Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 3934/2020
SEVENTH PLANE NETWORKS
PRIVATE LIMITED ...... Petitioner
Through: Mr. Nikhil Gupta, Advocate with
Mr. Divyanshu Agrawal and Ms. Rubel
Bareja, Advocates
versus
UNION OF INDIA & ORS. ..... Respondents
Through: Mr. Harish Vaidyanathan Shankar,
CGSC for respondent No.1.
Mr. Amit Bansal, Sr. Standing Counsel
with Mr. Aman Rewaria, Advocate for
respondents Nos. 2 and 3.
Ms. Sonu Bhatnagar, Senior Standing
Counsel with Mr. Vaibhav Joshi and
Ms. Anushree Narain, Advocates for
respondent No.4.
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% Date of Decision: 14 August, 2020
CORAM:
HON'BLE MR. JUSTICE MANMOHAN
HON'BLE MR. JUSTICE SANJEEV NARULA
J U D G M E N T
MANMOHAN, J: (Oral)
1. The petition has been heard by way of video conferencing.
W.P. (C) 3934/2020 Page 1 of 9
2. Present writ petition has been filed challenging the rejection order
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dated 17 January, 2020 whereby the declaration filed by the petitioner
under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (for short
“SVLDRS, 2019”) has been rejected on the ground that the audit was
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conducted and conveyed on 02 July, 2019 and amount of duty involved in
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the audit had not been quantified on or before the 30 day of June, 2019.
3. Mr. Nikhil Gupta, learned counsel for petitioner states that though the
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respondent No.4 issued audit memo in writing on 02 July, 2019, yet the
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petitioner had accepted the demand on disputed points on 28 June, 2019,
i.e. prior to coming into force of SVLDRS, 2019.
4. He points out that though respondent no. 4 in its counter-affidavit has
denied that all the demands were quantified and communicated to the
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petitioner on 28 June, 2020, yet the respondents 2 and 3 in their counter-
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affidavit have admitted that during the visit of the audit team on 28 June,
2020, not only the audit was concluded but tax amount on each issue was
quantified and communicated to the petitioner. Learned counsel for
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petitioner states that as the petitioner had admitted its liability on 28 June,
2019 itself, the demands stood quantified.
5. Learned counsel for petitioner submits that para 2(v) of Circular No.
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1074/07/2019-CX dated 12 December, 2019 and paras 4(a) and 10(g) of
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Circular dated 27 August, 2019 issued by the Central Board of Indirect
Taxes and Customs provide for relief under the aforesaid Scheme for cases
under investigation and audit where the duty involved had been admitted by
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the assessee/declarant in a statement on or before 30 June, 2019. The
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relevant portion of the para 2(v) of Circular dated 12 December, 2019 and
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paras 4(a) and 10 (g) of the Circular dated 27 August, 2019 read as under:-
W.P. (C) 3934/2020 Page 2 of 9
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A) Circular dated 12 December, 2019
“2. The references received by the Board have been
examined, and the issues raised therein are clarified in the
context of the various provisions of the Finance (No.2) Act, 2019
and Rules made there-under, as follows:
xxx xxx xxx
(v) For the purpose of eligibility under the Scheme in some of the
categories such as litigation, audit/enquiry/investigation etc., the
relevant date is 30-6-2019. However, it may so happen that the
facts of a case may change subsequently. For instance, in a case
under audit/ investigation/enquiry where the tax dues have been
quantified on or before 30.6.2019, a show cause notice is issued
after 30-6-2019. Similarly, a case, which was under appeal as
on 30-6-2019, may attain finality in view of appeal period being
over etc. It is clarified that the eligibility with respect to a
category in such cases shall be as it was on the relevant date ie.,
30-6-2019 .”
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B) Circular dated 27 August, 2019.
“4. The relief extended under this scheme is summed up, as
follows:
(a) For all the cases pending in adjudication or appeal (at any
forum), the relief is to the extent of 70% of the duty involved if it
is Rs.50 lakhs or less and 50% if it is more than Rs.50 lakhs.
