Bombay HC Allows SVLDR Benefit Where Liability Was Quantified Earlier

Venture Professional Hospitality Pvt. Ltd. Vs Union of India (Bombay High Court)

Liberal Interpretation of SVLDR Scheme and Importance of Pre-Cut-Off Quantification: A Pragmatic Approach by the Bombay High Court

Bombay High Court Delivers Landmark Victory for Taxpayer in SVLDR Scheme Dispute; Advocate Shreyas Shivastva and Saurabh Mashelkar Secures Relief

In a significant judgment for the hospitality sector and tax litigants, the Bombay High Court has ruled in favor of M/S Venture Professional Hospitality Pvt. Ltd., quashing an arbitrary rejection of their tax dispute settlement declaration. The case, which centered on the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS), underscores the court’s commitment to the principles of natural justice and the intended purpose of legacy settlement schemes.

The Core of the Dispute

The Petitioner, a provider of outdoor catering services, sought to settle its legacy service tax liabilities under the SVLDR Scheme. Despite the Petitioner admitting its liability of ₹69,26,979 in a statement recorded on June 11, 2019—well before the scheme’s cut-off date of June 30, 2019—the tax authorities rejected their declaration. The authorities claimed the amount had not been “quantified” in time, a stance that would have forced the company into decades of litigation.

A Masterful Legal Strategy by Advocates 

Leading the charge for the Petitioner, Advocate Saurabh R. Mashelkar(AOR) and Advocate Mr Shreyas Shivastva the Arguing Council  successfully challenged this rejection in a Writ Petition. They argued that the rejection was not only factually incorrect regarding the “quantification” of the debt but was also a gross violation of natural justice, as the Petitioner was never given an opportunity for a hearing before their application was tossed out.

Advocates’ strategy focused on the following key legal points:

• Quantification: Demonstrating that a written admission of liability during an investigation constitutes “quantification” under the law.
• Natural Justice: Highlighting that the Designated Committee failed to provide a mandatory hearing, rendering the rejection “desultory and cavalier”.
• Objective of the Scheme: Reminding the court that the SVLDR Scheme was designed to reduce litigation and allow businesses to “make a fresh beginning,” rather than creating new legal hurdles.

The High Court’s Ruling

The Division Bench, comprising Justice M. S. Sonak and Justice Jitendra Jain, agreed with the arguments presented by the Petitioner’s legal team. The Court observed that since the Petitioner had admitted their liability before the cut-off date, the Revenue’s contention that the duty was not quantified “cannot be accepted”.

The Court further noted that forcing the Petitioner back into the standard adjudication process would lead to a decade of appeals, which contradicts the very goal of the SVLDR Scheme. Consequently, the Court quashed the rejection and directed the Respondents to accept the declaration by taking the duty quantified at ₹1,06,21,929, as found by the Revenue.

A Victory for Fairness

This successful outcome provides a vital precedent for taxpayers facing technical rejections under amnesty schemes. The court ordered the authorities to calculate the final payable amount with 9% interest and to issue a final discharge certificate once paid, effectively ending years of uncertainty for Venture Professional Hospitality.

Bombay High Court Judgment – Structured Summary

Issue

Whether the rejection of the petitioner’s declaration under the SVLDR Scheme, 2019 was valid on the ground that tax liability was not quantified before 30 June 2019.

Key Facts

• Petitioner engaged in outdoor catering services (service tax applicable).
• During investigation:
  • Liability was admitted and quantified in statements (June 2019).
  • Written communication (March 2019) also disclosed tax computation.
• SVLDRS-1 declaration filed on 31 December 2019.
• Declaration rejected on 6 February 2020:
  • Reason: No quantification before cut-off date.

Petitioner’s Arguments

• Liability was quantified prior to 30 June 2019:
  • Statement dated 11 June 2019
  • Letter dated 1 March 2019
• No opportunity of hearing given before rejection.
• Willing to accept even higher quantified amount to avail scheme benefit.

Respondent’s Arguments

• Investigation incomplete → liability not formally quantified.
• Hence, petitioner ineligible under Section 125(1)(e).

Court’s Findings

1. Quantification existed before cut-off

• Statement (11 June 2019) clearly quantified liability.
• Written communication also indicated admitted dues.
• Therefore, eligibility condition satisfied.

