Completion of investigation and determination of tax liability, not an eligibility provision under ‘Sabka Vishwas’ scheme: Bombay HC

Completion of investigation and determination of tax liability, not an eligibility provision under ‘Sabka Vishwas’ scheme: Bombay HC

The Bombay High Court recently urged the tax department’s administrative section to establish and implement the Sabka Vishwas (Legacy Dispute Resolution) scheme in its entirety to address pending tax litigation from the pre-GST regime. The Legacy Dispute Resolution Scheme provides for the complete waiver of interest, penalty, and fine, immunity from prosecution, and a 40-70 overall decrease in payment of disputed tax amounts. The only requirement for taking advantage of the scheme is that the tax liability is quantified by June 30, 2019.

In the instant case, the petitioner ( Nabeel Construction Pvt Ltd) seeks a writ of certiorari for quashing and setting aside the Designated Committee-I order, which was filed under Article 226 of the Indian Constitution. The Designated Committee – I (SVLDRS), issued a show-cause cum-demand notice against Nabeel Construction and stated the company’s total tax liability to be Rs.1,26,62,148. This was after the Committee, rejected the SVLDRS-1 declaration by one of the directors of the company dated December 30, 2019.

The Directorate General of GST Intelligence, Zonal Unit, Mumbai, had begun an inquiry against the petitioner company in February 2019. During the investigation, the petitioner submitted copies of the documents from October 2013 to June 2017, based on the demand from the concerned officers. After this, Mohd. Azhar Ali, Director of the petitioner, stated before the Senior Intelligence officer voluntarily admitted the total tax liability of Rs.1,28,88,541. The petitioner also paid Rs. 30 lakhs before recording and Rs.60 lakhs after recording in two instalments.

The Union Governments SVLDR came into effect on September 1, 2019. On August 27, 2019, The Central Board of Indirect Taxes and Customs (CBIC) laid a circular before all Principal Chief Commissioners, Chief Commissioners, Principal Director Generals, and Director Generals, explaining the SVLDR scheme.

On December 30, 2019, the petitioner filed a Declaration seeking to benefit from the SVLDR scheme, based on his declaration in February 2019 before the Senior Intelligence Officer, and also made a representation on January 31, 2020. Later his declaration got rejected in February 2020, and a show- cause cum- demand notice was issued in September 2020, without giving him the chance of a personal hearing.

The issue in the instant case before the court was to decide whether the liability had been quantified before the cut-off date. The Court noted that tackling this issue required a personal hearing, which the company was denied.It could have mentioned the petitioner’s quantification of tax dues during the recording statement of the director by the investigating officer, which was not rebutted by the respondents, the court said.

The High Court concluded that the tax authorities’ decision was not only contrary to various principles of law established by it, but also in contravention to the Central Government’s intent in introducing the said scheme for the benefit of the assessee and to get them out of litigation pending under the pre-GST regime.

Case Name: Nabeel Construction Pvt.Ltd vs Union Of India