The Same relief is available for cases under investigation and
audit where the duty involved is quantified and communicated
to the party or admitted by him in a statement on or before
30.06.2019. ”
“10. Further, the following issues are clarified in the context
of the various provisions of the Finance (No. 2) Act, 2019 and
Rules made thereunder:
xxx xxx xxx
(g) Cases under an enquiry, investigation or audit where the
duty demand has been quantified on or before the 30th day of
W.P. (C) 3934/2020 Page 3 of 9
June, 2019 are eligible under the Scheme. Section 2(r) defines
“quantified” as a written communication of the amount of duty
payable under the indirect tax enactment. It is clarified that
such written communication will include a letter intimating
duty demand; or duty liability admitted by the person during
enquiry, investigation or audit; or audit report etc .”
(emphasis supplied)
6. He also points out that the Frequently Asked Questions (FAQs) issued
on the SVLDRS, 2019 by the Ministry of Finance states that even if the
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amount quantified under an audit before 30 June, 2019 gets modified
subsequently due to any reason, the assessee shall be entitled to file a
declaration under the SVLDRS, 2019. The relevant portion of the FAQs is
reproduced hereinbelow:-
“ Q.53. The amount quantified under an enquiry, investigation or
audit on or before 30.06.2019 gets modified subsequently due to
any reason. Will I still be eligible to file a declaration under the
Scheme ?
Ans. Only such cases of enquiry, investigation or audit are
covered under the Scheme where the duty/tax demand has been
finally worked out on or before 30.06.2019. In other words, all the
evidence/document gathering process is over and the tax liability
has been worked out on or before 30.06.2019. For instance, a
Draft Audit Report or the Final Audit Report has been issued on
or before 30.06.2019. Similarly, a letter intimating duty demand
has been issued by the department. These would include those
cases also where the duty/tax demand undergoes a change only
due to any clerical or calculation error. ”
7. He further submits that the impugned order is in violation of
principles of natural justice inasmuch as respondents had neither issued any
notice nor given any opportunity of hearing to the petitioner.
W.P. (C) 3934/2020 Page 4 of 9
8. Mr. Amit Bansal and Ms. Sonu Bhatnagar, learned counsel for
respondents state that petitioner was ineligible to apply under the SVLDRS,
2019 as the amount of duty involved in the audit had not been quantified
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before 30 June, 2019. They submit that the expression “quantified” under
Section 121(r) of the Finance Act, 2019 means a written communication of
the amount of duty payable under the indirect tax enactment. The relevant
portion of SVLDRS 2019 namely Sections 121 and 125 of the Finance Act,
2019 relied upon by them are reproduced hereinbelow:-
“121. Definitions. -In this Scheme, unless the context otherwise
requires,-
……….
(r) "quantified", with its cognate expression, means a written
communication of the amount of duty payable under the
indirect tax enactment ;
125. Declaration under Scheme. - (1) All persons shall be eligible
to make a declaration under this Scheme except the following,
namely :-
………….
(e) who have been subjected to an enquiry or investigation or
audit and the amount of duty involved in the said enquiry or
investigation or audit has not been quantified on or before the
30th day of June, 2019 ;”
9. They emphatically deny that all demands were quantified and
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communicated to the petitioner on 28 June, 2020. They state that only one
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audit memo dated 02 July, 2019 was issued to the petitioner i.e. after the
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cut-off date of 30 June, 2019. They emphasise that even the petitioner had
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mentioned the date of communication as 02 July, 2019 in his declaration
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filed on 26 December, 2019 in the Form SVLRDS-1 under the SVLDRS,
2019.
W.P. (C) 3934/2020 Page 5 of 9
10. Mr. Amit Bansal and Ms. Sonu Bhatnagar state that an opportunity of
hearing can only be granted if the conditions laid down under Section 127 of
the Finance Act, 2019 are fulfilled. They submit that there is no provision
for an opportunity of hearing to the declarant in case of ineligibility. The
relevant portion of the Section 127 is reproduced hereinbelow:-
“ 127. Issue of statement by designated committee . –
………..
(2) Where the amount estimated to be payable by the declarant,
as estimated by the designated committee, exceeds the amount
declared by the declarant, then, the designated committee shall
issue in electronic form, an estimate of the amount payable by
the declarant within thirty days of the date of receipt of the
declaration.
(3) After the 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 :
Provided that on sufficient cause being shown by the declarant,
only one adjournment may be granted by the designated
committee.”
