M/S M.P. Khaitan vs. The Designated Committee And Ors

Held

The Court held that the Designated Committee committed a grave error by not reckoning the Rs. 20 lakhs pre-deposit made by the appellant, which was made pursuant to the Tribunal's order. The Court found the Committee's actions to be devoid of reasons and a result of total non-application of mind, especially as the demand notice itself showed contradictory figures. The Court emphasized that the scheme's object of settlement requires a purposive interpretation, and arbitrary actions violating Article 14 of the Constitution can be remedied by the Court. The Court referred to departmental circulars and FAQs which clarified that pre-deposits should be adjusted. The Court rejected the revenue's argument that the Committee was functus officio, citing precedent that the authority can continue to decide applications even after the declaration/payment deadline. The Court found the appellant entitled to the relief sought. Consequently, the appeal was allowed, the writ petition was allowed, the Form SVLDRS 3 was set aside, and the Designated Committee was directed to reckon the Rs. 20 lakhs pre-deposit and issue a fresh Form SVLDRS 3 within six weeks. The demand dated July 26, 2021, was also set aside.

Facts

The appellant, M/s. M. P. Khaitan, filed a writ petition challenging a demand notice dated July 26, 2021, and a statement dated February 6, 2020, issued by the Designated Committee. The appellant had previously filed a declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) on December 12, 2019, seeking to resolve a service tax demand confirmed by an adjudication order dated February 24, 2009. The appellant had deposited Rs. 20 lakhs as pre-deposit for an interim stay granted by the Tribunal. In its SVLDRS declaration, the appellant mentioned this pre-deposit and indicated a tax due of Rs. 10,98,015/-. However, the Designated Committee, in Form SVLDRS 2 and subsequently in Form SVLDRS 3, erroneously showed the pre-deposited amount as 'zero'. The appellant pointed out this error and sought rectification under Section 127 of the scheme, but the Committee failed to address it, leading to the impugned demand notice. The writ petition was dismissed by the Single Bench for approaching the court after the scheme's expiry on June 30, 2020.

Key Issues

1. Whether the Designated Committee erred in not reckoning the pre-deposit of Rs. 20 lakhs made by the appellant while issuing Form SVLDRS 3, despite the appellant pointing out the error and providing supporting documents? 2. Whether the Designated Committee's action of issuing a demand notice dated July 26, 2021, after the scheme's closure on June 30, 2020, and without addressing the appellant's representation filed well before the closure, was arbitrary and violative of Article 14 of the Constitution of India? Petitioner's Arguments: The appellant argued that the Designated Committee failed to apply its mind and arbitrarily showed the pre-deposit as zero, despite clear documentary evidence and reliance on departmental circulars and FAQs clarifying that pre-deposits should be adjusted. They contended that the scheme's object of dispute resolution necessitates a purposive interpretation, and the Committee's actions were unreasonable. They relied on the circular dated September 25, 2019 (Circular No. 1072/05/2019-CX) and FAQs published by the CBIC. They also cited cases like Vaishali Sharma vs. UOI & Anr. and Assam Cricket Association vs. UOI to support the need for proper consideration and opportunity of hearing. Revenue's Arguments: The revenue contended that the scheme had ended on June 30, 2020, rendering the Designated Committee functus officio, and therefore, no relief could be granted. They also raised the issue of the appellant approaching the court after the scheme's expiry.