Bombay High Court Quashes SVLDRS-3 Issued Under 'Arrears'; Says It Must Be Reassessed Under 'Litigation' Category With 70% Relief

A Bench of Justice M.S. Sonak and Justice Advait M. Sethna while hearing a writ petition seeking quashing and setting aside of form SVLDS-3 issued to the assessee under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, stated that the Petitioner's case would fall under the ambit of Section 124(1)(a) of the Finance Act, and Petitioner would be legally entitled to relief to the extent of 70% of the tax dues/duty demand.

Section 124(2) provides that while issuing the SVLDRS statement of amount payable (Form SVLDRS-3), the Designated Committee must deduct any amount already paid by the declarant as pre-deposit during appellate proceedings or as deposit during inquiry, investigation or audit.

The assessee, M/s Unique Enterprises, is engaged in manufacturing condensers and cooling coils. The dispute began when the Department issued a Show Cause Notice, demanding central excise duty, along with proposals to impose penalties under various provisions of the erstwhile Central Excise Rules, 1944.

This demand was confirmed by the Commissioner through an Order-in-Original, where the Commissioner upheld the full duty demand and also imposed heavy penalties and fines upon the assessee.

The assessee challenged this order before the Customs, Excise and Gold (Control) Appellate Tribunal CEGAT (Tribunal). The Tribunal first directed the assessee to make a pre-deposit which the assessee paid. Later, by an order, the Tribunal set aside the Commissioner's order and remanded the matter back to the adjudicating authority for fresh re-quantification of the duty amount.

The matter then went to the Bombay High Court, again set aside the Tribunal's findings and sent the case back for a fresh hearing. Thereafter, the Tribunal dropped some amount of the duty demand, but the remaining portion of the duty was still left to be re-quantified, i.e. the original Show Cause Notice proceedings were still pending and had not reached finality.

It was during this pendency that the assessee filed a declaration under the SVLDRS in, leading to the present litigation.

The Designated Committee treated the case as an Arrears matter and issued SVLDRS-3.

Aggrieved by this, the assessee again preferred a writ petition before the Bombay High Court.

The Bombay High Court observed that the assessee's duty demand had not reached finality, because the Show Cause Notice was still pending re-quantification due to repeated remands by the Tribunal. Therefore, the case must be treated under the “Litigation” category of the SVLDRS Scheme, giving the assessee 70% relief.

The Bench also observed that the Department had wrongly treated the case as “Arrears”, which would defeat the purpose of the Scheme, and that the pre-deposit paid by the assessee must be considered.

In view of the above, the Bench quashed SVLDRS-3 and directed the Department to recalculate the dues under the Litigation category.

Case Title: M/s Unique Enterprises Vs. Union of India & Anr.

Case No: Writ Petition No. 2343 of 2021

Appearance for the Petitioner/Assessee: Ms. Kiran Doiphode i/by V. M. Doiphode & Co.

Appearance for the Respondent: Mr. Kiran Adik a/w S.D. Deshpande