Designated Committee Must Adjust Pre-Deposits & Investigation Recoveries While Issuing Final Statement Under SVLDRS-3 Scheme: Bombay HC

The Bombay High Court has held that the Designated Committee under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) is mandatorily required to verify and consider pre-deposits and amounts recovered during investigation under Form SVLDRS-3 (final statement issued by the Designated Committee showing the exact amount payable by the taxpayer under the Scheme) A Division Bench comprising Justice M.S. Sonak and Justice Advait M. Sethna, while hearing a writ petition filed by the assessee, quashed the SVLDRS-3 demand statement from the assessee without adjusting tax already recovered and pre-deposits made. The Court stated that mere non-availability of challans cannot be a ground to disregard material produced within the permissible timeline. The Court observed that issuing SVLDRS-3 without such verification is contrary to Section 124(2) of the Finance Act, 2019, which mandates adjustment of past payments. 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, Evershine Enterprises was issued two show-cause notices alleging service tax demand. The Order-in-Original confirmed both demands, which was thereafter challenged in appeal before the CESTAT. During the pendency of this appeal before the CESTAT, the Petitioner opted for SVLDRS, 2019, submitting that substantial amounts had already been pre-deposited or recovered during investigation. The object of SVLDRS is to bring final closure to pending disputes relating to pre GST Regime by offering relief in tax dues, interest and penalty, so that taxpayers can settle legacy litigation and the Government can clear the backlog of cases and focus fully on GST. However, the Revenue issued SVLDRS-3 demanding 50% of the tax dues without adjusting past payments. Aggrieved by this, the assessee preferred a writ petition before the High Court seeking quashing of the SVLDRS-3 statement issued by the Designated Committee. The Revenue argued before the High Court that SVLDRS-3 did not deduct / adjust the amounts already paid as pre-deposit and the amounts recovered during investigation while computing the amount payable under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The Bench noted that the assessee had filed challans within the required period and the Revenue's own show-cause notice recorded a recovery during investigation, yet the authorities never examined or verified these figures before issuing SVLDRS-3. Referring to the object of the SVLDRS, the Bench observed that the scheme is meant to resolve legacy disputes and reduce litigation, and its implementation cannot become a mechanical exercise that ignores payments already made. In view of the above, the Bench allowed the writ petition in favour of the assessee by quashing the SVLDRS-3 to the extent it fixed liability at Rs.1.12 Cr and directed the constitution of a Designated Committee to recompute the amount payable under the scheme after full verification of challans and the investigation-stage recovery. Case Title: Evershine Enterprises Vs. Union of India Through Secretary Ministry of Finance & Ors. Case No: Writ Petition No. 3138 of 2022 Appearance for Petitioner/Assessee: Mr. Bharat Raichandani, Bhagrati Sahu i/b. Prabhakar Shetty Appearance for Respondents: Mr. P.C. Cardozo, a/w Mamta Omle Click Here To Read/Download Order

Designated Committee Must Adjust Pre-Deposits & Investigation Recoveries While Issuing Final Statement Under SVLDRS-3 Scheme: Bombay HC

Rajnandini Dutta

Tags