Delhi High Court: Excluding Taxpayers Due to Non-Material Errors in Quantum when Correct Duty is Deposited is Contrary to SVLDR Scheme

Delhi High Court: Excluding Taxpayers Due to Non-Material Errors in Quantum when Correct Duty is Deposited is Contrary to SVLDR Scheme

The Delhi High Court by its division bench comprising of Justices Vibhu Bhakru and Amit Mahajan observed that, excluding a taxpayer merely because there were some obvious and not material errors in the quantum of the duty details filled in the form, although the correct amount of duty was deposited, would run contrary to the object of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme).

The brief background of the case is that the petitioner- Carpet Export Promotion Council was set up by the Ministry of Textiles with the object of promoting export of Indian handmade woolen and silk carpets, was aggrieved by the impugned decision of the concerned authority to reject the Petitioner’s application under SVLDR Scheme.

During audit, an objection was raised regarding wrongful availing of Cenvat Credit on exempted income being the grants-in-aid received from the Ministry of Commerce and the Ministry of Textiles.

According to Respondent- Union of India & Another., the proportionate amount of the Cenvat Credit was required to be reversed. In addition, the Respondents also found that the Petitioner had wrongly availed cesses which were reversed but the interest and penalty remained outstanding. As per the meeting with the Additional Commissioner CGST, it was agreed that if the Petitioner would clear the dues, he would be exempted from interest and penalty.

Thereafter, the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, came into effect which covered cases like that of the Petitioner retrospectively. The petitioner therefore sought waiver of interest and penalty under the scheme, however, his application was abruptly rejected.

The bench upon perusal of the submission, the High Court stated that the Petitioner had correctly disclosed that no amount was left to be paid and a minor error such as, not including a duty amount is a curable one and thus, rejection of his application would run contrary to the object of the scheme.

According to the Court, the legislative intent to enact the SVLDR Scheme was to include all taxpayers for offloading the baggage of disputes, and all taxpayers, except those which were specifically excluded, were entitled to avail the benefit of the said Scheme.

The Court further stated that SVLDR Scheme also covered cases where no disputes were pending and enabled the taxpayers to voluntarily pay taxes and avail amnesty under the SVLDR Scheme.

The Court clarified that the petitioner in terms of the SVLDR Scheme, was entitled to waiver of the interest and penalty on deposit of the tax dues, the Bench found that the Petitioner had deposited the tax dues prior to 31 March, 2019, and there was no amount payable after the tax relief.

“The error on the part of the petitioner is that it did not include the duty amount, which related to the other three audit objections in the column of duty details and the duty paid. Clearly, this error was a curable one and did not affect the estimation of the amount payable after availing the benefit under the SVLDR Scheme. The petitioner had, in the course of proceedings prior to the SVLDR Scheme coming into force, paid the tax in respect of the said audit observations and had sought waiver of interest and penalty, which it claimed, was acceded to by the concerned Additional Commissioner, CGST,” noted the bench.

Referring to the decision of Thought Blurb vs. Union of India & Ors (2020), the Bench was of the considered view that the Petitioner’s application had been rejected in violation of the principles of natural justice.

Thus, while disposing of the petition, the High Court directed the designated authority to proceed with the Petitioner’s declaration in accordance with the scheme.