2. Violation of Natural Justice

• Declaration rejected without hearing.
• Authorities failed to communicate their computation.

3. Purpose of SVLDR Scheme

• Designed to:
  • reduce litigation
  • ensure quick recovery
• Rejection would lead to years of litigation, defeating scheme objective.

4. Equitable Consideration

• Petitioner agreed to accept ₹1,06,21,929 liability.
• Court favored settlement over prolonged dispute.

Final Order

The Court:

• √ Quashed rejection of SVLDRS-1 declaration
• √ Directed authorities to:
  • Recalculate dues based on ₹1,06,21,929
  • Adjust pre-deposit
  • Add 9% interest
• √ Petitioner to pay within prescribed time
• √ Authorities to issue discharge certificate thereafter

Key Takeaways

• “Quantification” under SVLDRS can include:
  • statements during investigation
  • written admissions by assessee
• Hearing is mandatory before rejection
• Courts favor substantive justice over technical denial
• Reinforces pro-settlement interpretation of SVLDR Scheme

Significance and Analysis

This judgment is significant for the following reasons:

(i) Broad Interpretation of Quantification

The ruling clarifies that quantification can arise from:

• statements recorded during investigation
• voluntary disclosures by the assessee

It need not be a formal departmental determination.

(ii) Reinforcement of Natural Justice

The decision reiterates that administrative rejection under tax schemes must comply with procedural fairness, including the right to be heard.

(iii) Pro-Settlement Judicial Approach

The Court aligns with the legislative intent of SVLDRS by prioritizing:

• dispute resolution
• revenue certainty
  over technical disqualifications.

(iv) Practical Impact

The judgment will:

• benefit assessees whose declarations were rejected on technical grounds
• guide authorities to adopt a more facilitative approach in implementing settlement schemes

Conclusion

The Bombay High Court’s ruling underscores a shift from rigid technical interpretation to a substance-over-form approach in tax dispute resolution schemes. By recognizing pre-cut-off admissions as valid quantification and enforcing procedural fairness, the Court strengthens the credibility and effectiveness of SVLDRS.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. By the parties’ consent, the matter was finally heard.

2. This petition challenges the rejection of the declaration Form SVLDRS-1 filed by the Petitioner under ARN No.LD3112190004536 dated 31 December 2019 (Exhibit-K).

BRIEF FACTS:–

3. Petitioner is engaged in the business of providing outdoor catering services, which is exigible for tax under Chapter V of the Finance Act, 1994 (Service Tax).

4. On 2 November 2018, summons under the Finance Act, 1994 was issued to the Petitioner and a statement of one Mr. Manjunath Nanda Poojary, Director of the Petitioner was recorded with respect to Service-tax liability of the Petitioner. In the said statement, the Petitioner admitted that there has been a default in payment of Service-tax dues on account of financial crunch. The Petitioner also admitted certain mistakes and subject to reconciliation of the financial statements and Service-tax returns, the Petitioner estimated Service-tax liability of Rs.40 lakhs with an undertaking to pay Rs.30 lakhs within one day. However, same was not complied with and, therefore, summons were issued on 10 December 2018 and 19 December 2018 calling upon the Petitioner to produce various documents mentioned in the annexure to the said summons.

5. On 27 December 2018, the Petitioner stated that he has deposited certain service tax amount under protest since he needs to consult his accountant on various issues relating to service tax. On 13 February 2019, the Petitioner informed the Respondents that they had paid Rs.48,46,837/- towards service tax.

6. On 1 March 2019, the Petitioner requested the Respondents to work out the service tax liability and inform them so that the Petitioner can take an appropriate decision for making payment and waiving the issuance of a show cause notice. In the said letter, the Petitioner also worked out the service tax liability based on its calculation, which worked out to Rs.7,03,784/- after reducing the service tax already paid of Rs.45,46,837/-. The Respondents have not replied to this letter to date.

7. On 11 June 2019, in the course of investigation, in answer to question No.2, the Petitioner stated that the service tax liability for the period 2014-2015 to 2017-2018 is Rs.69,26,979/-. The Petitioner also stated the amounts paid during the said period and the final service tax liability due on that day, was worked out at Rs.39,54,479/-.

