Bombay High Court Orders Fresh Verification Under SVLDRS, Says Authorities Can't Ignore Pre-Deposit Evidence

Mumbai: The Bombay High Court, in a significant ruling, has quashed a demand issued under the 'Sabka Vishwas' (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS), holding that the designated committee has a mandatory duty to "verify" and adjust for pre-deposits and prior recoveries before determining the final amount payable by an applicant.

A division bench of Justice M.S. Sonak and Justice Advait M. Sethna , hearing a writ petition by Evershine Enterprises, set aside the authorities' demand for ₹1.12 crore and directed them to conduct a fresh verification of the petitioner's claims within three months.

Background of the Dispute

The case originated from two service tax show-cause notices issued to Evershine Enterprises for the period 2008-2013, demanding a total tax of over ₹2.42 crore. After the demand was confirmed by an Order-in-Original in 2018, the company filed an appeal.

While the appeal was pending, the government introduced the SVLDRS, a one-time amnesty scheme to settle legacy indirect tax disputes. Evershine Enterprises applied under the scheme on November 27, 2019, seeking to resolve the matter.

Core Arguments

Petitioner's Contention: Evershine Enterprises, represented by Advocate Mr. Raichandani, argued that they had already paid a substantial amount of ₹1.89 crore towards the tax liability through various challans and that a significant sum of approximately ₹80 lakh had been recovered by the department during the investigation itself. They contended that as per Section 124(2) of the Finance Act , 2019, these amounts should have been deducted from the total tax due before calculating the final settlement amount. The petitioner submitted challans and other documents on December 9 and 16, 2019, to substantiate their claim.

Respondent's Stance: The Union of India, represented by Advocate Ms. Cardozo, countered that the petitioner had admitted to the total tax liability in several correspondences. They argued that the challans were produced belatedly, were not co-relatable with official records, and that the authorities were not obligated to consider them, especially since the scheme had a strict deadline of January 15, 2020.

Court's Analysis: The Crucial Duty to 'Verify'

The High Court found merit in the petitioner's arguments, concluding that the designated committee had failed in its fundamental duty to verify the claims. The bench noted that the petitioner had submitted the evidence of prior payments before the final demand (Form SVLDRS-3) was issued on December 26, 2019.

The court highlighted a critical piece of evidence from the department's own records.

> "The consideration of the above challans/documents was necessary in this case because even the show-cause notice-cum-demand-notice dated 13 June 2013, issued to the Petitioner makes a reference to service tax amounting to Rs.80,95,307/- being 'appropriated as the said amount recovered from the Assessee during the course of investigation'."

The bench emphasized that while the petitioner's admission of the total tax liability was on record, it could not be "construed as the Petitioner having waived its right to contend that the amounts paid by way of predeposit or the amounts recovered... should not be adjusted."

Citing the precedent set in *** Code Engineers Pvt. Ltd. vs. Union of India ***, the court reiterated that the central objective of the SVLDRS is dispute settlement. The role of the designated committee is to "verify" the correctness of a declaration, not to conduct an adjudicatory or appellate exercise. This verification must be based on records furnished by both the applicant and the department.

> "In this case, as noted above, we find that this crucial exercise of verification was not at all carried out insofar as the Petitioner’s claim of predeposit or recovery of amounts during the course of investigations," the Court observed.

Final Verdict and Implications

The Bombay High Court quashed and set aside the impugned SVLDRS-3 form. It directed the authorities to reconstitute the designated committee to:

1. Verify the petitioner's claims regarding pre-deposits and recoveries.

2. Examine the challans furnished by the petitioner.

3. Consider the implications of the recovery amount mentioned in the department's own show-cause notice.

4. Provide a hearing to the petitioner and issue a fresh determination within three months.

The court clarified that it has not made a final decision on the validity of the petitioner's claims but has mandated that they be properly examined as required by law. This judgment reinforces the principles of procedural fairness and underscores that administrative authorities operating under settlement schemes cannot arbitrarily ignore evidence presented by applicants.