SVLDRS eligibility and natural justice: recorded admission of tax liability before the cut-off date can satisfy quantification.

Under the SVLDRS, a declaration exposed to rejection carries adverse civil consequences, so the affected declarant should be given a fair opportunity to explain why the claim is valid before summary rejection. The note also states that eligibility in the enquiry or investigation category can be satisfied where duty is quantified on or before the cut-off date, and that quantified duty may include a written communication or an admission of liability recorded during investigation. On that basis, a recorded admission of service tax liability, supported by a contemporaneous worksheet and later payments, is treated as sufficient quantification.

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Issues: (i) Whether rejection of the SVLDRS declaration without affording personal hearing violated the principles of natural justice; (ii) Whether the declarant was eligible under the Scheme on the footing that the tax dues had been quantified before the cut-off date.

Issue (i): Whether rejection of the SVLDRS declaration without affording personal hearing violated the principles of natural justice.

Analysis: The rejection of a declaration under the legacy dispute scheme entails adverse civil consequences because it exposes the declarant to the continuation of investigation and consequent liability. Where the Committee proposes to reject the declaration, the affected party must be given an opportunity to explain the basis on which the declaration is claimed to be valid. A summary rejection without hearing is inconsistent with fair procedure in the context of a scheme intended to settle legacy disputes.

Conclusion: The rejection without personal hearing was in breach of the principles of natural justice and could not be sustained.

Issue (ii): Whether the declarant was eligible under the Scheme on the footing that the tax dues had been quantified before the cut-off date.

Analysis: Under the Scheme, a person subjected to enquiry or investigation is eligible where the duty involved has been quantified on or before the cut-off date. Quantified duty includes a written communication of duty payable and extends to admission of liability by the declarant in a statement recorded during enquiry or investigation. The Scheme and the CBIC clarification do not require completion of investigation or issuance of a show-cause notice as a condition precedent. Admission of service tax liability in the recorded statement, supported by the contemporaneous worksheet and subsequent payments, satisfied the requirement of quantification.

Conclusion: The declarant was eligible and the declaration ought to have been treated as maintainable under the investigation or enquiry category.

Final Conclusion: The rejection of the declaration was set aside and the matter was sent back for fresh consideration with an opportunity of hearing and consequential action in accordance with the Scheme.

Ratio Decidendi: For eligibility under the legacy dispute scheme, quantification may be established by a recorded admission of duty liability before the cut-off date, and a declaration cannot be rejected under the enquiry or investigation category without affording a fair hearing where adverse civil consequences follow.

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