Designated Committee Must Verify All Tax Predeposits Under SVLDRS-3: Bombay High Court - 2025-11-03

Tax Relief Respite: Bombay High Court Mandates Truth-Seeking in Legacy Dispute Resolution

In a significant ruling for taxpayers navigating the labyrinth of legacy tax disputes, the Bombay High Court has emphasized that statutory settlement schemes cannot bypass the foundational duty of verification. The Division Bench, comprising Justices M.S. Sonak and Advait M. Sethna, has ruled that an authority’s determination under the 'Sabka Vishwas' (Legacy Dispute Resolution) Scheme (SVLDRS), 2019, cannot ignore evidence of predeposits or tax recoveries made by an assessee during investigations.

A Legacy of Confusion

The dispute centered on Evershine Enterprises , a firm caught in a protracted service tax demand saga spanning from 2008 to 2013. Despite having remitted substantial sums, the firm found itself facing a demand notice under the SVLDRS-3 in December 2019 that failed to account for existing predeposits or previously recovered amounts. The Petitioner argued that while they had acknowledged certain liabilities, they had consistently maintained their right to have those payments adjusted against their final settlement dues, as provided for in Section 124(2) of the Finance Act, 2019.

The Revenue countered, citing a finite scheme window and claiming the Petitioner failed to produce adequate documentary proof in time—a argument the Court eventually found lacking in procedural fairness.

The Mandate to "Verify"

The core of the legal question revolved around the scope of a designated committee's power. Does "verification" grant the committee the right to ignore evidence?

Drawing upon the precedent set in * Code Engineers Pvt. Ltd. vs. Union of India *, Justice M.S. Sonak noted that the purpose of the law is to resolve legacy disputes, not to adjudicate them with blinders on. The Court held that the term "verify" must take its color from the scheme’s objective: to substantiate the truth.

"The verification required to be carried out by the designated committee is not an adjudicatory exercise or an appellate exercise," the court observed. "The mandate of the designated committee is to verify the correctness of the declaration based on the particulars furnished by the declarant as well as the records available with the department."

Key Observations from the Bench

The Court’s judgment highlights the vital nature of administrative due process:

• On the duty to examine evidence: "Such documents, which are in the form of challans, could not have been simply ignored. Such documents needed to be examined and verified."
• On the scope of the scheme: "The central focus of the scheme is settlement of legacy disputes by offering incentives to the declarant, subject no doubt to the aspect of eligibility."
• On the need for transparency: "At this stage, we are not recording any firm findings... All that we say is that these aspects were required to be considered by the concerned Respondents when determining the amount in Form SVLDRS-3."

A Corrective Course

The Bombay High Court has set aside the SVLDRS-3 form to the extent of the disputed Rs 1.12 crore demand. The Court has now directed the constitution of a new designated committee, granting them a three-month window to properly verify the challans and the appropriation claims referenced in the original 2013 show-cause notice.

For the taxpayer, this ruling serves as a vital safeguard, reinforcing that when the state offers a path to amnesty or settlement, it must walk that path with a commitment to documented reality, not just administrative convenience. For the tax authorities, it is a stern reminder that 'legacy' status does not exempt them from the standard duty of verification.