Discharge Certificate Under Sabka Vishwas Scheme Bars Appeal On Settled Tax Dispute: CESTAT Hyderabad

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad has held that the Revenue cannot continue an appeal concerning a tax dispute after the assessee has settled it under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and received a discharge certificate covering the same matter and period.

“Once the statutory authorities themselves accept the declaration and issue discharge certificate, the dispute reaches finality. Neither the assessee nor the Department can thereafter continue litigation relating to the same matter except in situations specifically carved out under the statute,” the tribunal observed.

The bench comprised Judicial Member Angad Prasad and Technical Member A.K. Jyotishi. It was hearing the Revenue's appeal against Big C Mobiles Pvt. Ltd.

The appeal challenged the Commissioner's decision to drop the service tax demand for the extended limitation period.

Big C Mobiles is engaged in the sale of mobile phones through retail outlets in Telangana and Andhra Pradesh. The dispute arose from a show cause notice alleging non-payment of service tax on insurance coverage charges collected from customers from 2013-14 to June 2018.

The Commissioner confirmed a service tax demand of ₹1.43 crore for the normal limitation period. He dropped the demand relating to the extended period.

The Revenue challenged that part of the order before the tribunal.

Subsequently, Big C Mobiles opted to settle the dispute under the Sabka Vishwas Scheme. The Designated Committee accepted its declaration.

Big C Mobiles paid the amount determined under the scheme. An SVLDRS-4 discharge certificate was issued on February 10, 2020, certifying full and final settlement of the tax dues.

In simple terms, the discharge certificate records the settlement of the tax dues covered by the declaration after the amount determined under the scheme has been paid.

The tribunal noted that Section 129 of the Finance Act, 2019 makes a discharge certificate conclusive regarding the matter and period covered by the declaration. The provision also states that the declarant is not liable to pay any further duty, interest or penalty for that matter and period.

It further provides that no matter and period covered by the declaration can thereafter be reopened in another proceeding under the indirect tax laws.

“The provision unequivocally declares that every discharge certificate issued under Section 126 shall be conclusive regarding the matter and period covered by the declaration,” the tribunal observed. “Thus the legislative intent is unmistakable.”

The tribunal relied on the Bombay High Court's decision in Astute Valuers and Consultants Pvt Ltd. v. Union of India. It noted that the high court had held that issuance of a discharge certificate is not merely an acknowledgment of payment.

It constitutes full and final settlement of the tax dispute.

The tribunal held that the statutory discharge certificate had attained finality. It therefore found that continuation of the Revenue's appeal challenging the original order could not be sustained.

The tribunal also examined whether the Commissioner was justified in dropping the demand for the extended limitation period.

It noted that the December 21, 2018 show cause notice was the fifth notice issued to Big C Mobiles involving substantially similar issues. Earlier notices concerning previous periods had already been adjudicated.

The Department was therefore fully aware of the company's method of accounting, collection of insurance charges and payment of service tax, the tribunal observed. In these circumstances, the allegation of suppression of facts could not be sustained.

The tribunal relied on the Supreme Court's ruling in Nizam Sugar Factory v. Collector of Central Excise. The Supreme Court had held that where earlier show cause notices had been issued on identical facts, the Department could not subsequently invoke the extended limitation period on the ground of suppression when the relevant facts were already within its knowledge.

Applying this principle, the tribunal held that invocation of the extended limitation period in the fifth show cause notice was wholly unsustainable.

It found no error in the Commissioner's decision to restrict the demand to the normal period and drop the extended-period demand.

The tribunal ultimately held that issuance of the Sabka Vishwas discharge certificate had resulted in complete and final settlement of the dispute. It dismissed the Revenue's appeal as not maintainable.

For Appellant: V.R. Pavan Kumar, Authorized Representative

For Revenue: V.R. Pavan Kumar, Authorized Representative

For Respondent: Advocate P. Rama Krishna for Big C Mobiles Pvt. Ltd.