Taxpayer Can't Be Denied Sabka Vishwas Benefit Over Tax Quantification Sent To Bank: Bombay High Court
The Bombay High Court on 22 September held that a taxpayer cannot be denied the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme merely because the department quantified its service tax liability in a communication addressed to the taxpayer's bank rather than directly to the taxpayer.
A Division Bench of Justices M.S. Karnik and Sandesh D. Patil allowed RG Studios' petition challenging the rejection of its declaration under the Scheme, under which the firm had declared service tax dues of Rs. 44.28 lakh. The judges held:
“Merely because such quantification is addressed to the Bank is no ground to deprive the petitioner of the benefit of the Scheme.”
The department had quantified RG Studios' outstanding service tax liability at Rs. 44.28 lakh before the 30 June 2019 cut-off. In March 2019, it directed the firm's bank to create a lien over its account and specified the outstanding service tax amount in the communication.
The Revenue argued that the communication could not amount to quantification since it was addressed to the bank and not RG Studios. It also argued that interest had not been quantified and, therefore, there was no complete quantification of the liability.
Rejecting the argument, the Court held that the relevant consideration was the existence of a written communication specifying the amount of tax payable. The fact that it was addressed to the bank did not alter the position since the communication directly affected RG Studios by creating a lien over its bank account.
The Bench also relied on its earlier decision in Landmark Associates v. Union of India, where it held that a notice issued for recovery of service tax before the 30 June 2019 cut-off could amount to quantification for the purposes of the Scheme.
Accordingly, the High Court allowed RG Studios' writ petition and set aside the rejection of its declaration under the Sabka Vishwas Scheme.
For Petitioner: Bharat Raichandani, along with Mahesh Raichandani and Bhagrati Sahu, instructed by UBR Legal Advocates.
For Respondents: Karan Adik, along with Sangeeta Yadav.