SVLDRS Benefit Denied Where Service Tax Not Finally Quantified by 30 June 2019: Gujarat High Court Ruling

The Gujarat High Court in Planet Automative Pvt. Ltd. & Anr. Vs Union of India & Ors. has delivered an important judgment on the scope of eligibility under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS). The decision squarely addresses when service tax can be said to have been “quantified” for purposes of claiming relief where inquiry or investigation is pending.

The Court upheld the rejection of the assessee’s SVLDRS declaration on the ground that the service tax dues had not been finally quantified on or before 30 June 2019, which is the statutory cut-off date under the Scheme.

Background and Chronology of Events

Business Activity and Initiation of Inquiry

  • The petitioners are authorised dealers of Hyundai brand motor cars.
  • An inquiry and investigation under the service tax law commenced against them on 21.05.2018.
  • During an on-the-spot preliminary scrutiny conducted on that date, it was noticed that service tax amounting to Rs. 25,73,507/- appeared unpaid.
  • One representative of the petitioners, Shri Ashok Kalyanbhai Patel, in his statement during the inquiry, conceded liability for this amount.

Further Investigation and Escalation of Demand

  1. Summons for Records

    • Summons dated 20.11.2018 were issued calling upon the petitioners to produce requisite records for a detailed investigation of their service tax liability.
    • The required documents were eventually submitted under a letter dated 18.12.2019.

  2. Detection of Higher Liability and Show Cause Notice

    • Upon scrutiny of the records furnished, the department found that service tax of Rs. 1,83,11,330/- was allegedly unpaid.
    • A show cause notice dated 12.06.2020 was issued proposing recovery of this unpaid service tax, along with interest and penalty.

  3. Adjudication and Appeal

    • The proceedings culminated in an order dated 15.11.2022, passed by the Joint Commissioner, CGST & Central Excise, Ahmedabad, imposing penalty of Rs. 1,55,11,789/-.
    • The petitioners challenged this order by filing an appeal before the Commissioner (Appeals), CGST & Central Excise.
    • By order dated 29.02.2024, the appellate authority modified the demand and sustained the tax demand on a taxable value of Rs. 82,06,270/-, together with interest and penalty.

SVLDRS Declarations Filed by the Assessee

First Declaration – Form SVLDRS‑1 Dated 31.12.2019

  • The petitioners submitted Form SVLDRS‑1 on 31.12.2019 under the SVLDRS, claiming eligibility on the basis that:

    • During investigation on 21.05.2018, they had admitted service tax liability of Rs. 25,73,507/-.
    • This admission, according to them, amounted to “quantification” as required for eligibility in cases involving inquiry or investigation.

  • The designated authority, however, rejected Form SVLDRS‑1 with the specific endorsement:

    “service tax not quantified on or before 30.06.2019”

Second Declaration – Filed on 16.01.2020

  • The petitioners later filed another declaration on 16.01.2020, this time declaring service tax liability of Rs. 59,60,800/-.
  • This declaration also failed, as the amount declared had likewise not been quantified before 30.06.2019.

Contentions of the Assessee

Interpretation of Eligibility under Section 125(1)(e)

The petitioners anchored their arguments primarily on:

  • Section 125(1)(e) of the SVLDRS
  • The definition of “quantified” in Section 121(r)
  • Clause 10(g) of Circular No. 1071/4/2019-CX-8 dated 27.08.2019 issued by CBIC

Their submissions were:

  1. Admission Equals Quantification
    • They contended that the written statement dated 21.05.2018, wherein liability of Rs. 25,73,507/- was admitted, constituted “quantification” for purposes of the Scheme.
    • Reliance was placed on Section 121(r), which defines “quantified” as a written communication of the amount of duty payable.
    • Clause 10(g) of the CBIC Circular clarifies that “quantified” includes:
      • Letters intimating duty demand
      • Duty liability admitted by a person during inquiry, investigation or audit
      • Audit reports, etc.
    • On this basis, they asserted that the condition under Section 125(1)(e) stood satisfied prior to 30.06.2019.