Tribunal Quashes Service Tax Demand Based Solely on SVLDRS Disclosure
Dynamic Infratech's Appeal Succeeds as CESTAT Rules Against Unsupported Tax Demand
In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Bangalore has set aside a demand for service tax against M/s. Dynamic Infratech, holding that the demand, based solely on a voluntary disclosure under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS), was impermissible under the law. The bench, comprising Mr. P.A. Augustian and Mrs. R. Bhagya Devi, emphasized that demands must be grounded in factual verification and proper investigation.
Dynamic Infratech, represented by Chartered Accountant Mr. Jatin A. Chirstopher, had declared a service tax liability of Rs. 29,18,974 under the SVLDRS but failed to pay the amount by the deadline of June 30, 2020. Consequently, the Commissioner of Central Tax, Mangalore, confirmed the demand based on the disclosure. However, the tribunal found that the original show-cause notice lacked the necessary foundation, as it was issued purely on the appellant's voluntary disclosure without any supporting documentation or reference to services rendered.
The tribunal held that the authorities could not rectify deficiencies in an invalid show-cause notice by remanding the matter for redrafting or factual verification. This decision aligns with the Supreme Court's precedent in Commissioner of Central Excise v. Gas Authority of India Ltd. (2008), which underscores that a demand must be based on valid allegations and factual findings.
The tribunal's decision further clarifies that under the SVLDRS, any demand following non-payment of declared liability should proceed under regular service tax demand provisions, not solely on voluntary disclosures in SVLDRS Form-1. The tribunal highlighted the absence of a thorough investigation by the adjudicating authority and rejected the remand for re-adjudication as it amounted to correcting an invalid show-cause notice.
This ruling underscores the importance of rigorous procedural adherence in tax demands and reinforces taxpayers' rights to challenge demands lacking factual and legal substantiation.
Bottom Line:
Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Demand cannot be confirmed based solely on voluntary disclosures made in Form-1 under SVLDRS. Remand for redrafting of show-cause notice is impermissible under the law.
Statutory provision(s): Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, Sections 125, 126, 127, 129; Central Excise Act; Commissioner of Central Excise v. Gas Authority of India Ltd. 2008 (232) ELT 7 (S.C.)
