P. N. Gadgil & Sons Ltd. v. Union of India

13. Submissions of the Respondents: The Respondents submitted that the provisions of Section 127(3) and (4) of SVLDR Scheme granting opportunity of hearing is not applicable to the facts of the present Petitioner, since the Petitioner was non-eligible at the threshold itself. The Respondents further submitted that there was no quantification of duty on/or before 30th June, 2019 and therefore it was rightly found that the Petitioner is not eligible to avail the benefit of SVLDR Scheme. The Respondents further contended that the letter of the Petitioner dated 27th May, 2019 does not quantify the demand but only seeks to furnish the details of turnover called for during the course of the audit. The Respondents therefore contended that the petition be dismissed. Analysis and Conclusion:

14. Issue: The moot point which arises for our consideration is whether the Petitioner is eligible to avail the benefit of SVLDR Scheme, 2019 on the ground whether there was a quantification of the demand on/or before 30th June, 2019, being the cut-off date specified in the SVLDR Scheme.

15. Before we address the issue which is posed for our consideration it would be apt to reproduce certain provisions of the SVLDR Scheme, 2019 introduced by the Finance Act, 2019. Definitions: (c) “amount in arrears” means the amount of duty which is recoverable as arrears of duty under the indirect tax enactment, on account of-

(i) no appeal having been filed by the declarant against on order or an order in appeal before expiry of the period of time for filing appeal; or

(ii) an order in appeal relating to the declarant attaining finality; or

(iii) the declarant having filed a return under the indirect tax enactment on or before the 30th day of June, 2019, wherein he has admitted a tax liability but not paid it; (g) “audit” means any scrutiny, verification and checks carried out under the indirect tax enactment, other than an enquiry or investigation, and will commence when a written intimation from the central excise officer regarding conducting of audit is received; (r) “quantified”, with its cognate expression, means a written communication of the amount of duty payable under the indirect tax enactment. Section 123 For the purposes of the scheme, “tax dues” means- (a) where ……. (b) where a show cause notice under any of the indirect tax enactment has been received by the declarant on or before the 30th day of June, 2019, then, the amount of duty stated to be payable by the declarant in the said notice: Provided that if the said notice has been issued to the declarant and other persons making them jointly and severally liable for an amount, then, the amount indicated in the said notice as jointly and severally payable shall be taken to be the amount of duty payable by the declarant;

(c) Where an enquiry or investigation or audit is pending against the declarant, the amount of duty payable under any of the indirect tax enactment which has been quantified on or before the 30th day of June, 2019;

(d) where the amount has been voluntarily disclosed by the declarant, then, the total amount of duty stated in the declaration. (e) where an amount in arrears relating to the declarant is due, the amount in arrears. Section 125 Declaration under Scheme: (1) All persons shall be eligible to make a declaration under this Scheme except the following, namely:- (a) who have filed an appeal before the appellate forum and such appeal has been heard finally on or before the 30th day of June, 2019; (b) who have been convicted for any offence punishable under any provision of the indirect tax enactment for the matter for which he intends to file a declaration;

(c) who have been issued a show cause notice, under indirect tax enactment and the final hearing has taken place on or before the 30th day of June, 2019;

(d) who have been issued a show cause notice under indirect tax for an erroneous refund or refund; (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 audit has not been quantified on or before the 30th day of June, 2019; (f) a person making a voluntary disclosure,

(i) after being subject to any enquiry or investigation or audit; or

(ii) having filed a return under the indirect tax enactment, wherein he has indicated an amount of duty as payable, but has not paid it; (g) who have filed an application in the Settlement Commission for settlement of a case; (h) persons seeking to make declarations with respect to excisable goods set forth in the Fourth Schedule to the Central Excise Act, 1944. (2) A declaration under sub-section (1) shall be made in such electronic from as may be prescribed. Section 127 Issue of statement by designated committee: (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. (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. (3) After the issue of the estimate under sub-section (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. (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. (5)…… (6)…… (7)…… (8)…….

16. Section 125 of the SVLDR Scheme provides for eligibility of persons who can avail benefit of the scheme by making a declaration. However, clauses (a) to (h) of Section 125(1) provide for exceptions as to who cannot avail the benefit of the scheme. In the case of the Petitioner the relevant clauses applicable for our consideration would be clauses (c), (e) and (f). If the Petitioner falls under any one of these clauses, then such person is not eligible to make a declaration and avail the benefit of the scheme.

17. Clause (c) of Section 125(1) of SVLDR Scheme disqualifies a person who has been issued a show cause notice under indirect tax enactment and the final hearing has taken place on/or before 30th June,

2019. In the case of the Petitioner, this clause would not be applicable because the show cause notice is dated 14th January, 2020.

