Liability admitted by director under Sabka Vishwas Scheme considered valid declaration even if investigation is pending: BOM HC

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Service Tax - Amnesty scheme - Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019

Case Details: Nabeel Construction (P.) Ltd. v. Union of India - [2022] 134 taxmann.com 335 (Bombay)

Judiciary and Counsel Details

    • R.D. Dhanuka and S.M. Modak, JJ.
    • Abhishek A. Rastogi and Pratyushprava Saha, Ms. Kanika Sharma, Ms. Khaitan for the Petitioner. 
    • Pradeep S. Jetly, Sr. Adv. and Jitendra B. Mishra for the Respondent.

Facts of the Case

The petitioner is engaged in providing construction services of commercial or industrial buildings and civil structures. An inquiry for investigation was conducted by DGGI. The Director of the petitioner submitted a statement before the DGGI and admitted a service tax liability of Rs. 1.28 Crores. A part of this liability i.e. Rs. 1.26 Crores was confirmed in the show cause notice. With respect to this liability, the petitioner deposited an amount of Rs. 90 lakhs.

In the meantime, the Government launched the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 with respect to which the petitioner filed the Declaration in Form SVLDRS-1. The petitioner declared the tax liability of Rs. 1.28 Crores under the Scheme, computed the amount payable as Rs. 64 lakhs (i.e. 50% of the ‘tax dues’) and adjusted the deposit amount of Rs. 90 Lakhs. The net liability after such adjusted was computed as zero.

Notably, Section 125 of the Scheme provides that the person would not be eligible to claim the benefit of the scheme where the amount of duty involved in the enquiry or investigation has not been ‘quantified’ on or before the 30th day of June, 2019. On this basis, the department passed an order and rejected the declaration submitted by the applicant without giving an opportunity of being heard.

High Court Held

The Bombay High Court held that the tax dues as admitted by the Director in the statement on or before 30-6-2019 would satisfy the term ‘quantified’ under the Sabka Vishwas Scheme and any amount payable which has been quantified before the cut-off date, where an enquiry or investigation is pending, falls within the term ‘tax dues’. It was observed that the scheme requires the admission of tax liability by the declarant during investigation or enquiry and the figures on admission need not be exactly the same as quantified by the department. The High Court directed the department to consider declaration as valid.

Further, the Bombay High Court quashed the order due to non-compliance of principles of natural as the opportunity of being heard was not given to the petitioner.

List of Cases Referred to

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