CESTAT Delhi Upholds Service Tax Demand After Missed Amnesty Scheme Deadline, Sets Aside Penalty Citing Pandemic

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi, has upheld a service tax demand as well as interest against a taxpayer engaged in providing works contract services.

It found that the taxpayer did not make the payment required under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 within the prescribed timeline and was therefore not eligible for its benefits. This is despite the fact that the deadline had been extended until June 30, 2020 due to the Covid-19 pandemic.

Judicial Member Dr. Rachna Gupta, however, set aside the penalty imposed on T.D. Shibu. The tribunal noted that the delay occurred during the pandemic and that there was no indication of mala fide intent.

“The SVLDRS, 2019 was a legacy scheme, a benefit to a defaulting assessee and that there is no ambiguity vis-à-vis the time period entitling the assessee for those benefits, it is held that since the payment was not made during the stipulated time, the benefit of scheme stood already lapsed at 30.06.2020,” the tribunal observed.

The appeal arose from proceedings against T.D. Shibu, who had voluntarily disclosed service tax liability of ₹2.90 lakh under the Sabka Vishwas Scheme on 31 December 2019.

The declaration was accepted, and a statement in Form SVLDRS-3 was issued on 30 January 2020. The disclosed amount was required to be paid within the prescribed period. The deadline was later extended until 30 June 2020 because of the Covid-19 pandemic. Even then, the payment was not made within time.

T.D. Shibu argued that payment had been made through the banker before the due date. According to the taxpayer, the amount could not be credited by 30 June 2020 because of pandemic-related conditions.

It was also contended that denying the benefit of the scheme on account of delayed payment defeated its objective of resolving legacy disputes.

The revenue authorities maintained that the scheme was a time-bound opportunity for taxpayers who had not disclosed their liabilities. They argued that compliance with the payment timeline was mandatory.

After going through the same, the tribunal also concluded that compliance with the stipulated period was a necessary.

It further noted that failure to do so would result in the declaration lapsing.

The tribunal found that the payment was made after the extended deadline. It therefore held that the requirements of the scheme had not been satisfied.

Referring to settled principles of statutory interpretation, the tribunal held that clear statutory language could not be disregarded on grounds of hardship.

As a result, the tribunal upheld the service tax demand. It also sustained the interest liability confirmed by the departmental authorities.

On the question of penalty, however, the tribunal took a different view.

“There seems no mala fide intent of not making the requisite payment or delaying the same despite voluntarily applying under the amnesty scheme with the appellant. With these observations, I set aside the order confirming the imposition of penalty upon the appellant,” it held.

The appeal was partly allowed.

For Appellant: Shri Abhishek, Chartered Accountant

For Respondent: Shri V.J. Saharan, Authorized Representative