8. Meanwhile, the Union of India came out with Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme) for reducing the litigation by calling upon the assessees to make certain percentage of the admitted liability within the time frame specified therein and on payment of the same the dispute would be resolved without any penalty etc. The cutoff date for quantification of liability for availing the benefit of the said Scheme was 30 June 2019.

9. On 31 December 2019, the Petitioner applied in Form SVLDRS-1 for availing the benefit of the SVLDR Scheme. In the said form, the duty quantified was Rs.69,26,979/- and after reducing pre-deposit of Rs.29,72,500/- arrived at tax dues of Rs.4,90,989/-. The application was made under the category ‘Investigation’.

10. On 6 February 2020, the aforesaid declaration came to be rejected and same was communicated by e-mail to the Petitioner. The Petitioner by its letter dated 12 November 2020 protested against the said rejection on various grounds. Meanwhile, the Petitioner also raised a grievance with the Respondents for obtaining the reasons for rejection. The reasons provided by the Respondents pursuant to the said request were that on a verification report received from the concerned DGGI, the investigation was under process and final amount has not been quantified till the date of receiving the report i.e. 31 January 2020. The reasons further stated that as per Section 125(1)(e) of the Finance (No.2) Act, 2019 since the duty is not quantified before 30 June 2019, the Petitioner is not eligible.

11. Mr. Shrivastava, learned counsel for the Petitioner submits that in the statement dated 11 June 2019, Petitioner quantified and admitted its liability at Rs.69,26,979/- which is prior to the cut-off date of 30 June 2019. He submitted that by letter dated 1 March 2019, the Petitioner gave its working and requested the Respondents to give their tax working so that the Petitioner can pay the amount and waive the show cause notice. There was no reply to the said letter. He further submitted that no opportunity of hearing was given prior to the rejection as required by Section 127 of the Finance (No.2) Act, 2019. He submitted that eligibility is not in dispute but what is in dispute is quantification. He also relied upon the FAQ’s issued by the Respondents which are annexed at pages 68 to 70 of the present petition and submitted that since the present Petitioner has intimated in writing the admitted duty, the Respondents were not justified in rejecting the declaration. He further submitted that had an opportunity of hearing was given to the Petitioner then the Petitioner would have agreed to the demand raised in the show cause notice of Rs.1,06,21,929/- and would have availed the benefit of the Scheme. He further submitted, on instructions, that the Petitioner is willing to admit the quantification of duty at Rs.1,06,21,929/- and avail the benefit of the Scheme and further are also willing to pay the amount as per the Scheme alongwith interest @ 9 % p.a. from the date of rejection till the date of payment.

12. Mr. Mishra, learned counsel for the Respondents relied upon various summons issued to the Petitioner and its non-compliance which prevented the Respondents to quantify the demand. He relied on paragraphs 22, 28 and 40 of the affidavit in reply of one Mr. Yogesh Yadav dated 8 October 2021 and submitted that since there was no quantification on the cut-off date, the Respondents were justified in rejecting the declaration. He relied upon the following two decisions:-

(i) JSW Steel Limited vs. Union of India and Ors.^l&

(ii) Shri Siddhi Kumar Infrastructure Pvt. Ltd. vs. Union of India²

13. We have heard learned counsel for the Petitioner and Respondents and with their assistance have perused the documents.

14. There is no dispute that on 11 June 2019, in the statement recorded during the course of investigation, the Petitioner in answer to question No.2 quantified service tax liability for the period 2014-2015 to 2017-2018 at Rs.69,26,979/- and after reducing the service tax paid of Rs.29,72,500/- admitted service tax payable as on 11 June 2019 at Rs.39,54,479/-. The Petitioner undertook to pay the said amount along with interest and penalty. Furthermore, the Petitioner on 1 March 2019 addressed a letter to the respondents requesting the Respondents to work out the tax and inform the Petitioner so that the Petitioner can make the payment and waive the issuance of show cause notice.

Admittedly, there was no reply by the Respondents to this letter. In the said letter also the petitioner admitted duty liability of Rs.55,50,621/-based on its calculation and after reducing the amount already paid worked out balance duty at Rs.703,784/- Therefore, the contention of Respondents that the duty involved in the course of investigation has not been quantified as on 30 June 2019 cannot be accepted and consequently the Petitioner becomes eligible under Section 125(1)(e) of the Finance (No.2) Act, 2019 to avail the benefit of the scheme.

