Facts of the Case

The petitioner, engaged in storage and warehousing services and earlier registered under the Service Tax regime (having since migrated to GST for its current operations), had been served an order on 11.10.2019 by the Joint Commissioner of GST and Central Excise, Madurai, demanding Rs. 69,08,453 for wrongly availed Cenvat credit and Rs. 16,00,666 for suppression of taxable value, along with a penalty of Rs. 85,09,119 under Section 78 of the Finance Act read with Rule 15 of the CENVAT Credit Rules, 2004. Unable to appeal in time due to the pandemic and business losses, the petitioner instead opted for the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, filing Form SVLDRS-1 on 24.12.2019 for Rs. 51,05,471. The Designated Committee issued Form SVLDRS-3 on 16.01.2020 (which the petitioner claims it learnt of only later, on account of delayed uploading), fixing this as the amount payable.

Payment under the scheme had to be made within 30 days, later extended to 30.06.2020 on account of COVID-19. The petitioner failed to pay in full within that window, remitting Rs. 15,00,000 only on 24.06.2022 and Rs. 21,27,000 on 03.10.2022 — leaving a balance of Rs. 14,78,471. When the department then sought to revert to the full original demand of Rs. 1,70,18,238 (on the footing that the scheme's window had lapsed), the petitioner filed this writ petition.

Issues Involved

  1. Whether a taxpayer who had opted into the Sabka Vishwas Scheme, 2019 but failed to complete payment within the scheme's timeline (as extended for COVID-19) could still claim the benefit of the scheme's reduced settlement amount, rather than face the original, much larger demand.

Petitioner's Arguments

  • The scheme was designed for the benefit of taxpayers, offering substantial relief (70% or 50% waiver depending on demand size); the delay in completing payment was attributable to COVID-19 disruptions and business losses from demonetisation, not any lack of bona fides.
  • Only the balance of Rs. 14,78,471 remained payable under the scheme amount already determined in Form SVLDRS-3; reverting to the full original demand of over Rs. 1.7 crore was disproportionate.

Respondent's Arguments

  • The petitioner had violated Section 127(5) of the Finance Act, 2019, by failing to comply with the scheme's repayment timeline, and was consequently not eligible to claim its benefits; the scheme was time-bound by design.

Court Order / Findings

  • During the pendency of the petition, the Court had already directed the petitioner to pay the balance of Rs. 14,78,471, which the petitioner complied with by challan dated 25.05.2023, thereby fully discharging the principal amount due under the scheme.
  • The Court held that, given the special facts of the case and the scheme's rehabilitative purpose ('for the development of all'), the petitioner should be allowed the benefit of the scheme amount rather than the full original demand.
  • To balance this concession against the delay, and to ensure revenue was not prejudiced, the Court directed the petitioner to pay interest at 15% per annum from 01.10.2020 until the respective dates of payment (with pro rata credit for amounts already paid), on payment of which a discharge certificate was to be issued within three weeks.

Important Clarification

This case involves the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 — a one-time amnesty scheme for pre-GST Service Tax and Central Excise disputes under the Finance Act, 1994 — not the GST Act itself. Its relevance today is limited to any taxpayer still carrying an unresolved SVLDRS matter: courts have shown willingness to extend the scheme's benefit even after a missed deadline, on payment of appropriate interest, given the scheme's remedial purpose, though this is very fact-specific and not a general entitlement.

Sections Involved

  • Finance Act, 1994 — Section 78 (penalty) and CENVAT Credit Rules, 2004, Rule 15
  • Finance (No. 2) Act, 2019 — Section 127(5) and the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019

Decision – In Favour of

Allowed in favour of the petitioner, subject to conditions — the petitioner was permitted the benefit of the SVLDRS settlement amount on payment of 15% per annum interest from 01.10.2020, with a discharge certificate to follow.

Case Details

  • Court: Madurai Bench of the Madras High Court
  • Case No.: W.P.(MD) No. 29269 of 2022 with W.M.P.(MD) No. 23231 of 2022
  • Coram: Justice P.T. Asha
  • Date of Order: 05.06.2023

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