M/S Sav Constructions vs. The Commissioner Of CGST And Central Excise

Held

The Court held that the interest cannot be levied for the entire amount of Rs. 57,89,270/-. The impugned order dated August 23, 2022, was quashed. The Court reasoned that Section 110 of the Finance Act, 2013, states that "such dues" along with interest shall be recovered, and "such dues" refers only to the unpaid portion. The respondents' interpretation of levying interest on the entire tax liability when a portion has been paid was deemed to be without authority of law and an addition of words not found in the statute. The Court also applied the principle that in tax laws, the interpretation favorable to the assessee should be preferred. Consequently, the respondents were directed to recalculate the interest for the unpaid amount of Rs. 13,89,270/- and recover only that amount. Upon payment of this recalculated interest, the attachment of the bank account was to be released. The ratio is that interest under Section 110 of the Finance Act, 2013, is leviable only on the unpaid portion of the declared tax dues under the VCE Scheme, not the entire declared amount if a part has been paid.

Facts

The petitioner, M/s Sav Constructions, a civil construction firm registered under Service Tax and subsequently GST, availed the Service Tax Voluntary Compliance Encouragement Scheme (VCE Scheme) under the Finance Act, 2013. The scheme required payment of declared tax dues in installments. The petitioner declared Rs. 57,89,270/-. They paid 50% of the tax liability by December 31, 2013. The balance was due by June 30, 2014. The petitioner paid Rs. 15,00,000/- on June 26, 2014, and the remaining Rs. 13,89,270/- on February 21, 2015, after the extended due date of December 31, 2014. The Office of the Accountant General (Audit) directed recovery of interest on the entire tax liability, which the respondents sought to enforce. The petitioner challenged an order dated August 23, 2022, issued by the 5th respondent.

Key Issues

1. Whether the petitioner, having failed to pay the entire balance tax dues under the VCE Scheme by the stipulated deadlines, is liable to pay interest on the entire declared tax liability of Rs. 57,89,270/-, or only on the unpaid portion of Rs. 13,89,270/-, as per Section 110 of the Finance Act, 2013? Petitioner's arguments: The petitioner contended that Section 110 of the Finance Act, 2013, mandates recovery of "such dues" along with interest, implying only the unpaid portion. They argued that the respondents are adding words not present in the section, leading to a "Casus Omissus." They also invoked the principle that in tax laws, if two interpretations are possible, the one favorable to the assessee should be applied, citing Commissioner of Income Tax Bombay Vs. Podar Cement Pvt. Ltd. Respondents' arguments: The respondents argued that once the declarant violates the conditions of the scheme, they are not entitled to its benefits. They relied on Section 108 of the Finance Act, 2013, stating that immunity is granted only upon full payment of declared tax dues and interest. They cited a C&AG Report and the Kerala High Court's decision in Kasmisons Builders Pvt Ltd. Vs Assistant Commissioner of Service Tax, asserting that amnesty schemes must be strictly interpreted and time limits adhered to.