SVLDRS Relief Cannot Be Treated as ‘Arrears’ When Central Excise Duty Not Finalised: Bombay HC Quashes ₹12.93 Lakh Demand [Read Order]

The Bombay High Court has held that relief under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 cannot be denied by classifying tax dues as “arrears” when the central excise duty demand had not attained finality as on 30 June 2019. The Court quashed a demand of ₹12.93 lakh raised under Form SVLDRS-3, ruling that cases involving pending re-quantification of duty fall under the “litigation” category and are entitled to higher statutory relief.

M/s. Unique Enterprises, a proprietary concern engaged in the manufacture of condensers and cooling coils, filed a writ petition challenging the classification of its declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

The dispute originated from a show cause notice dated 6.01.1993, by which central excise duty amounting to ₹39,53,517 was demanded along with proposals for penalty and fine. An order-in-original passed in 1997 confirmed the demand, penalty, and fines, prompting the assessee to approach the appellate tribunal. During appellate proceedings, a pre-deposit of ₹10 lakh was made pursuant to interim directions.

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By an order dated 30.12.2010, the tribunal remanded the matter for re-quantification of duty. Subsequently, part of the demand amounting to ₹7,19,997 was ultimately dropped, while the remaining demand was never finally quantified due to remand proceedings and further appellate developments. When the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 came into force, the assessee filed a declaration under the “litigation” category under Section 124 of the Finance Act, 2019, claiming 70% relief on the balance disputed demand.

However, the designated committee treated the case as falling under the “arrears” category and issued Form SVLDRS-3 demanding ₹12,93,408 after allowing only 60 percent relief and ignoring adjustment of the earlier pre-deposit. Aggrieved by this classification and quantification, the assessee approached the Bombay High Court.

The appellant contended that the proceedings were pending adjudication due to remand and that the duty demand had never attained finality as on 30.06.2019. It was argued that once the tribunal remanded the matter for re-quantification, the case reverted to the stage of show cause notice, thereby falling within the “litigation” category under Section 124 of the Finance Act, 2019.

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Further, submitted that a pre-deposit of ₹10 lakh had already been made and was acknowledged by the department itself in Form SVLDRS-2, and therefore the same could not be ignored while issuing Form SVLDRS-3.

The revenue authorities contended that part of the demand had attained finality and that no appeal was pending in respect of a portion of the duty confirmed earlier. On this basis, it was argued that the case was correctly classified under the “arrears” category, making the assessee eligible only for 60 percent relief under Section 124 of the Finance Act, 2019. Further, contended that the alleged pre-deposit could not be conclusively verified from departmental records and therefore could not be adjusted while computing the amount payable under the scheme.

The Division Bench comprising Justice M. S. Sonak and Justice Advait M. Sethna allowed the writ petition, ruling that for the purpose of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, a matter would fall under the “litigation” category where the duty demand had not been finalised and had not attained finality as on 30 June 2019.

The Bench observed that once the tribunal remanded the proceedings for re-quantification, the entire demand remained open and pending adjudication. The Court rejected the revenue’s attempt to artificially bifurcate the demand and treat it as arrears, holding that such an interpretation would defeat the object of the scheme. Further, stressed that Section 124 of the Finance Act, 2019 clearly distinguishes between confirmed dues and disputed dues, and remanded matters could not be treated as crystallised arrears.

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On the issue of pre-deposit, the Bench noted that the department itself had adjusted the ₹10 lakh pre-deposit while issuing Form SVLDRS-2, and therefore could not later disregard the same while issuing Form SVLDRS-3.

Accordingly, the Bombay High Court quashed Form SVLDRS-3 demanding ₹12.93 lakh and directed the designated committee to recompute the amount payable by treating the case under the “litigation” category and granting relief in accordance with Section 124 of the Finance Act, 2019.

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