Designated Committee Sabka Vikas Legacy Dispute Vs M/S L M Wind Power Blades India Pvt. Ltd.

DESIGNATED COMMITTEE SABKA VIKAS LEGACY DISPUTE RESOLUTION SCHEME THROUGH ITS MEMBER PRINCIPAL COMMISSIONER CGST, NO.1, QUEENS ROAD, VASANTH NAGAR, BENGALURU KARNATAKA.

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CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS

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Digitally signed by VANAMALA N

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Location: HIGH COURT OF KARNATAKA

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THROUGH THE CHAIRMAN,

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NORTH BLOCK, NEW DELHI - 110001.

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UNION OF INIDA

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THROUGH THE MINISTRY OF FINANCE, DEPARTMENT OF REVENUE

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ROOM NO. 46, NORTH BLOCK, NEW DELHI - 110001.

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COMMISSIONER OF CENTRAL TAX GST COMMISSIONERATE, BENGALURU NORTH WEST,

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BMTC BUILDING, SHIVAJINAGAR, BENGALURU - 560051.

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…APPELLANTS

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(BY SRI.ARAVIND V CHAVAN., ADVOCATE) AND:

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M/S L M WIND POWER BLADES INDIA PVT LTD., JOHN F WELCH TECHNOLOGY CENTRE, EPIP ZONE, BROOKE FIELD, BENGALURU - 560066, KARNATAKA.

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…RESPONDENT

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(BY SRI.RAVI RAGHAVAN., ADVOCATE A/W SRI. ROHAN KARIA., A/W SRI. NISCHAL K.M., ADVOCATES )

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THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO 1. ALLOW THIS APPEAL AND SET ASIDE THE JUDGEMENT DATED 20.10.2022 PASSED BY THE LEARNED SINGLE JUDGE OF THIS HONBLE COURT IN WP No. 21178/2021 (TRES) AND CONSEQUENTLY DISMISS THE WRIT PETITION No. 21178/20212; 2. CONSEQUENTIALLY, TO RESTORE THE ORDER DATED 20.12.2019 AT; 3. CONFIRM THE ORDER-IN-ORIGINAL DATED 26.04.2021; 4. OR ALLOW TO CONSIDER THE QUANTIFIED AMOUNT OF Rs. 1,81,99,569/- IN SVLDRS-

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1 QUANTIFIED AS PER AUDIT ENQUIRY DATED 01.10.2018.

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THIS APPEAL, COMING ON FOR PRELIMINARY HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

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CORAM: HON'BLE MR. JUSTICE B M SHYAM PRASAD and HON'BLE MR. JUSTICE T.M.NADAF

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ORAL JUDGMENT

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(PER: HON'BLE MR. JUSTICE B M SHYAM PRASAD)

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The appellants are aggrieved by the writ Court's

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order dated 20.10.2022 in Writ Petition No.21178/2021 [ T-RES ]. The Writ Court, while interfering with the Order-in-Original dated 26.04.2021, has remitted the matter back to the appellants for reconsideration of the respondent's application under "Sabka Vishwas [Legacy Dispute Resolution] Scheme, 2019 [for short, "Scheme 2019" ] dated 20.12.2019 based on the different judgments referred to in the course of the order as also the Circulars dated 27.08.2019 and 12.12.2019. The

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controversy is about the respondent’s liability [ as alleged by the petitioners ] to pay Rs.1,37,05,125/- for the period between October 2014 and March 2017 under the Finance Act, 1994 and Research and Development Cess Act,1986 and the claim for the benefit under the Scheme 2019.

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The writ Court's essential reason for interference and direction as aforesaid is in the light of the reasoning that reads as under:

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"The material on record in the instant case discloses that on 01.10.2018, the respondent had quantified the amount payable by the petitioner as Rs.1,81,99,659/- to which the petitioner had submitted a reply on 06.06.2019 admitting, accepting, agreeing and quantifying the service tax payable by him as Rs.1,3705,125/- much prior to 30.06.2019, which was the cut the office is directed to relist this petition on date under the SVLDR Scheme and clarified by the Circulars dated 27.08.2019 and 12.12.2019 issued by the respondent. Under these circumstances, in the peculiar/special facts and circumstances

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obtaining in the instant case and in the light of the judgments of is Court referred to supra, I am of the considered opinion that the respondents committed an error in not only passing the impugned order at Annexure-A rejecting the claim of the petitioner for benefit under the SVLDR Scheme, but also erred in passing the impugned order at Annexure-H dated 26.04.2021 and consequently, the impugned orders deserve to be set aside and the matter be remitted back to the respondent for reconsideration afresh in accordance with law."

