Discharge Certificate Under SVLDRS 2019 Bars Subsequent Demand Notices: Bombay High Court Rules

In a significant ruling for taxpayers, the High Court of Judicature at Bombay has reinforced the finality of the Sabka Vishwas (Legacy Dispute Resolution) Scheme ( SVLDRS ), 2019. The division bench, comprising Justices M.S. Sonak and Advait M. Sethna, held that once a Discharge Certificate is issued under the scheme, revenue authorities cannot issue subsequent show-cause notices for interest or penalties concerning the same matter and period.

The Dispute: A Broken Promise of Settlement?

The petitioner, Astute Valuers and Consultants Pvt. Ltd., sought to resolve long-standing service tax audit observations through the SVLDRS . Having declared their dues and paid the required amounts, the petitioner was issued a Form SVLDRS -4, or "Discharge Certificate," on 22 February 2020, which served as a receipt for full and final settlement.

Despite this legal closure, the revenue department later issued two separate show-cause notices in March 2021 and June 2022, demanding additional interest on the allegedly delayed payments. The petitioner challenged these notices, arguing that the department was acting contrary to the statutory immunity granted under the Finance Act, 2019.

The Court’s Verdict: Finality in Tax Amnesty

The Bombay High Court sided with the petitioner, dismissing the department’s argument that technical errors in the petitioner’s initial application category justified re-opening the case. The bench clarified that the SVLDRS was designed as a one-time measure to liquidate past disputes and provide certainty to businesses.

The court emphasized that the Respondents failed to show any evidence of "falsity, misstatement, mis-declaration, or suppression" that would warrant ignoring the Discharge Certificate. Consequently, the court set aside the show-cause notices and ordered the department to treat the petitioner’s declaration as valid under the audit category, ensuring the petitioner receives the benefit of their payments.

Key Observations

The High Court emphasized the conclusive nature of the settlement scheme with these pivotal remarks:

• "We find that despite issuance of the Discharge Certificate [...] the Respondents demanded interest and penalty. [...] In such situation, when a discharge certificate for the settlement of all tax dues has been issued, the demands raised by the show cause notices issued would be ex facie contrary to law."
• "The issuance of such 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 scheme... provides for certain immunities including penalty, interest or any other proceedings... to those persons who pay the declared tax dues."
• "It would be a travesty of justice to shut the doors on the Petitioner in the given case when the Respondents themselves have issued a Discharge Certificate to the Petitioner indicating final settlement and a quietus to any further litigation."

Implications for Future Disputes

This decision serves as a powerful precedent for taxpayers who have utilized amnesty schemes. By prioritizing the "Ease of Doing Business" and the statutory intent of the Finance Act, 2019, the Court has signaled that revenue authorities cannot invoke technicalities to bypass the immunity provided by a Discharge Certificate. For businesses, this ruling offers much-needed protection against "unnecessary hurdles and unwarranted technicalities," reaffirming that a settlement is, indeed, a final settlement.