Full Judgment Text
WPL3135_20.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO.3135 OF 2020
Fork Media Private Limited … Petitioner
Vs.
Union of India and others … Respondents
Mr. Bharat Raichandani i/b. UBR Legal for Petitioner.
Mr. Pradeep Jetly, Senior Advocate a/w Mr. J. B. Mishra for the
Respondents.
CORAM : UJJAL BHUYAN &
ABHAY AHUJA, JJ.
Reserved on : JANUARY 06, 2021
Pronounced on: JANUARY 28 , 2021
Judgment and Order : ( Per Ujjal Bhuyan, J. )
Heard Mr. Raichandani, learned counsel for the petitioner and Mr.
Jetly, learned senior counsel for the respondents.
2. By filing this petition under Article 226 of the Constitution of
India, petitioner seeks quashing of order dated 05.05.2020 and further
seeks a direction to the respondents to afford an opportunity of hearing
to the petitioner and thereafter pass appropriate order in terms of the
Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
3. It may be mentioned that by the impugned order dated 05.05.2020
issued by respondent No.4 i.e., the designated committee, while granting
tax relief of Rs.4,00,39,033.00 and further directing payment of
Rs.2,89,14,033.00, CENVAT credit of Rs.3,28,49,069.00 was not
accepted by respondent No.4 as pre-deposit made by the petitioner
thereby depriving the petitioner the benefit of the said amount while
determining the quantum of tax relief and consequential amount payable
which would have been nil if the said amount of CENVAT credit was
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treated as a pre-deposit.
4. Case of the petitioner is that it is a private limited company
incorporated under the Companies Act, 1956. It is engaged in the
business of providing digital advertising solution services. Being a
service provider, it was registered as such under the Finance Act, 1994.
It is stated that petitioner was filing service tax returns in terms of the
Finance Act, 1994 read with the Service Tax Rules, 1994 and making
payment of service tax wherever applicable.
5. It appears that an enquiry was initiated against the petitioner by
the service tax department for alleged non-payment of service tax for the
period from April, 2016 to June, 2017. By letter dated 01.02.2019,
petitioner had informed the Senior Intelligence Officer, Directorate
General of Goods and Services Tax Intelligence (DGGI), Zonal Unit,
Mumbai that out of the total service tax liability of Rs.8,00,78,066.00, it
had paid Rs.4,39,74,069.00 by using input credit of Rs.3,27,81,954.00
and by cash payment of Rs.1,11,92,105.00. The officer was informed
that petitioner was in the process of arranging funds for discharging the
complete liability of service tax.
6. It is stated that there is no dispute as to the quantum of
outstanding service tax liability of the petitioner at Rs.8,00,78,066.00
which was quantified prior to 30.06.2019.
7. In the meanwhile, central government introduced the Sabka
Vishwas (Legacy Dispute Resolution) Scheme, 2019 (for short ‘Scheme’
hereinafter) vide the Finance (No.2) Act, 2019 (briefly ‘the Act’
hereinafter) for bringing to an end pending litigations pertaining to
central excise and service tax under the erstwhile indirect tax regime
which have been subsumed under the goods and services tax (GST) by
conferring substantial benefits on the declarants subject to eligibility.
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8. In terms of the aforesaid scheme, petitioner filed its declaration on
30.12.2019 under the category of ‘investigation, enquiry or audit’ and
within the sub-category of ‘investigation by DGGI’. In the said
declaration, petitioner declared an amount of Rs.8,00,78,066.00 as the
outstanding service tax liability for the period under consideration and
also indicated pre-deposit of Rs.4,39,74,069.00.
9. Under section 124(1)(d) of the Act, the amount payable under the
scheme is 50% of the tax dues if the tax dues are linked to an enquiry,
investigation or audit which amount was quantified on or before
30.06.2019. Section 124(2) of the Act allows for deduction of any pre-
deposit / deposit made by a declarant.
10. In the instant case, tax dues of the petitioner were quantified on or
before 30.06.2019 at Rs.8,00,78,066.00. So the amount payable works
out to Rs.4,00,39,033.00 being 50% of the tax dues. As per the
petitioner’s declaration, it had already paid Rs.4,39,74,069.00 (cash
payment of Rs.1,11,25,000.00 and CENVAT credit of
Rs.3,28,49,069.00) as pre-deposit / deposit. The same being more than
the amount payable i.e., Rs.4,00,39,033.00, there would be no
requirement for making further payment as per the scheme.