18. Clause (e) of Section 125(1) of the SVLDR Scheme provides for disqualification of a person who has been subjected to an enquiry or investigation or audit and the amount of duty involved in the said enquiry or investigation or audit has been quantified on/or before 30th June, 2019. In the present case, the Petitioner was subjected to audit vide letter dated 10th July, 2018 issued by Respondent No.4. However, the amount of duty involved in the said audit was not quantified on/or before 30th June, 2019. The reliance placed by the Petitioner on letter dated 27th May, 2019 to contend that there has been a quantification of duty is incorrect. The letter of 27th May, 2019 by the Petitioner only records furnishing of information required for the purposes of the audit. In the annexure to the said letter, the Petitioner has bifurcated its goods between “Bullion-others” which according to the Petitioner are goods on which excise duty is leviable and “Bullion-Vedhani” being turnover of goods which is exempt. The letter dated 27th May, 2019 and the annexure thereto only provides turnover of dutiable goods and exempt goods. There is no quantification of duty by the Petitioner in the letter dated 27th May, 2019. This is fortified by a letter dated 24th October, 2019 addressed by the Additional Commissioner to the Petitioner wherein there is further reference to letter dated 3rd October, 2019 and it is stated that the Petitioner has not agreed to the payment of tax/duty along with interest and penalty. These two letters of 3rd October, 2019 and 24th October, 2019 are addressed much after the cutoff date of 30th June, 2019. The quantification of duty happened only on the issuance of the show cause notice dated 14th January, 2020 which also falls after the cut-off date of 30th June, 2019. The Petitioner in its reply dated 14th January, 2020 after contending how there is no liability to the show cause notice has admitted the excise duty liability of Rs.1.94 crore as per the show cause notice and this is evident from the letter dated 14th January, 2020, extract of which is reproduced reads as under: “Without accepting that “Vedhani” can be treated as jewellery, we being tax compliant assessee would prefer to minimize litigation and to buy the peace, we wish to file an application with Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme) to close the matter. For the said purpose we accept the liability of Excise Duty of Rs.1.94 Crs as per the above referred show cause notice. We waive our right to be heard in person for the above matter and we request you good-self to kindly adjudicate the matter at the earliest.”

19. The Petitioner was thus disqualified as per clause (e) of Section 125(1) of SVLDR Scheme to make a declaration since in the Petitioner’s case there has not been a quantification before the cut-off date. Section 121(r) defines “quantified” to mean a written communication of the amount of duty payable under the indirect tax enactment. In the instant case, the letter of the Petitioner dated 27th May, 2019 cannot be read to mean a communication of the amount of duty payable since there is no such statement in the said letter or its annexure. On the contrary the communication of the amount of duty payable is for the first time in the show cause notice dated 14th January, 2020 and therefore even on this account the submission of the Petitioner that there is a quantification vide letter dated 27th May, 2019 is to be rejected.

20. The phrase ‘quantification’ has been the subject matter of interpretation before various courts.. In Karan Singh V/s. The Designated Committee Sabka Vishwas (Legacy Dispute Resolution) Scheme[1], the Delhi High Court observed that the phrase “quantification” can only mean to be a duty liability which has been determined by the department. The Court observed that in terms of Section 121(r) of the Finance Act, 2019 the word “quantified” means a written communication of the amount of duty payable under indirect tax enactment and that a unilateral quantification by the Petitioner does not render an assessee eligible to avail the benefit of the scheme since it was the prerogative of the department to quantify the amount and not the assessee.

21. In this connection it is also important to note the decision of the Madras High Court in the case of Vitthalrao Jayaprakash V/s. The Designated Committee Sabka Vishwas (Legacy Dispute Resolution) Scheme (Writ Appeal No. 2450 of 2021) who in para 12 in the context of “quantification” observed as under: “Thus it is evident that for availing the benefit of the scheme, one of the conditions precedent is that the tax liability of the tax payer ought to have been quantified. Even though the Appellant had submitted a letter dated 13th June, 2019 much before the date of closure of the scheme, the fact remains that is tax liability has not been quantified and therefore, he cannot avail the benefit of the scheme. In fact the letter dated 13th June, 2019 has been given by the Appellant for the purpose of quantification of service tax liability in the on-going investigation pending against him, which itself is a disqualification for the Appellant to avail the benefit of scheme. The Appellant, in the letter dated 13th June, 2019 did not claim the benefits of the scheme but only requested the Respondents to quantify the tax liability payable by him……...

13. Thus, the letter dated 13.06.2019 would clearly indicate that the appellant furnished certain documents only for quantification of the service tax liability and there is no whisper that he intended to avail the benefits of the scheme. Secondly, the letter also indicates that as on 13.06.2019, the service tax liability of the appellant has not been quantified, which is one of the pre-conditions to avail the benefits of the scheme. Therefore, the rejection of the application of the appellant by the first respondent herein is proper.”

22. It is also important to note in the facts of the present case, the FAQs issued by the Respondents and the relevant question reads thus: “Q[3]. If an enquiry or investigation or audit has started but the tax dues have not been quantified whether the person is eligible to opt for the Scheme ? Ans. No. If audit, enquiry or investigation has started, and the amount of duty/duty payable has not been quantified or before 30th June, 2019, the person shall not be eligible to opt for the Scheme under the enquiry or investigation or audit category. ‘Quantified’ means a written communication of the amount of duty payable under the indirect tax enactment [Section 121(g)]. Such written communication will include a letter intimating duty demand; or duty liability admitted by the person during enquiry, investigation or audit; or audit report etc. [Para 10(g) of Circular No 1071/4/2019-CX dated 27th August, 2019]”

23. The common thread passing through clauses (a) to (h) of the exception to section 125(1) is that there has to be a quantification for being eligible to avail the benefit of the SVLDR Scheme and in the absence of “quantification” a person fails the eligibility test.