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Sri Aravind V. Chavan, the learned

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counsel for the appellants, and Sri Ravi Raghavan, the learned counsel for the respondent, are heard on whether there must be interference with the writ Court's impugned order, and if there must be interference, the terms upon which this writ appeal must be disposed of in the light of the following undisputed facts.

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[a] The Superintendent of the concerned Commissioner of Central Tax [Audit], Bengaluru

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Audit-II has caused communication dated 01.10.2018 [Annexure-B] to the respondent stating that the department has quantified its liability in a sum of Rs.1,81,99,659/- as the Service Tax short paid.

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[b] The respondent has caused the Reply dated 06.06.2019 [Annexure-C] disputing the quantification pointing out certain errors. The department has responded stating inter alia that the re-quantified demand would be for a sum of Rs.1,37,05,125/- in tandem with the respondent's objections. This is followed by the show-cause notice dated 13.11.2019 [Annexure-

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F] calling upon the respondent to pay Rs.1,37,05,125/- as service tax short paid.

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[d] The petitioner, acting under the Scheme 2019, has applied on 20.12.2019 [Annexure-G] for the benefit under the Scheme 2019 quantifying its liability in a sum of Rs.1,37,05,125/- as stated

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in a Department's Communication dated 05.07.2019 [Annexure-D].

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[e] The respondent's objection is rejected with the remark that the final audit report is issued after 30.06.2019 and the amount is quantified only by this report after 30.06.2019.

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[f] This rejection has resulted in an order-inoriginal dated 26.04.2021 [ Annexure-H ] in terms of the show cause notice dated 13.11.2019 [ Annexure-F ]. The petitioner has called in question this order-in-original dated 26.04.2021.

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Sri Ravi Raghavan submits that the respondent, to demonstrate eligibility under the Scheme 2019 and to succeed against the order-inoriginal dated 26.04.2021, should have shown that the amount in dispute was not quantified as of 30.06.2019, and because the respondent has shown the same has succeeded in the grievance against the

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order-in-original dated 26.04.2021. Sri Aravind V. Chavan, to buttress the petitioners' grievance with the writ Court's order, relies upon paragraph 5 of the Circular dated 12.12.2019. This paragraph reads as under:

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"For the purpose of eligibility under the Scheme in some categories such as litigation, audit/enquiry/investigation etc., the relevant date is 30.06.2019. However, it may so happen that the facts of a case may change subsequently. For instance, in a case under audit/investigation/enquiry where the tax dues have been quantified on or before 30.06.2019, a show cause notice is issued after 30.06.2019. Similarly, a case, which was under appeal as on 30.06.2019, may attain finality in view of appeal period being over etc. It is clarified that the eligibility with respect to a category in such cases shall be as it was on the relevant date ie. 30.06.2019."

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Sri Aravind V. Chavan submits that the eligibility to apply for the benefit under the Scheme 2019, as it follows from the afore Circular, is based on whether

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there is quantification of " the disputed amount " as of 30.06.2019 - the relevant date under this circular, and when it cannot be disputed that the quantification is only with the final Audit Report dated 05.11.2019, the writ Court has fallen into a factual error in granting the relief to the respondent.

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Sri Ravi Raghavan submits that the respondent cannot dispute that the relevant date is 30.06.2019 or that as of such date the liability should not have been quantified; and that if the liability had been quantified as of that date, the respondent would not be eligible to apply under the Scheme 2019. However, the learned counsel underscores that this Court must examine whether the writ Court has erred in facts in observing that the respondent would be entitled to the benefit of the Scheme 2019 because it has accepted its liability in the light of the provisions of Section 127 [1] and 127

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[2] of the Finance Act, 2019 [for short, ' the Finance Act' ] which incorporates the Scheme 2019.

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In continuation, Sri Ravi Raghavan

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canvasses [a] that if the amount was not quantified as of 30.06.2019, it would be open to the concerned [ as contemplated under Section 125[1][e] of the Finance Act ] to apply; [b] that when an application is filed, depending on whether the amount estimated by

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the declarant and by the Designated Committee is equal or there is a difference, the procedure contemplated will be under Section 127[1] or 127[2] of the Finance Act; [c] that if the estimate are equal, the Designated Committee must issue in the prescribed form a statement indicating the amount payable by the declarant before the specified date and [d] that if the estimate by the Designated Committee exceeds the amount declared by the applicant, then as contemplated under Section 127 [2] of the Finance Act the estimated amount must be communicated in

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the prescribed electronic form to the declarant with subsequent opportunity.