11. On 17.03.2020, petitioner was served with an estimate in Form
No.SVLDRS-2 wherein the pre-deposit paid by the petitioner was
shown at only Rs.1,11,25,000.00, thereby estimating the amount payable
by the petitioner at Rs.2,89,14,033.00 (Rs.4,00,39,033.00 less
Rs.1,11,25,000.00). In the process, CENVAT credit of the petitioner
amounting to Rs.3,28,49,069.00 was excluded from the pre-deposit
amount. It was mentioned that if the declarant did not agree with the
estimated amount payable as determined by the designated committee, it
should appear for personal hearing before the designated committee on
19.03.2020 to explain the reasons therefor. In the remarks column, it was
mentioned that DGGI, Mumbai Zonal Unit in its verification report had
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stated that CENVAT documents were not yet verified as on 30.06.2019,
the cut off date under the scheme.
12. In response thereto, petitioner filed Form No.SVLDRS-2A
declaring that it did not agree with the estimate made by the designated
committee pointing out that it had made payments through CENVAT
credit which were not considered by the department. Petitioner further
stated that it wanted to make a written submission and that it wanted to
have a personal hearing. However, it indicated that it wanted to seek
adjournment of the personal hearing fixed on 19.03.2020 suggesting
06.04.2020 as the preferred date for hearing. Petitioner has explained in
the writ petition that it had sought for an adjournment of the personal
hearing because such hearing was fixed at short notice. That apart, the
overall situation in the country was getting quite alarming in view of
Covid-19 pandemic. Therefore, the request for adjournment was made.
13. Respondent No.4 while acceding to the prayer of the petitioner for
deferment of personal hearing informed the petitioner vide email dated
19.03.2020 that the personal hearing of the petitioner before the
designated committee was fixed on 30.03.2020 at 12 noon.
14. Petitioner has pointed out that in view of Covid-19 pandemic,
Ministry of Home Affairs, Government of India as the National Disaster
Management Authority issued an order on 24.03.2020 declaring nation-
wide lock-down for a period of 21 days with effect from 25.03.2020.
Directions were issued to all state governments and union territories for
strict implementation of the lock-down.
15. In view of imposition of lock-down, petitioner could not appear in
the personal hearing on 30.03.2020.
16. While the lock-down continued, petitioner was surprised to
receive Form No.SVLDRS-3 from respondent No.4 disallowing
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payment of CENVAT credit as pre-deposit by confining the pre-deposit
to the cash payment of Rs.1,11,25,000.00 only and consequently
quantifying the amount payable by the petitioner at Rs.2,89,14,033.00.
This was done without granting opportunity of personal hearing to the
petitioner subsequent to 30.03.2020 on which date the scheduled
personal hearing was not possible because of the lock-down. Form
No.SVLDRS-3 was received by the petitioner on 05.05.2020.
17. Immediately thereafter petitioner wrote a letter dated 08.06.2020
requesting respondent Nos.3 and 4 to grant an opportunity to the
petitioner to explain as to why the CENVAT credit should be treated as a
pre-deposit. However, there was no response.
18. Aggrieved, present writ petition has been filed.
19. By order dated 22.10.2020, this Court had issued notice.
20. In response, respondents have filed reply affidavit through Shri.
Rajesh Sanan, Commissioner of Central Goods and Services Tax
(CGST) and Central Excise, Mumbai Central Commissionerate. At the
outset, respondents have contended that petitioner had evaded tax and,
therefore, Directorate General of GST Intelligence (DGGI) Zonal Office,
Mumbai has booked a case for tax evasion against the petitioner.
However, designated committee has taken decision on the basis of
reports received from the Deputy Director, DGGI Zonal Office, Mumbai
dated 04.03.2020 and 16.03.2020 whereunder DGGI had reported that
only Rs.1,11,25,000.00 was paid by the petitioner in cash as pre-deposit
and, therefore, cash payment of Rs.1,11,25,000.00 may be considered as
pre-deposit.
