether the notice dated 12 September 2018 quantifying service tax payable at Rs. 99,00,000 constituted sufficient pre-cut-off quantification.
  4. Whether the petitioner was entitled to rely upon the fact that Rs. 57,02,485 had already been paid much before the cut-off date.
  5. Whether rejection of the petitioner’s SVLDRS application was contrary to the CBIC Circulars dated 27 August 2019 and 12 December 2019.
  6. Whether the principles laid down in M/s Bioneeds (P) Limited v. Commissioner of Central Tax & Others, M/s Nikitha Build Tech (P) Limited v. Union of India & Others, and M/s LM Wind Power Blades India Pvt. Ltd. v. Designated Committee & Others applied to the petitioner’s case.
  7. Whether the impugned orders deserved to be set aside and the SVLDRS application remitted for fresh reconsideration.

Petitioner’s Arguments

The petitioner contended as follows:

  1. The respondents themselves had quantified service tax payable at Rs. 99,00,000 through the notice dated 12 September 2018.
  2. This quantification occurred well before the statutory cut-off date of 30 June 2019.
  3. The quantified demand was reiterated through the final reminder dated 15 November 2018.
  4. The later show cause notice dated 9 December 2019 demanded Rs. 95,94,517, which was lower than the previously quantified sum of Rs. 99,00,000.
  5. A substantial amount of Rs. 57,02,485 had already been paid by the petitioner.
  6. Since quantification had occurred before 30 June 2019, the petitioner was entitled to the benefit of the SVLDRS Scheme.
  7. The petitioner’s declaration dated 12 December 2019 ought to have been considered in light of the Scheme.
  8. Rejection of the application was inconsistent with the CBIC Circulars dated 27 August 2019 and 12 December 2019.
  9. The petitioner relied upon the following Karnataka High Court decisions:
    • M/s Bioneeds (P) Limited v. Commissioner of Central Tax & Others, W.P. No. 15497 of 2021, decided on 26 August 2022;
    • M/s Nikitha Build Tech (P) Limited v. Union of India & Others, W.P. No. 21844 of 2021, decided on 20 October 2022; and
    • M/s LM Wind Power Blades India Pvt. Ltd. v. Designated Committee & Others, W.P. No. 21178 of 2021, decided on 20 October 2022.
  10. On the strength of those decisions, the petitioner argued that pendency of investigation could not defeat eligibility where the amount stood quantified before the cut-off date.

Respondents’ Arguments

The respondents opposed the writ petition and submitted that:

  1. There was no merit in the petition.
  2. The petitioner was not entitled to the relief claimed.
  3. The rejection of the petitioner’s claim under the SVLDRS Scheme did not warrant interference.
  4. The writ petition was liable to be dismissed.

The judgment records the respondents’ opposition in concise terms. The detailed reasoning ultimately adopted by the Court focused on the pre-cut-off quantification, earlier binding/co-ordinate Bench decisions, and the relevant CBIC Circulars.

Court Order / Findings

The Karnataka High Court made the following material findings:

1. Pre-Cut-Off Quantification Was Established

The Court found that on 12 September 2018 itself, the respondents had quantified the amount payable by the petitioner at Rs. 99,00,000.

This was substantially before the SVLDRS cut-off date of 30 June 2019.

2. Substantial Payment Had Already Been Made

The Court found that out of the quantified amount, the petitioner had already paid Rs. 57,02,485 much before 30 June 2019.

3. Earlier Karnataka High Court Judgments Applied

The Court considered its earlier decisions and reiterated the principle that:

So long as the tax payable had been quantified before 30 June 2019, pendency of an enquiry, investigation or audit on or before that date would not by itself disentitle the assessee from the benefit of the SVLDRS Scheme.

4. Respondents Committed an Error

In the peculiar and special facts and circumstances of the case, the Court held that the respondents committed an error in rejecting the petitioner’s claim for benefit under the SVLDRS Scheme.

5. Consequential Impugned Order Also Unsustainable

The Court further held that the respondents erred in passing the consequential impugned order after rejecting the Scheme benefit.

6. Impugned Orders Set Aside

The Court set aside:

  • the impugned order at Annexure-F dated 30 December 2019; and
  • the impugned order at Annexure-G dated 9 September 2020 / 12 December 2020, as described in the operative portion of the judgment.

7. SVLDRS Application Remanded for Fresh Reconsideration

The matter was remitted to the concerned respondents for fresh reconsideration of the petitioner’s SVLDRS application dated 12 December 2019.

8. Earlier Judgments and Circulars Must Be Considered

The respondents were directed to reconsider the claim bearing in mind:

  • the judgments referred to by the High Court;
  • the Circular dated 27 August 2019;
  • the Circular dated 12 December 2019; and
  • the observations made in the present order.

9. Reasonable Opportunity Must Be Given

The Court expressly directed that sufficient and reasonable opportunity be provided to the petitioner.

Important Clarification

1. Pending Investigation Does Not Automatically Defeat SVLDRS Eligibility

The key principle applied by the Court is that pendency of an enquiry, investigation or audit as on 30 June 2019 does not by itself bar relief under the SVLDRS Scheme where the tax/duty liability had already been quantified before the cut-off date.

2. Quantification Can Arise from Written Communication

The related case law discussed by the Court recognises that “quantification” is not confined only to a final adjudication order.

A written communication intimating duty demand, an admitted duty liability during enquiry or investigation, or similar written material may satisfy the quantification requirement depending on the statutory framework and facts.

3. Revenue’s Own Quantification Was Material

In the present case, the Court placed importance on the fact that the respondents themselves had quantified the amount at Rs. 99,00,000 on 12 September 2018.

4. Later Show Cause Notice Demand Was Lower

The subsequent show cause notice demanded Rs. 95,94,517, which was lower than the earlier quantified figure of Rs. 99,00,000.

5. Relief Was Granted in Peculiar and Special Facts

The Court expressly referred to the peculiar/special facts and circumstances of the case while granting relief.

6. Court Remanded for Reconsideration Rather Than Finally Computing Scheme Benefit

The operative order remitted the SVLDRS application for fresh reconsideration in accordance with law. Therefore, the judgment should not be inaccurately described as a final judicial computation of the exact discharge amount payable under the Scheme.

Sections / Legal Provisions Involved

·         Article 226 of the Constitution of India : The writ petition was filed under Article 226 seeking certiorari against the impugned order and mandamus for reconsideration of the SVLDRS application.

·         Finance (No. 2) Act, 2019 : The Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 was introduced through the Finance (No. 2) Act, 2019.

·         Section 123(c) of the Finance (No. 2) Act, 2019 / SVLDRS Scheme : This provision was materially discussed through the related judgments reproduced and applied by the Court. It concerns determination of “tax dues” in cases involving enquiry, investigation or audit where the amount of duty payable had been quantified on or before 30 June 2019.

·         Section 121(r) – Meaning of “Quantified” : The statutory definition of “quantified” under the SVLDRS framework concerns a written communication of the amount of duty payable under the indirect tax enactment.

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https://www.mytaxexpert.co.in/uploads/1783402062_1185compressed.pdf

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