Rajasthan High Court Rejects Claim To Adjust Earlier Service Tax Payment Against Dues Under Sabka Vishwas Scheme

The Rajasthan High Court has held that a taxpayer who declares the full service tax liability under the voluntary disclosure category of the Sabka Vishwas Scheme cannot later seek adjustment of an earlier tax payment against that declared amount, ruling that the statutory scheme treats the figure voluntarily declared as the tax due.

A Division Bench comprising Justice Arun Monga and Justice Ashutosh Kumar held that in a voluntary disclosure case, the amount declared by the taxpayer itself is treated as the tax dues under Section 123(d) of the Finance (No. 2) Act, 2019.

The Court also held that the earlier payment did not fall within the payments that can be deducted under Section 124(2).

The case concerned M/s Greens And Grows, which had service tax liability relating to works contract services for the financial years 2014 to 2017. The firm opted for the voluntary disclosure category under the Scheme to settle its liability.

In its Form SVLDRS-1 filed on January 13, 2020, the firm declared service tax dues of ₹32,18,746. At the same time, it informed the authorities that it had already paid ₹19,90,803 in September 2015. It therefore claimed that only ₹12,27,943 remained payable.

The designated committee did not accept this calculation. It issued Form SVLDRS-2 informing the firm of the amount determined and later issued Form SVLDRS-3, maintaining that the earlier payment could not be deducted from the amount declared under the voluntary disclosure category.

The firm then approached the High Court. It argued that the ₹19.90 lakh already paid should be adjusted so that it would not have to pay the same amount again.

The firm relied upon Section 124(2), which allows certain amounts already paid as pre-deposit during appellate proceedings or as deposits during enquiry, investigation or audit to be deducted while calculating the amount payable under the Scheme.

The Revenue opposed the plea, arguing that the payment made by the firm in 2015 was not a pre-deposit or a deposit made during any enquiry, investigation or audit. It was simply a payment towards its existing service tax liability.

The High Court agreed with the Revenue. It noted that Section 123(d) specifically provides that, in a voluntary disclosure case, the tax dues mean the total amount of duty stated in the declaration.

"...In a voluntary disclosure the measure is the declarant's own statement. The statute fixes the tax dues at the total amount of duty stated in the declaration. It does not speak of the duty net of past payments. It does not speak of a balance. It speaks of the total amount stated", it said.

In this case, the firm had declared ₹32,18,746 as its tax dues and had also repeated the same amount in the column relating to the amount payable. The Court therefore held that this amount had to be treated as the tax dues for the purpose of the Scheme.

The Court then examined the earlier payment of ₹19,90,803. It found that the payment did not fall within Section 124(2), as there was no pending appeal, enquiry, investigation or audit when the amount was paid.

The Bench held that the payment was only a deposit made towards the firm's running service tax liability. It therefore could not be deducted under Section 124(2).

The Court further noted that although the Scheme was intended to settle legacy tax disputes, the firm had itself chosen the voluntary disclosure category. It could have declared the amount after taking its earlier payment into account or opted for another category if it was eligible.

"...we are in agreement that a Scheme framed to liquidate legacy disputes must be construed to advance its purpose. But given that the petitioner selected the category of voluntary disclosure, it was open to it to declare its dues after accounting for the sum already paid, or to bring its case within a different category if the facts permitted. Having twice stated a figure that the statute makes conclusive, and having invoked a category to which the statute attaches no relief and forbids verification, the petitioner cannot later resile from that declaration", the Court said.

Having declared ₹32,18,746 as its tax dues, the firm could not later seek to change the effect of that declaration, the Court held.

The Bench found no illegality or procedural unfairness in the decision of the authorities and declined to interfere under Article 226 of the Constitution.

The writ petition was accordingly dismissed.

For Petitioner: Falak Mathur and Yug Singh

For Respondent: Mahi Yadav, AAG, Chelsi Agarwal, Ajay Shukla, Shivam Sharma and Jyoti Sharma, Advocates