20.1. Before issuing Form SVLDRS-3, designated committee had
granted opportunity of personal hearing to the petitioner vide SVLDRS-
2 dated 17.03.2020 and fixed personal hearing on 19.03.2020. However,
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petitioner had sought for an adjournment vide SVLDRS-2A. Accepting
the request of the petitioner, designated committee adjourned the
personal hearing to 30.03.2020. It is stated that petitioner neither
attended the personal hearing on the adjourned date nor uploaded its
supporting documents. Thus, petitioner did not disclose how it had taken
CENVAT credit. Therefore, designated committee issued SVLDRS-3 on
05.05.2020 on the basis of the available record.
20.2. Referring to sub-section (3) of section 127 of the Act and Rule 6
of the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019,
it is contended that only one adjournment can be granted by the
designated committee. If the declarant does not appear before the
designated committee for personal hearing after adjournment, the
designated committee shall decide the matter based on available record.
Therefore, there is no infirmity in the issuance of SVLDRS-3 by the
designated committee on 05.05.2020.
21. Mr. Raichandani, learned counsel for the petitioner has referred to
section 128 of the Act and submits that respondents could still have
modified its order dated 05.05.2020 when petitioner drew its attention to
the obvious omission vide letter dated 08.06.2020. Non-consideration of
the above quantum of CENVAT credit as a pre-deposit by the petitioner
is an error apparent on the face of the record which could have been
corrected by exercising power under section 128 of the Act but the same
was not done.
21.1. Mr. Raichandani has taken us through the various documents on
record and submits that in view of Covid-19 pandemic and the resultant
lock-down, no personal hearing could have been held on 30.03.2020
which was right in the middle of the lock-down. Both the central
government and the state government had taken strict measures to
enforce the lock-down, violation of which was threatened with arrest and
other coercive measures. In such a situation, petitioner could not have
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appeared in the personal hearing fixed on 30.03.2020. Therefore, such
non-appearance could not have been used against the petitioner to say
that since petitioner failed to appear in the adjourned personal hearing,
respondents were not obliged to grant further hearing to the petitioner.
Even then also, designated committee has failed to discharge its duty
enjoined by law in as much as it has failed to decide the matter based on
available record by accepting CENVAT credit of Rs.3,28,49,069.00 as
pre-deposit of the petitioner. This has caused serious prejudice to the
petitioner. Impugned decision which is in violation of the principles of
natural justice has adversely affected the rights of the petitioner and
therefore, the same is liable to be interfered with by this Court.
22. Per contra , Mr. Jetly has referred to the averments made by the
respondents in the reply affidavit more particularly to the averments
made in paragraphs 5 and 25 thereof and submits that due opportunity of
hearing was granted by respondent No.4 to the petitioner who failed to
avail the benefit of such hearing. Even if petitioner could not appear in
the personal hearing on 30.03.2020, it could still have furnished the
relevant documents online in support of its claim of CENVAT credit
being treated as a pre-deposit which could have then been considered by
respondent No.4. Since petitioner failed to do so, respondent No.4 acting
on the letters / reports of DGGI Zonal Office, Mumbai dated 04.03.2020
and 16.03.2020 treated the cash payment of Rs.1,11,25,000.00 only as
the sole pre-deposit. No fault can be found with such exercise of power
by respondent No.4.
23. Submissions made by learned counsel for the parties have been
duly considered. Also perused the materials on record.
24. From the pleadings and submissions, it is quite evident that
grievance of the petitioner is two-fold though both are inter-related. First
grievance pertains to personal hearing denied to the petitioner and the
second grievance pertains to non-consideration of the CENVAT credit of
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Rs.3,28,49,069.00 as pre-deposit made by the petitioner while granting
tax relief under the scheme.
25. Let us first deal with the first grievance of the petitioner. Chapter
V of the Act deals with the scheme. Chapter V comprises of sections 120
to 135 of the aforesaid Act. As per section 126(1), the designated
committee shall verify the correctness of the declaration made by the
declarant under section 125 in such manner as may be prescribed. Sub-
section (2) deals with composition and function of the designated
committee.
25.1. Section 127 deals with issue of statement by designated
committee. All the sub-sections of section 127 are not relevant for the
present discourse. We may confine our discussion to sub-sections (1) to
(4). As per sub-section (1), where the amount payable by the declarant as
estimated by the designated committee equals the amount declared by
the declarant then the designated committee shall issue in electronic
form a statement indicating the amount payable by the declarant within
60 days.
