Service tax dues quantified before 30.06.2019 cut-off under SVLDRS; rejected Form-1 quashed, Form-II issuance directed.

Rejection of a declarant's SVLDRS Form-1 was challenged on the ground that service tax liability had been admitted and quantified before the Scheme cut-off date of 30.06.2019. The HC held that eligibility under SVLDRS turns on prior quantification, and a belated return filed during investigation does not defeat the declaration where quantification had already occurred, following its earlier ruling that discrepancies between admitted/quantified amounts and figures in Form-1 do not disentitle a declarant. The endorsement rejecting Form-1 was quashed, and the authorities were directed to issue SVLDRS Form-II, enabling further processing under the Scheme.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether rejection of a declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, was legally sustainable where the assessee's service tax liability had been admitted and quantified in a statement recorded during proceedings prior to the cut-off date, but the department rejected the declaration citing belated filing during investigation and issuance of a show cause notice after the cut-off date.

(ii) Whether, upon finding such rejection unsustainable, the proper relief was to quash the rejection and direct issuance of the statutory form enabling further processing of the declaration under the Scheme.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Eligibility under the Scheme where liability was admitted and quantified prior to the cut-off date, despite later show cause notice / belated return

Legal framework (as discussed by the Court): The Court proceeded on the Scheme's eligibility requirement that the tax liability must stand quantified on or before the cut-off date, and treated prior judicial application of this principle (in an identical context) as governing the present case.

Interpretation and reasoning: The Court found, on the record, that during proceedings initiated by the department, a statement of the assessee's managing director was recorded well before the cut-off date, containing a specific admission that service tax liability had not been discharged for the relevant period and quantifying the liability at a stated amount. The Court held that this constituted admission and quantification prior to the cut-off date. On that basis, the Court concluded that the department's rejection-premised on the return being filed belatedly during investigation and the liability being covered by a show cause notice issued after the cut-off date-failed to account for the determinative fact that quantification had already occurred before the cut-off date. The Court treated the pre-cut-off quantification as sufficient to attract Scheme benefit, and held that subsequent steps in the proceedings (including later issuance of show cause notice) could not defeat eligibility once this condition was satisfied.

Conclusion: The Court held the rejection of the Scheme declaration to be erroneous and unsustainable, because the assessee's liability had been admitted and quantified prior to the cut-off date, entitling the assessee to be considered under the Scheme.

Issue (ii): Appropriate relief upon finding rejection illegal-quashing and direction to issue Form-II

Interpretation and reasoning: Having held the rejection arbitrary/illegal in the circumstances, the Court granted consequential relief designed to restore processing under the Scheme. It directed issuance of the prescribed form that would allow the assessee to proceed to the next step contemplated under the Scheme (including the assessee's entitlement to submit the further response form and proceed in accordance with law).

Conclusion: The Court quashed the impugned rejection/endorsement and directed the authorities to issue the relevant Scheme form to enable continuation of the Scheme process in accordance with law.

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