SVLDRS Declaration for Proposed Penalty Eligible; Mention of Amount from SCN Not a Bar: Gujarat High Court - 2024-09-27

Gujarat HC: Declaration for Proposed Penalty Eligible Under SVLDRS, Mentioning SCN Amount Not a Disqualifier

Ahmedabad: The High Court of Gujarat , in a significant ruling, has held that a declaration filed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) is eligible even if it pertains to a Show Cause Notice (SCN) for a proposed penalty, and merely mentioning the proposed penalty amount from the SCN in the declaration form does not render it invalid. The bench, comprising Hon’ble Mr. Justice Bhargav D. Karia and Hon’ble Mrs. Justice Mauna M. Bhatt , quashed the respondent authorities' order rejecting Ultratech Cement Ltd.'s SVLDRS application.

Case Background: Dispute Over SVLDRS Eligibility

The case, R/SPECIAL CIVIL APPLICATION NO. 14519 of 2020, arose after Ultratech Cement Ltd. (the petitioner) challenged the rejection of its SVLDRS declaration. The dispute stemmed from a Show Cause Notice dated February 25, 2019, issued by the tax authorities proposing to impose a penalty of Rs. 20,72,31,044/- on Ultratech under the Cenvat Credit Rules, 2004 , for alleged wrongful taking and distribution of ineligible Cenvat credit.

Following the introduction of the SVLDRS, Ultratech filed a declaration (Form SVLDRS-1) on December 31, 2019, seeking to resolve the dispute. However, the Deputy Commissioner of SVLDRS, CGST, indicated via email on March 13, 2020, that the declaration was liable to be treated as void because the SCN did not quantify the penalty. Subsequently, the Designated Committee (SVLDRS) rejected Ultratech's declaration on March 18, 2020. The petitioner contended this rejection occurred without an effective opportunity for a personal hearing, as a notice for a hearing on March 17, 2020, was received late by post.

Arguments Presented

Ultratech Cement Ltd.'s Contentions: The petitioner, represented by Advocate Mr. Anand Nainawati , argued that their case was squarely covered by the SVLDRS. Key submissions included: * The SCN was issued for the levy of a penalty, making them eligible under the scheme. * Reference was made to Frequently Asked Questions (FAQs) issued by the respondent authorities for SVLDRS, specifically Question Nos. 1 and 48. These FAQs clarify that any SCN for penalty/late fee is covered, irrespective of whether it is under adjudication or appeal, and where the final hearing had not taken place as of June 30, 2019. * The SCN itself, in Para-12, quantified the proposed penalty, contrary to the respondents' claim. * Thus, rejecting the declaration on grounds of ineligibility or non-quantification was unjustified.

Union of India's (Respondent) Counter-Arguments: Learned advocate Ms. Hetvi Sacheti , appearing for the respondent authorities, defended the rejection, stating: * The application was rejected not merely for non-quantification in the SCN by authorities, but because Ultratech's declaration stating a penalty amount of Rs. 20,72,31,044/- was deemed incorrect. * Since the SCN was only for proposing a penalty and had not been adjudicated, no penalty was actually imposed. Therefore, mentioning this amount rendered the declaration incorrect and the petitioner ineligible. * The petitioner failed to appear for the personal hearing scheduled on March 17, 2020.

High Court's Analysis and Reasoning

The High Court meticulously examined the facts and the provisions of the SVLDRS. The judgment highlighted: * It was undisputed that the SCN was pending adjudication when the SVLDRS was introduced, and the cut-off date was June 30, 2019. * The SCN dated February 25, 2019, did indeed state the proposed penalty amount of Rs. 20,72,31,044/- in its Para-12.

The Court heavily relied on the official FAQs for the SVLDRS. It quoted: > "Q1. Who is eligible to file declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 ? > Ans. Any person falling under the following categories is eligible... (b) Who has been issued SCN for penalty and late fee only and where the final hearing has not taken place as on 30.06.2019."

> "Q48. With respect to penalty/late fee matters, whether only SCNs for late fee or penalty are covered under this Scheme or also such cases under appellate proceedings? > Ans. The Scheme is applicable to any SCN for penalty/late fee, irrespective of whether it is under adjudication or appeal.”

Based on these clarifications, the Court opined: > "In view of the frequently asked question Nos.1 and 48 as referred hereinabove, we are of the opinion that the scheme is applicable to any show cause notice for penalty/late fee, irrespective of whether it is under adjudication or appeal. The case of the petitioner therefore would squarely fall in the eligible cases and merely because the petitioner has shown the amount of proposed penalty mentioned in the show cause notice would not make the declaration made by the petitioner as [ineligible] under the Scheme." (Para 21, contextual interpretation for clarity)

The Court found that the petitioner's case squarely fell within the eligible categories defined by the SVLDRS. The fact that Ultratech mentioned the proposed penalty amount from the SCN in its declaration did not disqualify it from the scheme's benefits.

Final Decision and Implications

The High Court allowed Ultratech Cement Ltd.'s petition, delivering a clear verdict: * The impugned order dated March 18, 2020, passed by the respondent No.2 (Designated Committee) rejecting the SVLDRS declaration was quashed and set aside. * The matter was remanded back to the respondent authorities to adjudicate Ultratech's Form SVLDRS-1 in accordance with the law, acknowledging that the SCN for penalty was pending adjudication as on June 30, 2019. * The respondent authorities were directed to issue Form SVLDRS-4 (Discharge Certificate) as per the scheme's provisions within 12 weeks from the receipt of the Court's order.

This judgment provides crucial clarity on the eligibility criteria under the SVLDRS, particularly for cases involving SCNs for proposed penalties. It underscores that procedural interpretations by authorities should align with the scheme's intent and officially issued clarifications like FAQs. The ruling reinforces the objective of the SVLDRS to reduce legacy tax litigation by allowing assesses to settle disputes related to penalties, even if such penalties were only at the proposal stage in an SCN.