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Himachal Pradesh High Court Grants Relief to Hotelier Under SVLDRS, Cites COVID-19 Hardship and Directory Nature of Payment Deadlines

Shimla , HP - In a significant ruling dated June 2, 2025, the Himachal Pradesh High Court provided relief to East Bourne Hotels Pvt. Ltd. under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS). The Division Bench, comprising Hon’ble Mr. Justice Tarlok Singh Chauhan and Hon’ble Mr. Justice Sushil Kukreja , quashed demand notices and directed the tax authorities to recalculate the petitioner's liability, acknowledging the severe impact of the COVID-19 pandemic and affirming the directory nature of payment deadlines under the scheme.

Case Background: Tax Dispute and Pandemic Woes

East Bourne Hotels Pvt. Ltd., a hospitality business in Shimla , faced outstanding service tax liabilities for the period 2011-12 to 2015-16. After an initial agreement to pay in installments faltered due to financial constraints, the hotel opted for the SVLDRS, an amnesty scheme introduced by the Central Government in 2019 to resolve legacy tax disputes.

The petitioner filed nine declarations under the "investigation, enquiry or audit" category, calculating its payable amount as Rs. 3,38,617 after applicable relief. However, the respondent department re-categorized the petitioner's case to "arrears," significantly increasing the tax payable to Rs. 29,48,623.

The hotel argued that the COVID-19 pandemic, which led to a complete shutdown of its operations from March 2020, rendered it incapable of meeting the payment deadline of June 30, 2020 (extended by the government due to the pandemic). Despite representations seeking an extension, the authorities maintained their stance, eventually issuing recovery notices.

Petitioner's Arguments for Relief

The petitioner, represented by Sr. Advocate Mr. Vishal Mohan, contended that: * The re-categorization from "investigation" to "arrears" by the tax department was erroneous. * The payment deadline prescribed under Section 127(5) of the Finance Act, 2019, governing the SVLDRS, should be considered directory, not mandatory, especially in light of the unprecedented pandemic. * The hotel was a bona fide assessee severely impacted by circumstances beyond its control and required more time to clear its dues. * They cited the Supreme Court's suo motu orders extending limitation periods during COVID-19 and several judgments from other High Courts (Madras, Bombay, Gujarat, and Delhi) where similar relief under SVLDRS was granted due to the pandemic.

Respondents' Position

The Union of India and other respondents, represented by Mr. V. B. Verma and Sr. Advocate Mr. Vijay Kumar Arora, did not dispute the factual circumstances. Their primary argument was that the SVLDRS scheme had concluded, and therefore, the petitioner was no longer eligible for its benefits. They maintained that their calculations were lawful and the payment deadlines were firm.

High Court's Analysis and Reasoning

The High Court meticulously examined the objectives of the SVLDRS, the impact of the COVID-19 pandemic, and relevant judicial precedents.

Objectives of the SVLDRS

The Court emphasized that the SVLDRS was a one-time measure aimed at liquidating past disputes related to central excise and service tax, ensuring disclosure of unpaid taxes, and achieving amicable resolution. The judgment noted: > "From a reading of the statement of object and reasons, it is quite evident that the scheme conceived as a one time measure, has the twin objectives of liquidation of past disputes pertaining to central excise and service tax on the one hand and disclosure of unpaid taxes on the other hand. Both these were equally important: amicable resolution of tax disputes and interest of revenue."

Impact of COVID-19 and Supreme Court Orders

The Court acknowledged the undisputed adverse effects of the COVID-19 pandemic on the petitioner's hospitality business. It referenced the Supreme Court's suo motu orders (e.g., dated March 23, 2020, and January 10, 2022) which extended periods of limitation across various laws due to the pandemic, establishing a judicial recognition of the widespread difficulties faced.

Precedents from Other High Courts

The judgment extensively reviewed decisions from the Madras, Bombay, Gujarat, and Delhi High Courts, which had granted relief to assessees under the SVLDRS in similar situations:

* Madras High Court in Apnaa Projects (P) Ltd. and N. Sundaranjan held that time limits for payment could be extended and were directory in nature, especially considering the pandemic.

* Bombay High Court in Cradle Runways Pvt. Ltd. found that denying SVLDRS benefits for minor delays, especially due to technical glitches or bona fide reasons during the pandemic, would be contrary to the scheme's objectives.

* Delhi High Court in IA Housing Solution (P) Ltd. (in context of Vivad Se Vishwas Scheme) affirmed the High Court's power under Article 226 to remedy injustice in extraordinary circumstances like COVID-19, even if departmental authorities lacked power to condone delays.

The Himachal Pradesh High Court found these precedents persuasive, stating: > "...in light of the judgment of the Hon’ble Supreme Court with regard to the extension of limitation referred to herein above and the coupled with the fact that the judgments rendered by the Hon’ble High Courts of Madras, Bombay, Gujarat and Delhi, granting benefits of SVLDRS in favour of the petitioner/assessee therein on the ground of the prevailing COVID-19 pandemic, even cases where payments were made subsequent to 30.06.2020, we are of the considered view that the impugned order rejecting the case of the respondents cannot sustain..."

Directory Nature of Payment Timelines

Crucially, the Court concurred with the Madras High Court's reasoning in N. Sundaranjan that the provisions regarding time limits for payment under the SVLDRS are directory, not mandatory. The judgment quoted: > "If it is mandatory, there will not be any delegation with regard to the Central Government to fix the time limit for availing the scheme and payment of tax. Since there is delegation with regard to the Central Government, it will only be directory in nature and that is the reason why the Central Government depends upon the situation prevailing in the country and extended the time limit from time to time."

The Court concluded that denying the petitioner the benefits of the SVLDRS would be unjust and contrary to the scheme's objectives, given the eligibility of the petitioner and the extraordinary circumstances.

Final Order and Implications

The High Court allowed the writ petition, quashing the demand notices (Annexures P-17, P-18), the SVLDRS-3 forms issued by the department, and the letter upholding the department's calculations (Annexure P-15).

The Court directed the respondents to: > "...re-calculate the correct liability of the petitioner under the amnesty scheme after associating and affording an opportunity to the petitioner to present its case."

This judgment provides a ray of hope for businesses that, despite being eligible for amnesty schemes like SVLDRS, were unable to meet payment deadlines due to the genuine and severe disruptions caused by the COVID-19 pandemic. It underscores the judiciary's role in interpreting statutory provisions contextually and ensuring that the objectives of beneficial schemes are not frustrated by rigid adherence to timelines in extraordinary situations.