Court rules on pre-deposit adjustment under SABKA VISHWAS Scheme

The court ruled in favor of the petitioners regarding the adjustment of pre-deposit/deposit under the SABKA VISHWAS (LEGACY DISPUTE RESOLUTION) SCHEME, 2019. It held that the pre-deposit should be deducted after extending relief under Section 124, not before. Additionally, the court declared Clause 2(iv) of Circular No. 1072/05/2019/CX invalid as it altered the definition of 'tax dues.' The Designated Committee was directed to re-compute the amount payable by the petitioners under the Scheme accordingly. Both writ applications were allowed, with instructions for revised forms issuance and deposit within specified timelines.

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Issues Involved:
1. Adjustment of pre-deposit/deposit under the SABKA VISHWAS (LEGACY DISPUTE RESOLUTION) SCHEME, 2019.
2. Validity and interpretation of Clause 2(iv) of Circular No. 1072/05/2019/CX dated 25.09.2019.

Issue-wise Detailed Analysis:

1. Adjustment of Pre-deposit/Deposit:
The primary contention revolves around whether the pre-deposit/deposit made during enquiry, investigation, or audit should be deducted after extending the relief available under Section 124 of the Scheme or if it should be adjusted first while determining the 'tax dues' under Section 123 of the Scheme.

The petitioners argued that the amount of duty determined in the Orders-in-Original should be considered as the 'tax dues,' and the relief under Section 124(1)(c)(ii) should be granted on this amount. They contended that the Designated Committee's approach of first reducing the pre-deposit/deposit from the 'tax dues' and then calculating the relief was incorrect and contrary to the Scheme's intent.

The court agreed with the petitioners, stating that the term 'recoverable' in Section 121(c) should be interpreted as the amount of duty determined in the Orders-in-Original, not the outstanding amount after deducting pre-deposits. The court emphasized that a literal interpretation of the Scheme should be adopted, and the pre-deposit should be deducted after extending the relief under Section 124(1).

2. Validity and Interpretation of Circular Clause 2(iv):
The petitioners challenged Clause 2(iv) of Circular No. 1072/05/2019/CX, which stated that the amount of pre-deposit/deposit should be first adjusted against the 'tax dues' before extending the relief under Section 124. They argued that this clause altered the definition of 'tax dues' under Section 123 and was contrary to the Scheme's purpose.

The court found that the Circular's interpretation led to an absurdity, as it placed taxpayers who made pre-deposits in a worse position than those who did not. The court held that the Circular could not override the statutory provisions of the Scheme and declared Clause 2(iv) invalid to the extent it altered the definition of 'tax dues.'

Conclusion:
The court directed the Designated Committee to re-compute the amount payable by the petitioners under the Scheme, considering the observations made. The revised computation should deduct the pre-deposit after extending the relief under Section 124. The court allowed both writ applications, directing the Designated Committee to issue revised SVLDRS-3 forms within four weeks and the petitioners to deposit the re-computed amount within two weeks thereafter.

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