Facts of the Case

The petitioner, a construction company engaged in execution of works contracts such as residential complexes, schools, and government infrastructure, was subjected to a show cause notice dated 23.04.2019 alleging short payment of service tax for the period 2014–15 to 2017–18.

During the pendency of proceedings, the petitioner opted for settlement under the Sabka Vishwas Scheme and paid 50% of the proposed tax demand. Consequently, a discharge certificate dated 15.05.2020 was issued.

Subsequently, another show cause notice dated 10.07.2020 was issued invoking the extended limitation period under Section 73 of the Finance Act, 1994, raising further demand on grounds including:

  • Non-disclosure of free-of-cost (FOC) materials
  • Incorrect treatment of NOIDA as a body corporate

The petitioner challenged the second show cause notice before the High Court. 

Issues Involved

  1. Whether issuance of a discharge certificate under SVLDRS bars subsequent show cause notices for the same period and subject matter.
  2. Whether the Revenue can invoke Section 129(2) exceptions to reopen matters concluded under the Scheme.
  3. Whether FOC material supplied by the service recipient forms part of taxable value.
  4. Whether NOIDA qualifies as a body corporate for service tax liability determination.

Petitioner’s Arguments

  • The discharge certificate issued under Section 129 is conclusive for the matter and period covered.
  • No further proceedings or demands can be initiated once settlement under SVLDRS is completed.
  • The second show cause notice pertains to the same subject matter and time period already settled.
  • The Revenue cannot rely on the exception relating to “voluntary disclosure” since the declaration was under the “litigation” category.

Respondent’s Arguments

  • The discharge certificate is not conclusive due to alleged false statements made by the petitioner.
  • Section 129(2)(c) permits reopening if material particulars are found false.
  • The second show cause notice relates to a different matter for the same period and is therefore valid under Section 129(2)(b)(ii).

Court’s Findings / Order

The Delhi High Court held:

  • The discharge certificate issued under SVLDRS is conclusive for the matter and time period covered.
  • The petitioner’s declaration was under “litigation” category, hence Section 129(2)(c) (voluntary disclosure exception) is not applicable.
  • The second show cause notice concerns the same subject matter and period, and cannot be treated as a different matter.
  • Therefore, the impugned show cause notice is unsustainable and liable to be set aside.

Important Clarifications by the Court

1. Scope of Discharge Certificate

  • Once issued, it provides complete immunity from further tax demands, interest, penalty, and prosecution for the same matter and period.

2. Distinction Between Categories under SVLDRS

  • Exception under Section 129(2)(c) applies only to voluntary disclosures, not litigation-based declarations.

3. On Free of Cost (FOC) Material**

The Court relied on:

  • Commissioner of Service Tax v. Bhayana Builders Pvt. Ltd.

Holding:

  • Value of goods supplied free of cost is not includible in taxable value if not part of contractual consideration.

4. Status of NOIDA

The Court clarified:

  • NOIDA is a statutory body corporate under the Uttar Pradesh Industrial Area Development Act, 1976.
  • Revenue’s assumption to the contrary is legally incorrect.

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/25092023CW61962020_183057.pdf

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