Petitioner eligible for Sabka Vishwas scheme as tax dues quantified before June 2019 cutoff date

Bombay HC allowed petition challenging rejection of application under Sabka Vishwas Legacy Dispute Resolution Scheme 2019. Court found petitioner eligible as tax dues were quantified before 30 June 2019 cutoff date, evidenced by director's statement acknowledging Rs. 120.16 lakhs service tax liability. Department's failure to consider CBIC Circular dated 27 August 2019 and FAQs dated 24 December 2019 rendered rejection improper. Matter remanded to authority for fresh consideration of application and computation within eight weeks, with direction for petitioner to pay reasonable interest given retention of amount over years.

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The core legal questions considered by the Court include:

1. Whether the Petition challenging the rejection of the Application under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 ("SVLDRS Scheme") is barred by delay and laches.

2. Whether the Petitioner was eligible under the SVLDRS Scheme, specifically whether the tax dues were "quantified" as on 30 June 2019 as required by the Scheme.

3. The proper interpretation of the term "quantified" in the context of the SVLDRS Scheme, including the relevance of the CBIC Circular dated 27 August 2019 and the Department's FAQs dated 24 December 2019.

4. Whether the rejection of the Petitioner's Application on the ground of non-quantification of tax dues was legally sustainable.

5. The appropriate relief and conditions, including the payment of interest, if the Petitioner is found eligible under the Scheme.

Issue 1: Delay and Laches

The Respondents contended that the Petition was barred due to delay and laches, as the rejection was communicated on 26 December 2019, but the Petition was filed only on 19 April 2021. Reliance was placed on a precedent where delay was held fatal.

The Court noted that the period in question was partially impacted by the COVID-19 pandemic, which affected the ability to initiate proceedings. The Court distinguished the precedent cited, emphasizing that the Petitioner did not unreasonably delay or create parallel rights for the Respondents. Thus, the objection based on delay and laches was rejected.

Issue 2: Eligibility under the SVLDRS Scheme and Quantification of Tax Dues

The SVLDRS Scheme mandates that tax dues must be "quantified" as on 30 June 2019. The rejection was based on the ground that the tax dues were not quantified by that date, as per a letter from the Directorate General of GST Intelligence (DGGI) dated 3 February 2020.

The Court examined the CBIC Circular dated 27 August 2019, particularly paragraph 10(g), which clarifies that "quantified" means a written communication of the amount payable, including letters intimating duty demand, admissions during enquiry or audit, or audit reports. The Department's FAQs dated 24 December 2019 further elucidated this position.

The Court found that the summons issued on 24 December 2018 and the statements recorded on 4 January 2019 and 17 March 2020 by the Petitioner's Director constituted sufficient written communication of the quantification of tax dues. The Director admitted a short-paid liability of Rs. 120.16 lakhs (approximately Rs. 1.21 Crores) during investigation, which was prior to the cut-off date.

Thus, the Court held that the tax dues were duly quantified before 30 June 2019, satisfying the Scheme's eligibility criteria. The ground for rejection on non-quantification was therefore unsustainable.

Issue 3: Interpretation of Quantification and Precedents

The Court referred to two Coordinate Division Bench decisions which had considered similar issues: Thought Blurb and Landmark Associates. In those cases, the Courts accepted that quantification through statements during investigation sufficed, even if the final liability determined later was higher or lower. The purpose of quantification was to establish eligibility, not to determine the final tax liability or investigate evasion.

In the present case, the final departmental assessment found a liability of approximately Rs. 1.16 Crores, which was less than the amount admitted by the Petitioner. This further strengthened the Petitioner's position.

The Respondents did not dispute the applicability of these precedents but argued that if relief was granted, it should be subject to payment of reasonable interest.

Issue 4: Relief and Interest

The Court acknowledged that although the rejection was improper, the Petitioner had retained and used the disputed amounts for several years. In the interest of equity, the Court directed that the Petitioner should pay the amount determined upon reconsideration along with simple interest at 6% per annum from 1 February 2020 until payment.

The matter was remanded to the concerned authority for fresh computation of the amount payable, taking into account amounts already paid by the Petitioner. The Petitioner was given eight weeks to comply with the payment after the fresh computation.

If the Petitioner paid the computed amount plus interest within the prescribed period, the impugned show cause notice would be quashed. Failure to pay would entitle the Respondents to proceed with the show cause notice.

Significant Holdings and Core Principles:

"(g) Cases under an enquiry, investigation or audit where the duty demand has been quantified on or before the 30th day of June, 2019 are eligible under the scheme. Section 2 (r) defines 'quantified' as a written communication of the amount of duty payable under the indirect tax enactment. It is clarified that such written communication will include a letter intimating duty demand; or duty liability admitted by the person during enquiry, investigation or audit; or audit report etc."

The Court established that the term "quantified" under the SVLDRS Scheme includes admissions of liability during investigation or audit, and not solely formal demand notices issued by the department. This interpretation aligns with the CBIC Circular and Department FAQs, which are integral to understanding the Scheme.

The Court emphasized that the purpose of quantification is to determine eligibility for the Scheme, not to finalize or adjudicate the actual tax liability or investigate evasion.

The Court held that delay and laches cannot be mechanically applied without considering contextual factors such as the COVID-19 pandemic and the absence of prejudice to the Respondents.

Finally, the Court balanced equitable considerations by allowing relief subject to payment of interest, recognizing the Petitioner's benefit from the amounts in question during the pendency of the dispute.

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