Arctic Cooling Solutions India Pvt Ltd v Union of India and others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE A.K.JAYASANKARAN NAMBIAR** **& THE HONOURABLE MR.JUSTICE GOPINATH P.** **WEDNESDAY, THE 17TH DAY OF MARCH 2021/26TH PHALGUNA, 1942** ## **W.A.No.53 OF 2021** **AGAINST THE JUDGMENT DATED 06.07.2020 IN W.P(C).NO.13255/2020(F) OF HIGH COURT OF KERALA** ## **APPELLANT/PETITIONER:** **ARCTIC COOLING SOLUTIONS INDIA PVT LTD 63/447, E KRISHNA ARCADE, NEAR BSNL, GANDHINAGAR, KOCHI-682 017, REPRESENTED BY ITS' MANAGING DIRECTOR.** **BY ADVS.SRI.A.KUMAR SHRI.JOB ABRAHAM SRI.AJAY V.ANAND** ## **RESPONDENTS/RESPONDENTS:** - **1 UNION OF INDIA REPRESENTED BY FINANCE SECRETARY, NORTH BLOCK, NEW DELHI-110 001** - **2 THE PRINCIPAL COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE, OFFICE OF THE PRINCIPAL COMMISSIONER, CENTRAL REVENUE BUILDING, I.S. PRESS ROAD, KOCHI-682 018** **3 THE DESIGNATED COMMITTEE-II, SABKA VISWAS (LEGACY DISPUTES RESOLUTION) SCHEME (SVLDRS), KOCHI COMMISSIONERATE, OFFICE OF THE PRINCIPAL COMMISSIONER, CENTRAL REVENUE BUILDING, I.S.PRESS ROAD, KOCHI-682 018** - **4 THE JOINT COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE, OFFICE OF THE PRINCIPAL COMMISSIONER, CENTRAL REVENUE BUILDING, I.S. PRESS ROAD, KOCHI-682 018** **R1 BY ADV. P.R.AJITH KUMAR, CGC R2-4 BY ADV. SRI.SREELAL N.WARRIER (B/O)** **THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 17.03.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **W.A.No.53/2021 :: 2 ::** ## **J U D G M E N T** ## **A.K. Jayasankaran Nambiar, J.** The petitioner in W.P.(C).No.13255/2020 is the appellant before us, aggrieved by the judgment dated 6.7.2020 of the learned Single Judge in the writ petition. The brief facts necessary for disposal of the Writ Appeal are as follows: 2. The writ petitioner company has filed declarations, as evidenced by Exts.P5, P6 and P7, in Form SVLDRS–01 on 31.12.2019 claiming the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 [hereinafter referred to as the 'Scheme']. The said Scheme contemplates the disclosure by an assessee of unpaid taxes pertaining to previous years, for the purposes of claiming tax relief as also relief from interest and penalty that can be levied/imposed on the assessee under the respective tax legislation. In the instant case, in the declarations filed by the petitioner, it had shown payment of certain amounts by way of tax during the assessment periods 2016-17 (April to September), 2016-17 (October-March) and 2017-18 (April-June). **W.A.No.53/2021 :: 3 ::** The declarations also contained a statement by the petitioner that returns had been filed in Form ST3 during the relevant period, and the figures relating to outstanding tax dues wherever applicable had been taken from the returns. It would appear that the declarations were processed by the designated Committee consisting of Joint Commissioner and Assistant Commissioner of Service Tax, and accepted by the Department, which proceeded to issue statements estimating the amounts payable by the petitioner in Form SVLDRS-03 dated 28.2.2020. The said statements are produced in the writ petition as Exts.P8 to P10. Thereafter, the petitioner was served with Exts.P12 to P14 rectification orders, purportedly rectifying the earlier orders that accepted the declarations filed by the appellant for the purposes of the Scheme. In the said orders, the stand of the Department was essentially that it had subsequently come to the notice of the Department that the petitioner had not actually filed returns during the relevant period in the electronic format, which was necessary, and hence, the tax relief extended to the petitioner, through the acceptance of the declarations, was erroneous. The orders indicated that inasmuch as the petitioner had not filed returns during the relevant period, the declarations could only be seen as “voluntary disclosure” for the purposes of the Scheme, and the petitioner was obliged to pay the entire tax amount outstanding as per the **W.A.No.53/2021 :: 4 ::** declarations, and would only get the benefit of waiver of penalty, interest, late fees etc. In the writ petition, the petitioner impugned the said rectification orders inter alia on the contention that the rectification orders had been passed beyond the time limit prescribed for the same under the Scheme. A further point that was urged in the writ petition was that the rectification orders had been passed without affording an opportunity of hearing to the petitioner, and without following the procedure contemplated under the Scheme for rectifying orders earlier passed by the Department. 