Taxpayer Victory! HC Overturns SVLDRS Rejection, Grants Interest @ 9%

The petitioner, who was indulging in the outdoor catering services subject to service tax under Chapter V of the Finance Act, 1994, was examined from 2014–2015 to 2017–2018. Summons were served, and statements were taken on oath acknowledging service tax liability. On 01.03.2019, the petitioner presented a written computation of dues and asked the department to verify the numbers so that payment may be made and show cause notice be avoided. On 11.06.2019, in a recorded statement, the petitioner quantified liability at Rs.69,26,979, after adjusting payments already made.

On 31.12.2019, the petitioner filed Form SVLDRS-1 (ARN LD3112190004536) under the “Investigation” category, showing quantified duty of Rs.69,26,979 and claiming pre-deposit credit of Rs.29,72,500. By email dated 06.02.2020, the declaration was rejected on the ground that liability had not been quantified before 30.06.2019. The petitioner protested, relying on the March and June 2019 quantifications, and further argued that rejection without giving an opportunity of hearing violated Section 127 of the Finance (No. 2) Act, 2019.

Main Issue: Whether denial of the SVLDRS declaration on grounds of supposed non-quantification prior to 30.06.2019 was tenable in the context of written calculations and statements made prior to the cut-off date, and whether denial without giving opportunity of hearing under Section 127 was reasonable.

High Court’s Verdict: The Court ruled that the liability had in reality been established prior to 30.06.2019, in both the 01.03.2019 letter and the 11.06.2019 statement. It also held that not making the order of granting the declaration without giving an opportunity of hearing was against Section 127.

In the course of proceedings, the counsel said that the petitioner was ready to accept duty liability at Rs.1,06,21,929 (as acknowledged in the respondents’ reply) and pay interest as ordered.

Thereafter, the rejection order dated 06.02.2020 was reserved. The Court ordered recomputation on the following basis: (i) charging the duty at Rs.1,06,21,929, (ii) setting off Rs.29,72,500 as pre-deposit (subject to confirmation), and (iii) charging interest @ 9% p.a. on the balance from 01.04.2020 until communication of final figures. The respondents were directed to communicate the revised amount within four weeks of the order; the petitioner was directed to pay within six weeks of such communication and inform the respondents. A final discharge certificate was to be issued within four weeks thereafter. The rule was made absolute and the petition disposed of.

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