25.2. Sub-section (2) says that where the amount payable by the
declarant as estimated by the designated committee exceeds the amount
declared by the declarant then the designated committee shall issue a
statement in electronic form mentioning the amount payable by the
declarant within 30 days of receipt of the declaration.
25.3. Under sub-section (3), after issue of the estimate under sub-
section (2), the designated committee shall give an opportunity of being
heard to the declarant if he so desires before issuing the statement
indicating the amount payable by the declarant. As per the proviso , on
sufficient cause being shown by the declarant, only one adjournment
may be granted by the designated committee.
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25.4. As per sub-section (4), after hearing the declarant, a statement in
electronic form indicating the amount payable by the declarant shall be
issued within a period of 60 days from the date of receipt of the
declaration.
26. In exercise of powers under section 132 of the Act, central
government has framed a set of rules called Sabka Vishwas (Legacy
Dispute Resolution) Scheme Rules, 2019 (briefly ‘the Rules’
hereinafter). Rule 6 deals with verification by designated committee and
issue of estimate etc. As per sub-rule (3), where the amount estimated to
be payable by the declarant exceeds the amount declared by the
declarant then the designated committee shall issue electronically within
thirty days of the date of receipt of the declaration in Form SVLDRS-2
an estimate of the amount payable by the declarant along with a notice
of opportunity of personal hearing. Sub-rule (4) says that if the declarant
wants to indicate agreement or disagreement with the estimate referred
to in sub-rule (3) or wants to make written submissions or waives
personal hearing or seeks an adjournment, he shall file electronically
Form SVLDRS-2A indicating the same. As per the proviso , if no such
agreement or disagreement is indicated till the date of personal hearing
and the declarant does not appear before the designated committee for
personal hearing, the designated committee shall decide the matter based
on available record. As per sub-rule (5), on receipt of a request for
adjournment under sub-rule (4), the designated committee may grant the
same electronically in Form SVLDRS-2B. As per the proviso , if the
declarant does not appear before the designated committee for personal
hearing after adjournment, the designated committee shall decide the
matter based on available record. However, sub-rule (6) deals with a
situation requiring correction of arithmetical error or clerical error
apparent on the face of the record by the designated committee on such
error being pointed out by the declarant or suo motu .
27. From the above, what transpires is that when the amount
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estimated to be payable by the declarant, as estimated by the designated
committee, exceeds the amount declared by the declarant in the
declaration then the designated committee shall issue in electronic form
an estimate of the amount payable by the declarant within 30 days. After
such estimate is issued in the prescribed format, the designated
committee shall give an opportunity of hearing to the declarant if he so
desires before issuing the statement indicating the amount payable by
the declarant. However, as per the proviso on sufficient cause being
shown by the declarant only one adjournment may be granted by the
designated committee.
28. While in the parent sub-section (3) of section 127 which deals
with designated committee giving opportunity of hearing to the declarant
Parliament has used the word shall but while considering grant of
adjournment as per the proviso to sub-section (3), Parliament has used
the word may . The distinction though subtle is significant. While giving
an opportunity of hearing to the declarant by the designated committee
when its estimation exceeds that of the declarant has been made
mandatory, granting of adjournment of such opportunity of hearing or
confining the same to only one adjournment by the designated
committee has been made discretionary. Elaborating further we may say
that on sufficient cause being shown the hearing may be adjourned.
Thus, discretion has been vested on the designated committee to grant
adjournment of personal hearing in an appropriate case. Such
discretionary power has to be exercised in a just, fair and judicious
manner. But if on the adjourned date, for reasons beyond the control of
either the designated committee or of the declarant or for any act of God,
say for example, there is fire or flood or an earthquake or a pandemic as
in the present case, the hearing cannot take place, can it be construed
that there can be no further hearing beyond the date of hearing fixed.
Such a view besides being too narrow and rigid would also be opposed
to the very principles of natural justice which is nothing but fair play in
action. In our view, in such a situation the adjourned date of personal
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hearing would not be considered as the date of hearing and, therefore, a
fresh date of personal hearing would have to be granted.