11. Having heard learned counsel for the parties and having perused the
paper book, this Court finds that the expression „quantified‟ in Section
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121(r) has been extended/widened by way of para 2(v) of Circular dated 12
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December, 2019 and paras 4(a) and 10(g) of Circular dated 27 August,
2019.
12. In Navnit Lal C. Javeri vs. K.K. Sen, Appellate Assistant
Commissioner of Income Tax, Bombay, AIR 1965 SC 1375, K.P.
Varghese vs. Income Tax Officer, Ernakulam & Anr., (1981) 4 SCC 173
W.P. (C) 3934/2020 Page 6 of 9
and Paper Products Ltd. Vs. Commissioner of Central Excise, (2001) 247
ITR 128 (SC) , it has been held that circulars are binding on departments and
department cannot challenge them even if they are inconsistent with the
statute.
13. This Court also finds that the audit in the present case was concluded
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on 28 June, 2019 and the amount due and payable was not only determined
as well as communicated by the respondents to the petitioner but was also
admitted by the petitioner. The relevant portion of the Audit Memo dated
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2 July, 2019 is reproduced hereinbelow:-
“Point No.4: Wrong availement of CENVAT Credit:
........ Therefore, the CENVAT Credit pertaining to input services
used in providing these particular services was not available to the
assessee in terms of Rule 2(1), 2(P), 3 and the assessee is liable to
reverse the CENVAT Credit of Rs.61,07,408/- (as per Annexure-
D) in terms of Rule 6(3A) of CCR-2004.
The above observation was brought to the notice of Shri Anurag
Mittal, authorised signatory of the Company, and he was verbally
agreed with the objections to pay the tax liabilities as mentioned
above. ”
(emphasis supplied)
14. Even in the counter-affidavit filed by respondent nos. 2 and 3 it has
been admitted that the tax amount was quantified and communicated to the
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petitioner when the Audit Team visited the premises for the last time on 28
June, 2019. The relevant portion of the counter-affidavit of respondent nos.
2 and 3 is reproduced hereinbelow:-
“3. That on 28.06.2019, the Audit team visited the premises of
the Petitioner for the last time and concluded the Audit. All the
observations were communicated to the Petitioner and further,
W.P. (C) 3934/2020 Page 7 of 9
the tax amount on each issue was quantified and communicated
to the Petitioner through various Computation Sheets. ”
(emphasis supplied)
15. This Court finds that the duty amount mentioned in Form SVLDRS-1
by the petitioner is the same amount that had been admitted by the declarant
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during the last visit of the Audit Team on 28 June, 2019 as mentioned in
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the respondents‟ Audit Memo dated 2 July, 2019.
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16. Though the petitioner vide its letter dated 3 July, 2019 had asked for
reduction in demand on account of change in the calculation formula, yet it
had not denied the demand that had been quantified by the respondents and
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admitted on 28 June, 2019.
17. Keeping in view the aforesaid admitted facts, this Court is of the view
that the duty liability stood admitted in an oral statement by the petitioner
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before 30 June, 2019 and consequently stood quantified prior to the cut-off
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date in accordance with the beneficial circulars dated 12 December, 2019
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and 27 August, 2019 issued by the Central Board of Indirect Taxes and
Customs.
18. This Court is further of the opinion that a liberal interpretation has to
be given to the SVLDRS, 2019 and the circulars issued by Central Board of
Indirect Taxes and Customs as their intent is to unload the baggage relating
to legacy disputes under the Central Excise and Service Tax and to allow the
businesses to make a fresh beginning.
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19. Consequently, the rejection order dated 17 January, 2020 is quashed
and the Designated Committee is directed to decide the petitioner‟s
application in accordance with the observations and findings of this Court
after giving an opportunity of hearing to the petitioner. For this purpose, list
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the matter before the Designated Committee on 03 September, 2020 at
11:00 A.M. A reasoned order, after giving an opportunity of hearing to the
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petitioner, shall be passed by the Designated Committee on or before 21
September, 2020.
20. With the aforesaid directions, present writ petition stands disposed of.
21. The order be uploaded on the website forthwith. Copy of the order be
also forwarded to the learned counsel through e-mail.
MANMOHAN, J
SANJEEV NARULA, J
AUGUST 14, 2020
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