M/S. Violet Event Marketing INDIA Private Limited vs. Union Of INDIA

Facts

The petitioner, engaged in event management services, had obtained service tax registration in 2009 and consistently filed returns and paid taxes. However, due to financial difficulties, it failed to pay service tax for the period April 2016 to June 2017, amounting to Rs. 1,72,93,758.00. The Government of India introduced the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, allowing voluntary disclosure of tax dues with immunity from penalty and prosecution. The petitioner filed a declaration under this scheme on September 13, 2019, for the aforementioned period. The designated committee, respondent No. 3, issued a letter of intimation dated September 27, 2019, rejecting the petitioner's declaration. The petitioner contended that prior to the scheme's announcement, it was not subjected to any investigation or inquiry for the period covered by the declaration, and that the subsequent letter and summons were issued to deny them the scheme's benefits.

Held

The Court held that the petitioner was eligible for the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The Court reasoned that the letter dated July 23, 2019, and the summons dated September 11, 2019, when read conjointly, pertained to the financial year 2014-2015, not the period of declaration (April 2016 to June 2017). Therefore, the petitioner was not subjected to any inquiry, investigation, or audit as of June 30, 2019, concerning the declared period. The Court also emphasized that in cases of voluntary disclosure, the designated committee is not supposed to conduct verification, and any subsequent discovery of false material particulars leads to the presumption that no declaration was made, not outright rejection based on pre-existing inquiries. Furthermore, the Court found that rejecting a declaration on grounds of ineligibility without affording the petitioner an opportunity of hearing violated the principles of natural justice, as such rejection could lead to adverse civil consequences. The Court cited the Bombay High Court's decision in Thought Blurb Vs. Union of India, which held that non-compliance with natural justice principles invalidates the decision-making process. Consequently, the impugned intimation was set aside, and the matter was remanded back to the respondents to consider the petitioner's declaration afresh as a valid voluntary disclosure, providing an opportunity of hearing and passing a speaking order within eight weeks.

Key Issues

1. Whether the petitioner was ineligible for the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, based on the issuance of a letter dated July 23, 2019, and summons dated September 11, 2019, thereby making them subject to inquiry or investigation as on June 30, 2019, as per the scheme's exclusion criteria? (Question of law and mixed fact and law, turning on Section 125(1)(f) of the Finance (No. 2) Act, 2019 and relevant circulars). Petitioner's arguments: The petitioner argued that the letter dated July 23, 2019, and the summons dated September 11, 2019, were issued solely to deny them the benefit of the voluntary disclosure scheme. They contended that these actions were not investigations or inquiries pertaining to the period of their declaration (April 2016 to June 2017) and that they were not subject to any inquiry, investigation, or audit as of June 30, 2019. They relied on Circular No. 1073/06/2019-CX dated October 29, 2019, and a subsequent circular dated December 12, 2019, clarifying eligibility criteria. Revenue's arguments: The respondents argued that the petitioner was not eligible because they were subjected to inquiry or investigation, citing the letter dated July 23, 2019, and the summons dated September 11, 2019, as evidence. They referred to the Finance (No. 2) Act, 2019, and circulars issued by the Central Board of Indirect Taxes and Customs (CBIC).