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Admittedly, under Section 125[1] of the

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Finance Act all registered persons to apply for the benefit under the Scheme 2019, and insofar those who are subjected to an enquiry or investigation or audit, the stipulation under Section 125[1] of the Finance Act is that the amount of duty involved in the enquiry or audit or investigation should not have been quantified by 30.06.2019. If quantified, the person becomes ineligible. The Section 125 [1][e] of the Finance Act reads as under:

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" 125 [1] All persons shall be eligible to make a declaration under this Scheme except the following, namely:-

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[a] xxxxxxx

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[b] xxxxxxx [c] xxxxxxx

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[d] xxxxxxx

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[e] Who have been subjected to an enquiry or investigation or audit and the amount of duty involved in the said enquiry or investigation or

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audit has not been quantified on or before the 30^th day of June 2019."

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The next aspect is about the procedure prescribed for consideration of the respondent's declaration for the benefit under the Scheme 2019, and the procedure depends upon whether the estimate by the declarant and the Designated Committee are equal or whether there is a difference with the authorities [ the Designated Committee] estimating the amount much higher than the amount estimated by the declarant - applicant. The Section 127 of the Finance Act will be relevant, and the Section reads as under.

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“127. [1] Where the amount estimated to be payable by the declarant, as estimated by the designated committee, equals the amount declared by the declarant, then, the designated committee shall issue in electronic form, a statement, indicating the amount payable by the declarant, within a period of sixty days from the date of receipt of the said declaration.

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[2] Where the amount estimated to be payable by the declarant, as estimated by the designated committee, exceeds the amount declared by the declarant, then, the designated committee shall issue in electronic form, an estimate of the amount payable by the declarant within thirty days of the date of receipt of the declaration.

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[3] After the issue of the estimate under subsection [2], the designated committee shall give an opportunity of being heard to the declarant, if he so desires, before issuing the statement indicating the amount payable by the declarant: Provided that on sufficient cause being shown by the declarant, only one adjournment may be granted by the designated committee.

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[4] After hearing the declarant, a statement in electronic form indicating the amount payable by the declarant, shall be issued within a period of sixty days from the date of receipt of the declaration.

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[5] The declarant shall pay electronically through internet banking, the amount payable as indicated in the statement issued by the designated committee, within a period of thirty days from the date of issue of such statement.”

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It is obvious from the above structure of the Scheme that if the estimate are equal, there is no further procedure except issuance of an electronic form with a statement showing the amounts payable by the declarant under the Scheme 2019. However, if there is to be any difference, the procedure under Sections 127[3] and 127[4] of the Finance Act must be followed.

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The Circular dated 12.12.2019

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underscores the eligibility for the benefit under the Scheme and that the relevant date is 30.06.2019; and the circular further considers that the facts of each case may change subsequently with a show cause notice being issued after 30.06.2019. The Circular dated 12.12.2019 clarifies that even in the changed circumstances, the relevant date will be 30.06.2019. This clarification does not introduce any element which states that the difference in the estimate should have been reconciled as of

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30.06.2019, and nothing is brought to this Court's attention to opine that subsequent circulars are issued stipulating 30.06.2019 not just as the relevant date but also for reconciliation of the difference in the amount declared by the applicant and estimated by the Designated Committee.

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In the present case, the respondent is issued with the audit observations on 01.10.2018 showing that its liability would be in a sum of Rs.1,81,99,659/-, and the respondent had replied to such communication on 06.06.2019 disputing certain observations and the amount. The amount was not quantified as of 30.06.2019, and as such, the respondent was eligible in terms of Section 125[1][e] of the Finance Act to apply for the benefit under the Scheme 2019 i.e., total waiver of interest and penalty. This Court must next consider whether there is a reconciliation of the estimate under Section

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127[4] of the Finance Act after an opportunity under 127 [3] thereof.

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This Court observes that it is established

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beyond dispute that there is a reconciliation with the amount being quantified on 05.11.2019 in terms of the final audit report of the even date, and that the respondent has filed its declaration under Section 127[5] of the Finance Act for the benefit accepting the amount estimated by the Prescribed Authority. As such, the respondent is entitled to the benefit of the Scheme 2019 under Section 127 of the Finance Act.

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Therefore, this Court, while answering the

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questions framed in favour of the respondent, must opine that the appeal must be disposed of directing the first appellant to issue electronic form under Section 127 of the Finance Act to enable the respondent to pay the liability that would be in terms of the Scheme 2019. It is ordered accordingly, and the respondent is reserved with liberty to file a

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