High Court sets aside demand notices in respect of a period, for which the assessee had discharged tax liability under SVLDRS
In a recent judgment, Hon’ble Bombay High Court has held that the demand of service tax interest and penalty in respect of a period, for which the assessee had already discharged tax liability under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) was contrary to the Finance Act, 2019, and without authority in law.
ABCAUS Case Law Citation:
4935 (2025) (12) abcaus.in HC
In the instant case, the Petitioner assessee had approached the Hon’ble High Court by filing a Writ Petition under Article 226 of the Constitution of India challenging the show cause notices despite obtaining discharge certificate under SVLDRS Scheme.
The man issue was as to whether after obtaining Discharge Certificate under the SVLDRS Scheme, 2019 petitioner can still be fastened with any liability in terms of interest, by issuing a show cause cum demand notice in respect of a period, for which the Petitioner has already discharged such tax liability.
The Petitioner was a private limited company inter alia engaged in providing advisory services. It was registered as service provider under the Finance Act, 1994. An audit was conducted into the Petitioner’s financial affair and records and certain discrepancy were observed. Pursuant thereto, the Petitioner made payments of tax in light of the audit findings.
After Govt. notified SVLDRS Scheme 2019, the Petitioner filed an application in Form SVLDRS-3 under Section 128 of the Finance Act, 2019 allowing the Designated Committee to rectify clerical error in making the application. The Petitioner made payment of the amount quantified under the SVLDRS. The Designated Committee issued Form SVLDRS-4 i.e. Discharge Certificate certifying the full and final settlement of tax dues as per Form SVLDRS-3.
However, in the very next month, the Assistant Commissioner CGST issued a show cause notice calling upon the Petitioner to pay interest on delayed payment of service tax. The Petitioner clarified that after paying the amount in pursuance of the amount determined in Form SVLDRS-3 there was no pending liability towards interest. It was only on discharge of liability as per Form SVLDRS-3 that the Petitioner was issued Form SVLDRS-4 that is the final Discharge Certificate, after which there was no pending.
However, GST Officials continued to send show cause to the Petitioner resulting in Petitioner approaching the Hon’ble High Court.
The Department contended that The Scheme proceeds on the basis that when an Assessee disputes the quantified amount during the audit, it does not apply to cases where the taxpayer accepts the amount quantified during the audit or enquiry. Therefore, any amount paid by the Petitioner after having accepted the quantification pursuant to the audit cannot be subjected to any benefit under the SVLDRS 2019.
It was also argued that the show-cause notices issued to the Petitioner pertained to an amount which were belatedly paid prior to taking benefit under the SVLDRS 2019. The Department was therefore justified in issuing the said show-cause notice.
The Hon’ble High Court observed that quantification/determination of the disputed amount was done prior to the cut-off date of 30 June 2019, as stipulated under Section 125(1)(e) of the Finance Act, 2019. Thus, the Petitioner was eligible to file such declaration claiming for the tax benefit under the SVLDRS.
The Hon’ble High Court further noted that as per section 129 of the Finance Act, 2019 the issuance of Discharge Certificate is not just conclusive of the amount but also of the full and final settlement of tax dues, once the same is issued.
The Hon’ble High Court opined that merely because the Petitioner at the time for filing SVLDRS-1 had incorrectly filed declaration under arrears category and not under audit, enquiry, investigation category would not deprive the Petitioner to claim relief which is available to the Petitioner eligible under the statutory framework of the Finance Act, 2019. So also, under the said Scheme the benefit available to the Petitioner was only to the extent as prescribed under Section 124 of the said Act.
The Hon’ble High Court observed that such Schemes as the SVLDRS are floated by the Government to strike a balance between amicable resolution of tax disputes and protecting revenue interest. This is vital in contemporary times. 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 authorities concerned would bear in mind its avowed object and purpose and ensure its smooth implementation, without unnecessary hurdles/bottlenecks and unwarranted technicalities. This would be a step forward in facilitating the vision of ease of doing business in India.
Accordingly, the impugned show cause notices were set aside and authorities were directed to grant the Petitioner benefit of the Scheme.
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