Bombay High Court Quashes Tax Notices Issued Against Mumbai Company After SVLDRS Settlement

The Bombay High Court has held that once a dispute is settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and a Discharge Certificate is issued, tax authorities cannot reopen the matter.

A Division Bench of Justice M S Sonak and Justice Advait M Sethna set aside two show cause notices issued by officers of the Central GST Audit-II wing, Mumbai, after the dispute was settled under the Scheme

The court said a Discharge Certificate under SVLDRS signifies full and final settlement of the dispute for the issue and period covered.

Quoting Section 129 of the Finance Act, 2019 the court noted "issuance of the Discharge Certificate to be conclusive of the matter and the time period"

The case arose from service tax audit objections raised by Central GST audit officials against Astute Valuers and Consultants Pvt. Ltd., a Mumbai-based valuation and advisory services firm. The tax liability was quantified by the department in March 2019, before the June 30, 2019 cut-off under the Scheme.

Astute Valuers deposited amounts pointed out during audit and opted for settlement under SVLDRS. It paid the amount determined by the designated committee. A Discharge Certificate dated February 22, 2020 was issued, certifying full and final settlement.

Despite this closure, officers of the Central GST Audit-II wing issued show cause notices in March 2021 and June 2022 seeking interest on alleged delayed payment of service tax for the same period.

Rejecting this action, the High Court noted that the notices were issued even after full payment and grant of discharge.

“We find that despite issuance of the Discharge Certificate dated 22 February 2020 the Respondents demanded interest and penalty vide letter dated 18 November 2020,” the bench observed, holding that such demands were “ ex-facie contrary to the Finance Act, 2019, and without authority in law”

Before concluding, the court emphasised the purpose of amnesty schemes like SVLDRS and cautioned authorities against frustrating their object,

“Such Schemes encourage bonafide Assessees to disclose unpaid taxes and bring a closure to the past disputes which ultimately result in a win-win situation for the stakeholders as also for the nation's economy. We are confident that the Government/executive would enforce such Schemes in accordance with law and under the applicable statutory framework.”

The court also rejected the argument that Astute Valuers had filed its declaration under the wrong category, holding that such an error was curable and could not be used to deny the benefit of the Scheme.

It further refused to dismiss the petition on the ground of delay, noting that the company had acted bona fide and continuously pursued representations.

Reaffirming that once a dispute is discharged under SVLDRS, it attains finality and cannot be reopened, the court quashed the post-settlement show cause notices.