29. Adverting to the facts of the present case, we find that designated
committee had initially fixed personal hearing on 19.03.2020. Petitioner
while objecting to the estimated amount determined by the designated
committee urged adjournment of the personal hearing fixed on
19.03.2020 on account of short notice and due to the situation arising out
of Covid-19 pandemic. While petitioner suggested 06.04.2020 as the
adjourned date of hearing, respondent No.4 fixed the personal hearing
on 30.03.2020.
30. We have already noted above that Government of India, Ministry
of Home Affairs acting as the National Disaster Management Authority
had declared complete lock-down countrywide for a period of 21 days
with effect from 25.03.2020 vide the order dated 24.03.2020 to prevent
spread of Covid-19 pandemic. Directions were issued for strict
implementation of the lock-down with violations being viewed seriously.
When the entire country was under lock-down, it is beyond
comprehension as to how petitioner could have attended the personal
hearing scheduled on 30.03.2020 which date fell within the 21-day
period of the lock-down. It was an impossibility on the part of the
petitioner and respondent No.4 was insisting on the petitioner to carry
out such an impossibility. Having regard to the expression ‘may’ used in
the proviso to sub-section (3) of section 127 of the Act and what we have
discussed in paragraph 28 above, we are of the view that the personal
hearing which was scheduled on 30.03.2020 could not have been
construed to be the sole adjourned date of hearing. In view of the
pandemic and the resultant lock-down, 30.03.2020 could not have been
treated as the adjourned date of personal hearing and another date of
personal hearing ought to have been fixed with due intimation to the
petitioner. In the circumstances, we are of the opinion that petitioner was
denied personal hearing before issuance of the impugned order dated
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05.05.2020, which is certainly adverse and prejudicial to the petitioner in
so far availing the benefit of the scheme inasmuch as CENVAT credit to
the extent of Rs.3,28,49,069.00, as claimed by the petitioner, has not
been treated as a pre-deposit. To that extent, impugned order dated
05.05.2020 is clearly vitiated and is liable to be set aside and quashed.
31. Since we have taken the view that the impugned decision
contravenes the principles of natural justice causing prejudice to the
petitioner and consequently the matter is required to be remanded back
to the designated committee, it is not necessary to delve into the second
grievance of the petitioner i.e., to treat the CENVAT credit amount of
Rs.3,28,49,069.00 as pre-deposit of the petitioner while granting relief
under the scheme.
32. However, before parting with the record, there is one more aspect
which we would like to briefly dilate upon. In their affidavit,
respondents have stated that designated committee (respondent No.4)
has limited the pre-deposit of the petitioner to cash payment of
Rs.1,11,25,000.00 and thus denying the benefit of CENVAT credit on the
basis of reports received from the Deputy Director, DGGI Zonal Office,
Mumbai dated 04.03.2020 and 16.03.2020. Neither of the two reports
have been annexed to the impugned order dated 05.05.2020 nor
furnished to the petitioner. The said reports have also not been annexed
to the reply affidavit. It is a settled proposition of law that when an
authority relies upon a document to take a decision which is adverse or
prejudicial to a party, principles of natural justice demands that copy of
such document or the essence thereof should be furnished to the affected
party before the decision is taken so that the affected party can properly
defend its case. Failure to do so would result in violation of the
principles of natural justice and fair play in action which would vitiate
the decision making process and ultimately the decision taken.
33. Thus having regard to the discussions made above, we are of the
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considered opinion that respondents were not justified in issuing the
impugned order dated 05.05.2020 in Form SVLDRS-3 which is
accordingly set aside and quashed. Matter is remanded back to
respondent No.4 to consider the declaration of the petitioner vis-a-vis
claim of CENVAT credit of Rs.3,28,49,069.00 as pre-deposit in addition
to the cash deposit of Rs.1,11,25,000.00. While doing so respondent
No.4 shall provide an opportunity of hearing to the petitioner and
thereafter pass a speaking order with due intimation to the petitioner.
The above exercise shall be carried out within a period of six weeks
from the date of receipt of a copy of this judgment and order. All
contentions are kept open.
34. Writ petition is accordingly allowed to the above extent. However,
there shall be no order as to costs.
35. This order will be digitally signed by the Private Secretary of this
Court. All concerned will act on production by fax or email of a digitally
signed copy of this order.
(ABHAY AHUJA, J.) (UJJAL BHUYAN, J.)
Minal Parab
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