Facts of the Case

The petitioner, M/s Sonjoli Construction Co., a proprietorship firm registered under GST, opted for the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) under the Voluntary Disclosure category. The petitioner submitted the declaration on 30.12.2019 and voluntarily deposited ₹10,74,702/- towards service tax liability.

Subsequently, the Joint Commissioner rejected the declaration by order dated 12.10.2020 under Section 129(2)(c) of the Finance Act, 2019, holding that an audit/enquiry had already been initiated against the petitioner and, therefore, the petitioner was not eligible to avail the benefit of the Scheme.

Aggrieved by the rejection, the petitioner approached the Rajasthan High Court challenging the legality of the rejection order.

Issues Involved

  1. Whether a declaration under the SVLDR Scheme, 2019 can be rejected merely because an enquiry or audit was initiated after 30.06.2019.
  2. Whether initiation of audit after the prescribed cut-off date disqualifies an assessee from filing a declaration under the Voluntary Disclosure category.
  3. Whether the rejection order passed under Section 129(2)(c) of the Finance Act, 2019 was legally sustainable.

Petitioner's Arguments

  • The petitioner contended that the declaration under the SVLDR Scheme was filed within the prescribed period along with payment of the entire admitted tax liability.
  • It was argued that the department rejected the declaration solely on the ground that an audit had been initiated.
  • The petitioner submitted that the notice for enquiry/audit was issued only on 26.12.2019, which was much after the statutory cut-off date of 30.06.2019.
  • Therefore, such a subsequent enquiry could not be treated as a valid ground for denying the benefits of the Voluntary Disclosure Scheme.
  • The petitioner relied upon judicial precedents holding that only enquiries initiated on or before 30.06.2019 create ineligibility under the Scheme.

Respondent's Arguments

  • The Department argued that an enquiry had already been initiated against the petitioner through a notice dated 26.12.2019, calling for records for audit.
  • According to the Department, once an enquiry had commenced, the petitioner became ineligible to make a declaration under the SVLDR Scheme.
  • However, the Department could not dispute that the statutory cut-off date prescribed for initiation of enquiry or audit was 30.06.2019, whereas the notice was issued only after that date.

Court Findings / Order

The Rajasthan High Court allowed the writ petition and held that:

  • The cut-off date prescribed under the Scheme is 30.06.2019.
  • Since the audit/enquiry notice was issued only on 26.12.2019, the petitioner could not be denied the benefit of the Voluntary Disclosure Scheme.
  • The Court relied upon the judgments of the Bombay High Court, particularly:
    • UCC Infrastructure Pvt. Ltd. vs. Union of India
    • M/s New India Civil Erectors Pvt. Ltd.
    • Thought Blurb vs. Union of India
  • The Court observed that only those enquiries, investigations or audits initiated on or before 30.06.2019 make an applicant ineligible.
  • Enquiries commenced after the cut-off date cannot defeat the objective of the SVLDR Scheme.

Accordingly,

  • The rejection order dated 12.10.2020 was quashed.
  • The declaration was restored.
  • The matter was remanded to the competent authority for fresh consideration after granting an opportunity of personal hearing.
  • The authority was directed to pass a reasoned order within eight weeks.
  • The Court also clarified that the Department may exercise powers under Section 129(2)(c) if, within one year of issuance of the discharge certificate, the declaration is found to contain false material particulars.

Important Clarification

This judgment reiterates that:

  • Only enquiries, investigations or audits initiated on or before 30 June 2019 create disqualification under the Voluntary Disclosure category of the SVLDR Scheme.
  • Audit notices or summons issued after 30.06.2019 cannot be relied upon to reject declarations filed under the Scheme.
  • Authorities must interpret the Scheme consistently with its objective of resolving legacy disputes and encouraging voluntary compliance.
  • A declaration wrongly rejected merely because of a post-cut-off enquiry deserves reconsideration.

Sections Involved

  • Section 125(1)(f)/(i), Finance Act, 2019 (Sabka Vishwas Legacy Dispute Resolution Scheme, 2019)
  • Section 129(2)(c), Finance Act, 2019
  • Relevant provisions relating to SVLDR Scheme, 2019 (Voluntary Disclosure Category)

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785567009_2530compressed.pdf  

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