24. Therefore, looked at from any angle the Petitioner is not eligible to make a declaration as per the exceptions carved out by Section 125(1) of the SVLDR Scheme.

25. The second contention of the Petitioner is that they were not heard before rejection of the application is on the basis of Section 127(3) and (4) of the SVLDR Scheme. The provisions of sub-section (3) and (4) would be applicable only if a person is found to be eligible to make a declaration under Section 125(1), the correctness of which is verified by the designated committee and same is found to be eligible under Section

125. It is only when a person is found to be eligible and there is a difference between the estimated amount payable by the declarant and that estimated by the committee that the provisions of sub-section (3) and (4) of Section 127 of the SVLDR Scheme become applicable. In the present case, as observed by us above, the Petitioner at the threshold itself is not eligible for availing the benefit of the scheme and therefore reliance placed on Section 127 (3) and (4) to assail the rejection on the ground of no hearing being given is misconceived.

26. In any view, as per the admission made by the Petitioner in letter dated 14th January, 2020 wherein the Petitioner admitted the liability of excise duty of Rs.1.94 crore as per the quantification made and reflected in the show cause notice dated 14th January, 2020, itself was sufficient that the Petitioner was not qualified from being eligible for the benefit of the scheme. Therefore, no purpose would have been served by giving any opportunity of hearing nor does the scheme provide for any hearing under Section 125 of the SVLDR Scheme. The letter dated 27th May, 2019 on which the case of the Petitioner is based also does not specify any quantification of duty and same is apparent on the face of the said letter. Therefore, the plea of the Petitioner on the ground of hearing not been given would not take the case of the Petitioner any further.

27. We may now deal with the decision of the Bombay High Court in the case of Thought Blurb V/s. Union of India[2] on the issue of opportunity of being heard. In the said case inspite of there being quantification of demand, the declaration under SVLDR Scheme was rejected without giving an opportunity of hearing. It was on these facts that the High Court observed that summary rejection of an application without affording any opportunity of hearing would be in violation of the principles of natural justice. The facts of the Petitioner before us are different. There is no quantification at all before the cut-off date and therefore even if an opportunity of hearing was given to the Petitioner, it would not have made 2 (2021) 125 taxmann.com 316 any difference as to the eligibility under the SVLDR Scheme. The Petitioner even before us has not been able to satisfy on this issue and therefore the prayer made now to remand the matter back on the principles of natural justice would not serve any purpose moreso because now the scheme has come to an end. It is settled position that a decision has to be read in the context of facts of that case and one cannot read the same dehors the facts. Therefore, for more than one reason the decision in the case of Thought Blurb (supra) is not applicable.

28. The second decision which requires consideration is the decision of the co-ordinate bench of this court in the case of Rakesh Industrial Stitching V/s. Union of India[3]. In this case the remark for rejection of SVLDRS declaration stated “investigation already initiated by department” and it was on the basis of this remark following the decision of Thought Blurb (supra) that the matter was remanded back. In the present Petitioner’s case the remark sates “The amount of duty was not quantified on or before 30th June, 2019” and it was specifically stated that ground of rejection is “ineligibility”. It is on these facts that the decision in the case of Rakesh Industrial Stitching (supra) is distinguishable.

29. The Petitioner has relied upon the decision of this Court in the

3 Writ Petition No.2835 of 2022 case of Saksham Facility Services Pvt. Ltd. V/s. Union of India and Others[4] in support of its contention. We have perused the said decision relied upon by the Petitioner and same is distinguishable inasmuch as in the case of Saksham Facility Services Pvt. Ltd. (supra), there was a quantification of the service tax liability prior to the cut-off date of 30th June, 2019 which is evident from paragraphs 5, 6 and 23 of the said decision. In the case of the Petitioner, as observed by us above, there is no quantification of duty prior to the cut-off date and therefore this decision does not assist the case of the Petitioner.

30.

SVLDR Scheme is a scheme aimed at liquidating legacy cases locked up in litigation at various forums. However, it does mean that the scheme should be interpreted in a way to make a disqualified person qualified to avail the benefits of the scheme, though such a scheme is in public interest inasmuch as the government can collect taxes immediately, pendency in courts gets reduced and the assessee gets relieved from uncertainty, penalties, etc. The entry into the scheme is to be interpreted strictly without doing any violence to the scheme. Any other interpretation in the garb of beneficial legislation would amount to giving the benefit of the scheme to those who are expressly not qualified. 4 2020-TIOL-2108-HC-MUM-ST

31. In view of above discussion, the petition is dismissed with no order as to cost. Rule accordingly stands discharged. [JITENDRA JAIN, J.] [G. S. KULKARNI, J.] Designation: PS To Honourable Judge