3. The learned Single Judge, who considered the matter, found force in the contention of the learned Standing Counsel for the Department that, inasmuch as the petitioner had not filed returns during the relevant period, the declarations had to be seen as false for the purposes of Section 129 of the Finance Act, 2019, which incorporated the Scheme. In particular, it was contended by the Department that where a voluntary disclosure was found to be false in respect of any material particular furnished in the declarations, then it had to be presumed that no such declaration was ever made, and the recovery proceedings under the applicable indirect tax enactment had to be instituted. The learned Single Judge therefore proceeded to dismiss the writ petition as devoid of **W.A.No.53/2021 :: 5 ::** merit. 4. Before us, it is the contention of Sri.A.Kumar, the learned counsel for the appellant that the rectification orders were all passed beyond the time prescribed under the scheme for passing such orders and further, that they were passed without complying with the procedural formalities that had to be adhered to while passing such orders. The aspect of violation of natural justice is also highlighted by pointing out that the appellant was not heard prior to the passing of the rectification orders. 5. On a query from the Bench with regard to whether or not returns had actually been filed during the relevant period, as stated in the declarations filed by the appellant, the appellant, as also the respondents, have filed affidavits clarifying that although the appellant may have attempted to upload returns pertaining to the relevant period in the website of the Department, such attempts did not fructify, and the appellant was not able to proceed beyond the stage of preparing a draft of the returns. As a result, the returns were never uploaded onto the system. Based on the the material made available before us at the time of hearing we are also convinced that the inability to upload the returns cannot be attributed to any defect in the system maintained by the **W.A.No.53/2021 :: 6 ::** Department. We have therefore to proceed on the assumption that no returns had been filed by the appellant during the relevant period, and the statements to the contrary, in the declarations, were factually incorrect. We may also observe, at this stage, that although the appellant has an alternate contention that he had filed the returns during the relevant period manually, the same may not be of any significance, since, the manual filing of a return is not an acceptable mode of filing return under the provisions of the Statute, as amended in 2011. 6. Once it is accepted that the declarations filed by the appellant were factually incorrect in respect of the material particulars furnished therein, the provisions of Section 129(2)(c) of the Finance Act, 2019 would have to be seen as empowering the Department to treat the declarations as never made, and to initiate proceedings for recovery of the tax amounts as per the provisions of the Finance Act, 1994, as amended, governing the levy and collection of Service Tax. The Department, however, has not chosen to deny the petitioner the benefit of the scheme, but has merely suggested a category change in respect of the declarations filed by the appellant. While the appellant had declared that the particulars of outstanding tax were based on returns filed without payment of the tax, the Department treated the declarations as **W.A.No.53/2021 :: 7 ::** “voluntary disclosures”. The effect of this category change is that the appellant will be entitled only to the benefits of waiver of interest, penalty, late fees etc. but will be obliged to pay the entire tax amount declared by it in the declarations, by virtue of the provisions of Section 124(1)(e) of the Finance Act, 2019. The rectification orders passed by the Department therefore continue to extend the benefit of the Scheme to the appellant, albeit on terms different from what he had sought. We find that the stand of the Department is in fact beneficial to the appellant especially since the Department had the option of treating the petitioner's declarations as 'never made', and thereby denying it the benefits under the scheme and initiating proceedings for recovery of the tax amount, together with penalty and interest in accordance with the statutory provisions. 