1. Court’s decision
The Bombay High Court allowed a writ petition filed by a manufacturing unit challenging Form SVLDRS-3 issued under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The Court held that the case squarely fell within the “litigation” category under Section 124(1)(a) of the Finance Act, 2019 because quantification of duty pursuant to the 1993 show cause notice was never finalized.
Consequently, the Designated Committee’s classification under the “arrears” category was held to be illegal, the Form SVLDRS-3 dated 12 March 2020 was quashed, and the Committee was directed to recompute the amount strictly under the litigation category and give due credit for the ₹10 lakh pre-deposit.
2. Facts
The petitioner, a manufacturer of condensers and cooling coils, received a show cause notice dated 6 January 1993 demanding ₹39,53,517 in excise duty and proposing penalties. The adjudicating authority confirmed the entire demand by order dated 19 December 1997.
The petitioner appealed to the Tribunal, which directed a ₹10 lakh pre-deposit. The petitioner claims to have paid this amount.
On 30 December 2010, the Tribunal remanded the matter for re-quantification of duty and fresh consideration of penalty. On further challenge, the High Court set aside the partial quantification order and again restored proceedings for de novo adjudication. Ultimately, by order dated 5 September 2014, the Tribunal dropped duty of ₹7,19,997, but left the balance duty demand unquantified, sending it back for reconsideration.
On 11 December 2019, the petitioner filed Form SVLDRS-1 under the litigation category, computing the pending tax dues as ₹32,33,520 (original demand minus the dropped component). The Designated Committee instead classified the case under arrears, issued Form SVLDRS-2 and Form SVLDRS-3, and ultimately demanded ₹12,93,408 after applying only 60% relief.
3. Issues
The Court considered:
• Whether the petitioner’s case was covered by Section 124(1)(a) litigation category or by Section 124(1)(c) arrears category;
• Whether the duty demand had attained finality by 30 June 2019;
• Whether the ₹10 lakh pre-deposit was duly paid and must be adjusted under Section 124(2);
• Whether the Designated Committee acted contrary to the scheme by ignoring the remand orders and classifying the matter as arrears.
4. Petitioner’s arguments
The petitioner argued that after the Tribunal’s remand order dated 30 December 2010 and the High Court’s further intervention in 2012, quantification of duty never attained finality. By September 2014, the Tribunal dropped only part of the demand, leaving the remainder to be freshly adjudicated. Thus, the entire matter remained pending adjudication as of 30 June 2019.
Counsel submitted that the definition of “litigation” squarely covers such cases, entitling the petitioner to 70% relief.
The petitioner further contended that it had paid the ₹10 lakh pre-deposit, which the Committee itself incidentally adjusted in Form SVLDRS-2, proving that payment was acknowledged.
The Committee’s inconsistent stand and erroneous classification, the petitioner argued, violated Section 124(1)(a) and defeated the very purpose of the scheme.
5. Respondents’ arguments
The Designated Committee argued that ₹7,93,255 of the duty demand stood confirmed because no appeal was filed concerning this portion, and therefore the case fell under arrears. According to the respondents, only the dropped amount of ₹7,19,997 was part of the remand; the remaining component had reached finality.
They further contended that the ₹10 lakh pre-deposit could not be verified online and therefore could not be acknowledged.
On this basis, the Committee justified granting only 60% relief and issuing Form SVLDRS-3 demanding ₹12,93,408.
6. Analysis of the law
The Court parsed Section 124(1)(a) and 124(1)(c). It highlighted that litigation applies where tax dues remain unfinalized—either due to a pending show cause notice or pending appeal.
The Court relied on its earlier interpretation in UCN Cable Network (P) Ltd. and Morde Foods Pvt. Ltd., which draw a bright-line distinction between pending adjudication (litigation) and finalized liabilities (arrears).
On facts, the Court noted that after multiple remands, no conclusive quantification of duty was ever achieved and the proceeding was still at the stage of re-quantification on 30 June 2019.
Therefore, the Court held that Section 124(1)(c) could not apply, as arrears require a final and crystallized demand—something entirely absent here.
7. Precedent analysis
The Court endorsed:
UCN Cable Network (P) Ltd. (2022)
The judgment clarified that litigation applies when the duty is not finalized and arrears apply only when the duty has attained finality. This distinction was held directly applicable.
Morde Foods Pvt. Ltd. (2021)
Held that where remand reverts the assessee to the show cause stage, the case automatically falls under litigation. The High Court applied this principle to conclude that the petitioner was similarly placed.
The Court rejected the respondent’s reliance on the “confirmed portion” argument because the entire quantification process remained open due to the remand orders.
8. Court’s reasoning
The Court held:
• The Tribunal’s 30 December 2010 remand order expressly kept duty quantification and penalty determination open, which meant finality had not been achieved.
• The subsequent order dated 5 September 2014 dropped part of the duty but did not finalize the balance; the show cause notice remained live.
• As of 30 June 2019, when SVLDRS eligibility is tested, the matter was still pending adjudication—thus qualifying as litigation, not arrears.
• The Committee’s contrary interpretation would render the SVLDRS scheme “unworkable and redundant”, defeating its purpose.
On the pre-deposit issue, the Court held that the Committee itself had adjusted ₹10 lakh while issuing SVLDRS-2 and had produced no material to dispute its authenticity. Thus, the petitioner was entitled to full credit under Section 124(2).
9. Conclusion
The Court quashed Form SVLDRS-3 dated 12 March 2020 and directed the Designated Committee to:
- Reassess the petitioner’s declaration under the litigation category;
- Apply 70% tax relief under Section 124(1)(a);
- Give full credit for the ₹10 lakh pre-deposit;
- Complete the reassessment within two months.
Rule was made absolute.
10. Implications
• SVLDRS classifications must strictly follow the litigation–arrears dichotomy; tax authorities cannot artificially treat pending quantification as arrears.
• Remand orders that reopen quantification automatically bring matters under litigation category, regardless of partial confirmation.
• Pre-deposit credits must be given full effect; authorities cannot ignore payments already acknowledged in their own forms.
• The judgment provides significant relief to assessees whose proceedings are stuck in repeated remands—even in very old legacy cases.
• The ruling discourages misclassification practices that reduce available relief from 70% to 60%.
CASE LAW REFERENCES
UCN Cable Network (P) Ltd., 2022 (Bom.)
Clarifies distinction between litigation and arrears; applied directly.
Morde Foods Pvt. Ltd., 2021 (Bom.)
Held that remand pushes case back to show cause stage; litigation category applies.
FAQ SECTION
1. When does a case fall under the ‘litigation’ category in SVLDRS?
When duty/tax has not attained finality as on 30 June 2019—such as when the matter is pending adjudication due to remand.
2. Can a partially dropped demand be treated as arrears?
No. If quantification remains incomplete or pending in any form, the case cannot be put in the arrears category.
3. Must a pre-deposit be credited even if online verification is not available?
Yes. If evidence is produced and the authority previously adjusted it, credit cannot be denied.
