Relief for Kaarya Facilities: Bombay HC Clarifies 'Tax Quantification' Standard Under SVLDRS Scheme [Read Order]

In a recent ruling, the Bombay High Court ruled in favour of Kaarya Facilities & Services Ltd., holding that the GST department wrongly denied the company benefits under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS), by misinterpreting what constitutes "quantification" of tax dues.

Kaarya Facilities filed a writ petition challenging the rejection of its SVLDRS application. The department had claimed the company was ineligible because the tax dues had not been “quantified” by the cut-off date of 30 June 2019. The petitioner’s counsel argued that its Director had already stated the servicetax liability as Rs. 1.21 crores in a written statement given to the tax authorities on 4 January 2019, well before the cut-off date.

The petitioner’s counsel argued that this statement, along with further clarifications provided in a CBIC Circular dated 27 August 2019 and FAQs issued by the department on 24 December 2019, clearly showed that the tax dues were quantified in writing. They stated that the rejection of the application contradicted these official clarifications and similar rulings from the same court in earlier cases.

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In response, the GST department’s counsel argued that there was a delay in filing the petition, since the rejection was communicated in December 2019 and the petition was only filed in April 2021. They also argued that the dues had not been properly quantified by the required date and cited a previous judgment of the court in support of their stand.

The bench, led by Justices M.S. Sonak and Jitendra Jain, observed that the delay was not unreasonable, especially given the impact of the COVID-19 pandemic. It further observed that the CBIC circular and FAQs made it clear that a written admission of tax liability during an investigation qualifies as quantification under the scheme.

The court also observed that the department had later assessed the tax dues at Rs. 1.16 crores, which was even less than the amount declared by the petitioner. Therefore, it held that the basis for rejecting the application was invalid.

The court declared that the petitioner was eligible for relief under the SVLDRS scheme and directed the GST authorities to reconsider the application. The court asked the department to recalculate the amount payable, taking into account payments already made by the petitioner, and to complete this within eight weeks.

The court also said that the petitioner must pay simple interest at 6% per annum from 1 February 2020 until the date of payment. If the payment is made within the given time, the show cause notice issued to the company will be quashed. Otherwise, the department will be free to proceed with the notice. The writ petition was allowed.

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