Ms Vassu Enterprises Through Its Proprietor Shri Ganesh Kumar Agiwal vs. The Union Of INDIA Through Its Secretary Ministry Of Finance Department Of Revenue

Facts

The petitioners, M/s. Vassu Enterprises and M/s. Aloke Dutta, filed writ petitions challenging the computation of amounts payable under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. In W.P.(T) No. 1405 of 2020, the petitioner, engaged in cargo handling and supply of tangible goods, had an amount of Rs. 2,45,24,953/- deposited/recovered during an investigation. A show cause notice was issued for service tax amounting to Rs. 4,69,12,227/- for the period January 2013 to March 2016. The petitioner filed a declaration under the Scheme under the 'Litigation Category'. The Designated Committee, however, treated the declaration under the 'Arrears' category, granting a 40% tax relief. Crucially, the Committee first adjusted the pre-deposit of Rs. 2,45,24,953/- from the total tax dues before calculating the 40% relief on the reduced amount, leading to a demand of Rs. 1,34,32,364.40/-.

Held

The Court held that the action of the Designated Committee in first deducting the amount of deposit made by the petitioners during enquiry, investigation, or audit and thereafter extending relief by computing the tax due on the outstanding amount was not in accordance with the mandate of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The Court found that Section 124(2) of the Scheme clearly indicates that the amount of deposit made during enquiry, investigation, or audit is to be deducted after extending relief under Section 124(1) and at the time of issuing the statement indicating the amount payable by a declarant. The Court further held that Clause 2(iv) of Circular No. 1072/05/2019/CX dated 25.09.2019, to the extent it provides that tax relief is to be granted on the outstanding duty amount as against the amount of duty recoverable, has the effect of altering the Scheme itself and cannot be given effect to. The Court reasoned that interpreting 'recoverable' as 'outstanding' would lead to an absurd and incongruous result, placing assessees who made deposits in a worse position than those who did not. The Court relied on pronouncements from the Delhi High Court in 'Code Engineers Pvt. Ltd.' and the Bombay High Court in 'Morde Foods Pvt. Ltd. & Anr.' and 'Eureka Fabricators Pvt. Ltd.'. The Court directed the Designated Committee to re-compute the amount payable by the petitioners under the Scheme and issue a revised SVLDRS-3 Form within four weeks, with the petitioners to deposit the revised amount within two weeks thereafter. Upon payment, the declarations would be deemed satisfied.

Key Issues

1. Whether pre-deposit or deposit made during enquiry, investigation, or audit should be deducted after extending relief under Section 124 of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, or adjusted first to determine 'tax dues' under Section 123 before extending relief under Section 124? (Question of law turning on Sections 123 and 124 of the Scheme). 2. Whether Clause 2(iv) of Circular No. 1072/05/2019/CX dated 25.09.2019 alters the definition of 'tax dues' under Section 123 of the Scheme by mandating the adjustment of pre-deposit/deposit against 'tax dues' before extending relief under Section 124? (Question of law turning on Section 123 of the Scheme and Circular No. 1072/05/2019/CX). Petitioner's arguments: The petitioners contended that the Scheme is a beneficial legislation and requires literal interpretation. They argued that deposits made during investigation should be deducted after the grant of relief under Section 124, as supported by Section 124(2) and pronouncements from the Delhi and Bombay High Courts. They also argued that the Circular alters the Scheme's provisions and is contrary to Supreme Court judgments. Revenue's arguments: The revenue's contention, as reflected in the Designated Committee's action and the Circular, was that pre-deposits/deposits should be adjusted first against the 'tax dues' before calculating the relief under Section 124, effectively reducing the base for the tax relief.