SVLDRS Application proposed to be rejected – filed after conduct of search

Ganesh Digital Networks Private Limited Vs Union of India and Ors, HC (Telangana); WP No. 11758 of 2021

Facts of the Case

  • The amnesty scheme known as ‘Sabka Vishwas (Legacy Dispute Resolution) Scheme’ (SVLDRS) was introduced in Finance Bill, 2019. As per the rules, persons opting for this scheme shall make a declaration in Form SVLDRS-1 on or before 31st December 2019.
  • On 20th December 2019, a search was conduced at the premises of appellant. At the time of search, the appellant furnished its books of account Gross service tax liability was accounted for ₹ 1.82 Crores and CENVAT Credit was accounted for ₹ 1.08 Crores.
  • On 21st December 2019, an amount of ₹ 50 lakh was paid during the conduct of search.
  • Appellant filed application in Form SVLDRS-01 on 31st December 2019 declaring the voluntary payment of tax as ₹ 74 lakhs (1.82 Crores less 1.08 Crores).
  • Since the payment was made under option ‘Voluntary Disclosure’, the designated committee proceeded to directly issue the Form SVLDRS-3 on 09th January 2020 for the same amount.
  • Appellant could not pay the amount because designated committee did not appropriate the deposit of  ₹ 50 lakhs made on 21st December 2019. Appellant actively followed up for correction of this mistake.
  • In the meanwhile, on 22nd April 2021, the investigating authority proceeded to issue show cause notice proposing to:
  1. Reject the SVLDRS application as being filed after initiation of search/ investigation
  2. Demand the services tax liability for ₹ 1.82 Crores and appropriation of ₹ 50 lakhs paid during investigation / search
  3. Impose the penalty under section 76 and 78 of the Finance Act, 1994
  4. Impose Interest on delayed payment of services tax
  • The last date for SVLDRS Scheme was 30.06.2020.
  • Lastly, the appellant paid the pending amount under the scheme as normal services tax and represented for issuance of SVLDRS-4 which was delayed due to technical latches of portal and department proceedings.
  • The order upholding the demand was issued.

Our Analysis

  • CBIC has clarified that in case declaration is made after being subjected to any enquiry or investigation or audit, designated committee shall analyse the eligibility on the basis of facts and circumstances of the case. Present investigation/enquiry etc. does not bar appellant from the benefits of scheme as accounted and audited liabilities are declared in the books of account i.e. Balance Sheet. Thus, section 125(1)(f)(i) of Finance (No. 2) Act, 2019 is not applicable in the present case.
  • Vide various circulars, CBIC has clarified that relevant date to determine the eligibility under scheme is 30.06.2019. Since the search is conducted on 20.12.2019 i.e. after the relevant date, the appellant is not barred from applying under the scheme.
  • The scheme was available till 30.06.2020. Further, section 129 gives right to proceed after issuance of discharge certificate in Form SVLDRS-4. However, the investigating officer proceeded to issue the show cause notice on 22.04.2020 i.e. before closure of scheme as well as issuance of svldrs-4. Therefore, SCN is pre-mature.
  • The search by ld. Investigation team was merely ironical and has no relation with filing of application under the SVLDRS scheme.
  • CENVAT Credit claimed in the books of account is considered as valid compliance with the provisions related to availment of credit. Reporting of these figures in st-3 form is merely a reporting requirement. Therefore, CENVAT Credit of the appellant shall not be disallowed.
  • In order to ensure effective compliance, the returns were furnished.

Order passed by appellate authority

  • Applicant is eligible to opt for SVLDRS application. The matter is adjudicated because Form SVLDRS-4 was not issued. Therefore, the allegation for rejection of SVLDRS application was set aside.
  • The claim for CENVAT Credit is allowed subject to verification. Therefore, the matter was remanded back for computation.

Our Comments

  • Now, the entire proceedings revolves around issuance of Form SVLDRS-4. If the same is issued, the proceedings will come to an end else it will be subject to order to be passed in remand proceedings.
  • A writ petition has been filed before jurisdictional high court praying for issuing the directions to the designated committee to issue Form SVLDRS-4. An interim relief has already been granted in the matter and the matter is now pending for final disposal.

2021-04-29_Interim Order

2021-04-29_Stay Order

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