7. As regards the contention of the learned counsel for the appellant that the rectification orders were passed beyond the time prescribed under the statutory provisions, and further, that the procedural formalities required to be complied with prior to passing of such orders had not been adhered to by the respondents, we find that even if we were to accept the said contention and find the rectification orders to be vitiated on account of a jurisdictional error, we need not interfere with the **W.A.No.53/2021 :: 8 ::** said orders if we find that justice has nevertheless been done in the case. 8. The learned counsel for the appellant, would next rely on the judgment of a learned single judge of the Madras High Court in **GT Holidays Private Limited v. Designated Committee, Sabka Vishwas Legacy Disputes Resolution and Another – [2020 SCC OnLine Mad 6240]** , where the court while dealing with a writ petition questioning the legality of a rectification order passed by the Department, refused to consider the Department's counter argument regarding the entitlement of the assessee to the benefit of the Scheme itself. With all due respect to the learned judge, we find ourselves unable to agree with the view taken, more so in the context of interpretation of provisions that offer amnesty to an assessee from the rigours of a fiscal statute. In matters of taxation, beneficial provisions have to be interpreted strictly in favour of the Department and against the assessee, unlike taxing provisions where the interpretation favours the assessee. Further, as already noted above, we find that, while under Section 129 of the Finance Act, the Department could have treated the declarations filed by the appellant as 'never made', for the purposes of the Scheme, it has not chosen to do so, thereby granting the appellant the benefit of the Scheme to the extent **W.A.No.53/2021 :: 9 ::** applicable. We therefore see no reason to interfere with the judgment of the learned Single Judge impugned in this appeal. 9. Before parting with this case, we might observe that in Ext.P12 rectification order pertaining to the period 2016-17 (April – September), the Department has shown an amount of Rs.9,94,359/- as payable by the appellant under the Scheme. Going through the details furnished before us by the parties in the course of these proceedings, we find that an amount of Rs.11,18,763/- has already been paid by the appellant towards tax during the said period. This would mean that, as against the outstanding tax amount declared as Rs.9,94,359/-, the appellant has, in fact, paid an amount of Rs.1,24,404/- in excess during the relevant period, which he cannot, at any rate, claim as refund going by the provisions of the Scheme. We deem it appropriate to clarify that the appellant shall be seen as having discharged his tax liability of Rs.9,94,359/- during the said period, and the limited relief that can be granted to the appellant under the Scheme, for the said period, is the waiver of interest, penalty, late fees etc. as applicable. As regards Ext.P14 rectification order, which pertains to the period 2017-18 (April – June), while requiring the appellant to pay the tax amounts mentioned therein, the Department shall give credit to the amount of Rs.2,93,254.80 paid by the appellant on 18.3.2020, **W.A.No.53/2021 :: 10 ::** pursuant to the initial acceptance of his declaration by the Department. 10. The appellant shall make the payments required under the Scheme within 30 days from the date of receipt of a copy of this judgment, and on the appellant making the said payment, the Department shall proceed to finalize the proceedings and issue the discharge certificate to the petitioner. The scheme shall be treated as in force for the limited purpose of finalising the proceedings as above. The Writ Appeal is disposed as above. **Sd/-** **A.K.JAYASANKARAN NAMBIAR JUDGE** **Sd/GOPINATH P. JUDGE** **prp/17/3/21** **W.A.No.53/2021 :: 11 ::** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **ANNEXURE A TRUE COPY OF CHALLANS AS PROOF OF PAYMENT OF SERVICE TAX. ANNEXURE B TRUE COPY OF THE TABLE SHOWING THE TAXABLE VALUE, ACTUAL AMOUNT OF SERVICE TAX DUES FOR THE RETURN PERIOD IN DISPUTE AND THE DETAILS OF PAYMENT. ANNEXURE C TRUE COPY OF THE CIRCULAR NO.1069/2/2019/2019 CX DATED 08.05.2019 ISSUED BY THE CBIC.** **RESPONDENTS EXHIBITS: NIL.** **//TRUE COPY//** **P.S. TO JUDGE**