CESTAT Bangalore: Show Cause Notice Issued Solely on Basis of Voluntary Disclosure Under SVLDRS Scheme Unsustainable in Law
Pranav B Prem
The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that a show cause notice cannot be issued solely on the basis of a voluntary disclosure made by the assessee under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS). A division bench comprising P.A. Augustian (Judicial Member) and R. Bhagya Devi (Technical Member) observed that the Revenue authorities cannot rely exclusively on Form SVLDRS-1 filed by the assessee to raise a demand, as such disclosure has no legal existence in view of Clause 2(c) of Section 129 of the Finance Act, 2019.
Background
The assessee, M/s. Dynamic Infratech, a service provider, had opted for the SVLDR Scheme and filed Form-1 declaring service tax liability of ₹29,18,974 under Section 125 of the Finance Act, 2019. Based on this, the Department issued Form-3 confirming the same amount payable. However, the assessee failed to pay the dues before the stipulated deadline. Subsequently, the Department issued a show cause notice invoking the extended period of limitation, demanding the same amount of ₹29,18,974 based solely on the voluntary disclosure made in Form-1 under SVLDRS.
Arguments
The assessee argued that the show cause notice was illegal and unsustainable, as it was issued purely based on its own SVLDRS declaration, without any supporting evidence or investigation showing taxable services or liability. It was contended that there was no independent verification or factual foundation for the demand, and therefore, the proceedings were void ab initio.
On the other hand, the Department contended that since the assessee had voluntarily admitted the liability by filing Form-1 and failed to make the payment before the due date, the show cause notice was rightly issued to recover the dues.
Findings of the Tribunal
The CESTAT carefully examined the provisions of the SVLDRS Scheme under Chapter V of the Finance Act, 2019. It noted that if a person fails to pay the amount declared under the scheme, the Department may proceed under regular provisions of the Service Tax law, but it cannot issue a show cause notice merely based on the voluntary declaration. The Bench emphasized that the show cause notice issued in this case did not refer to any service rendered, invoices, or documentary evidence to establish the liability of the assessee. It was purely grounded on the SVLDRS Form-1, which cannot be treated as an admission of liability under the statutory provisions. Further, the Tribunal criticized the Commissioner (Appeals) for remanding the case to verify facts and redetermine liability, holding that such a direction amounted to redrafting the show cause notice, which is impermissible in law. It observed: “Having found that the show cause notice itself was issued only on the basis of SVLDRS-1, the authorities cannot be given an opportunity to make good a wrong show cause notice. The remand for factual verification is beyond the scope of the original notice.”
The Tribunal concluded that the show cause notice issued solely on the basis of the SVLDRS Form-1 was unsustainable in law. Since there was no independent investigation or evidence to establish tax liability, the demand and consequential orders were quashed. Accordingly, the appeal filed by M/s. Dynamic Infratech was allowed.
Appearance
Counsel for Appellant/ Assessee: Mr. Jatin. A Chirstopher, Chartered Accountant for the Appellant
Counsel for Respondent/ Department: Mr. Neeraj Kumar, Supt. Authorised Representative for the Respondent
Cause Title: M/s. Dynamic Infratech v. Commissioner of Central Tax
Case No: Service Tax Appeal No. 20455 of 2023
Coram: P.A. Augustian (Judicial Member), R. Bhagya Devi (Technical Member)