15. The Petitioner made an application under SVLDR Form-1 to avail the benefit of the Scheme. In the said application, the Petitioner quantified the admitted duty at Rs.69,26,979/-. The said declaration was rejected without giving any opportunity of hearing. The Petitioner protested against the said rejection vide letter dated 12 November 2020. Had the Respondents given the opportunity of hearing before the rejection and the Respondents communicated to the Petitioner that the quantum of duty is not Rs.69,26,979/- but Rs.1,06,21,929/-, the Petitioner would have taken a call whether to accept the said figure of Rs.1,06,21,929/- and avail the benefit of the Scheme. It was incumbent upon the Respondents to have communicated the quantified figure as per them to the Petitioner.

16. Today, on instructions, the learned counsel for the Petitioner has made a statement that they are agreeable to admit the duty liability of Rs.1,06,21,929/- as per paragraph 28 of the reply of the Respondents. The learned counsel, again on instructions, also stated that the Petitioner would pay interest as may be determined by this Court. Therefore, in our view, on the peculiar facts of the present case and since prior to rejection no opportunity of hearing was given to the Petitioner, the declaration filed by the Petitioner under Form SVLDR-1 should be accepted by taking the duty liability at Rs.1,06,21,929/-

17. It is also important to note that if rejection of the declaration is to be upheld then show cause notice will have to be adjudicated resulting into order in original against which appeal would lie to the first appellate authority and thereafter to the Tribunal and ultimately to the High Court and/or Supreme Court. Pending the appeal before the first appellate authority and the Tribunal, the Petitioner would be required to pay only pre-deposit of certain percentage of demand and the balance will be stayed. In such circumstances, the Revenue will not get the benefit of recovering the amount demanded immediately but will have to wait for more than a decade, looking at the pendency before the appellate authorities and after a decade again for enforcing the demand if the Respondents succeed which would lead to uncertainty

18. However, if the declaration is accepted based on the statement made by the Petitioner, then the Respondents will be able to recover the amount immediately, and furthermore, looking at the objective of the Scheme, which is to reduce litigation, the present proceedings will also come to an end. It is also important to note that after 1 July 2017 the said Service-tax regime is not in existence. Therefore, keeping in mind all these factors, we feel that it would be in the interest of justice of both parties to direct the Respondents to accept the declaration by taking Rs.1,06,21,929/- as the duty quantified for availing the benefit of the Scheme. This is, in fact, the amount found due by the Revenue.

19. The decisions relied upon by the Respondents are not applicable to the facts of the present case, since in the present case on 11 June 2019 the Petitioner in its statement has quantified and admitted the liability. It is also important to note that by letter dated 1 March 2019 also the Petitioner had quantified and admitted certain liability and requested the Respondents to give their working which till today has not been replied to by the Respondents. Therefore, the two decisions relied upon by the respondent in the case of JSW Steel Limited (supra) and Shri Siddhi Kumar (supra) are not applicable to the facts of the present case. The FAQs issued by the Respondents dated 27 August 2019 (page 68 of the Writ Petition) and answer to question-45 (page 70 of the Writ Petition) also supports the case of the Petitioner that the quantification was done before the cut-off date. In the light of the above facts, we pass the following order:-

ORDER

(a) Rejection of SVLDR-1 declaration filed by the Petitioner vide e-mail dated 6 February 2020 is quashed and set aside;

(b) Respondents to calculate the revised amount payable under the SVLDR Scheme by taking the duty quantified at Rs.1,06,21,929/;

(c) The revised quantification to be reduced by Rs.29,72,500/- being pre-deposit made by the Petitioner and subject to verification;

(d) The balance figure payable will carry interest of 9% p. a. from 1 April 2020 till communication by the Respondents to the Petitioner of revised amount payable as per the above directions. The Respondent to communicate the final amount payable along with interest within four weeks from the date of uploading of the present order.

(e) The Petitioner to make payment of the revised amount communicated by the Respondents within a period of six weeks from the date of communication and further inform the Respondents about the payment having been made.

(f) The Respondents to issue the final discharge certificate within four weeks from the date of the Petitioner’s communication that the revised amount payable has been paid.

20. The Rule is made absolute in the above terms. Petition is disposed of.

Notes

¹ (2022) 96 GSTR 184

² 2022 (60) G.S.T.L. 220 (Born.)