Disqualification from Sabka Vishwas Scheme without proof of
investigation invalid: Delhi HC accepts declared tax liability, quashes SCN
Case
Summary
In a significant decision
aimed at preserving procedural justice under the Sabka Vishwas (Legacy
Dispute Resolution) Scheme, 2019, the Delhi High Court allowed the writ
petition filed by Mr. Daljeet Singh Gill, who was denied the benefit of
the scheme on vague grounds without proper service of any investigation
notices.
The Court held that in
the absence of proof of any pending investigation or quantification of tax
dues before 30 June 2019, the petitioner could not be disqualified under
Clauses 125(1)(e) and 125(1)(f) of the Scheme. The impugned Show
Cause Notice dated 31 December 2020 was accordingly quashed, subject
to payment of the declared liability within one month.
Parties to
the Case
- Petitioner:
Mr. Daljeet Singh Gill
- Respondents:
Union of India and Officials of the Central Tax, Gurugram, CGST
Commissionerate
- W.P.(C):
4644/2021
- Bench:
Hon’ble Justice Prathiba M. Singh and Hon’ble Justice Dharmesh Sharma
- Date of Decision:
20 February 2025
Facts of
the Case
1. Background
The petitioner, Mr. Daljeet Singh Gill, operated a business named M/s
Dhartiputra Infotech Inc., providing Business Auxiliary Services
during the pre-GST service tax regime.
2. Non-payment
of Service Tax
The department alleged non-payment of Service Tax for FYs 2015–16 and
2016–17 (including up to June 2017), leading to the issuance of a Show
Cause Notice (SCN) on 31 December 2020, demanding tax dues of ₹11,26,937
along with penalty.
3. Application
Under SVLDRS
o Petitioner
applied under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019
(hereafter, the Scheme), declaring the full liability.
o Initial
application dated 30 December 2019 (ARN LD3012190011883) was rejected
via email dated 08 January 2020 with no reasons.
o Second
attempt dated 15 January 2020 was also rejected on 27 January 2020,
again without a speaking order.
4. Claim
of Notices Not Served: The petitioner asserted that no relevant
notices or investigation documents disqualifying him under the Scheme were
ever served.
5. Ground
for Rejection: The department later claimed rejection was
due to pending inquiry/investigation under Clauses 125(1)(e) and (f),
which bar eligibility if tax was not quantified by 30 June 2019 or if
investigation was pending.
6. Lack
of Evidence from Department: Despite multiple opportunities
granted by the Court (orders dated 10 December 2024 and 27 January
2025), the department failed to provide any evidence showing that:
o Notices
were served on the petitioner before 30 June 2019;
o Any
pending investigation existed on record.
Legal
Issues Raised
1. Whether
the petitioner was disqualified from SVLDRS due to pending investigation or
unquantified demand under Clauses 125(1)(e)/(f)?
2. Whether
rejection of SVLDRS applications without a reasoned order and without proof of
disqualification violates natural justice?
3. Whether
the subsequent SCN dated 31 December 2020 is sustainable when the petitioner’s
liability was already voluntarily declared under the Scheme?
Legal
Provisions and Interpretations
- Clause 125(1)(e) & (f), SVLDRS,
2019: Disqualify a person from applying under the
Scheme if:
- (e) they are under
enquiry/investigation where the tax is not quantified before 30 June
2019;
- (f) they make a voluntary disclosure
after such enquiry/investigation has begun.
- CBIC Circular dated 25 September 2019:
Clarifies that:
- Documentary request under Section 14
of Central Excise Act (like financials) is not sufficient to deny
eligibility unless tax is quantified;
- Each case must be examined on its
own merits.
Petitioner’s
Submissions
1. No
Investigation or Quantification
o The
petitioner was not served any notices of investigation or tax
quantification before applying under SVLDRS.
o The
department’s alleged letters dated October 2019 had no proof of
dispatch or delivery.
2. Rejection
Was Arbitrary
o The
rejection emails contained no reasons; thus, the disqualification was non-speaking
and unlawful.
o Both
applications under the Scheme were denied with just one-line automated emails.
3. Entitled
to Scheme Benefits
o Since
no audit, inquiry, or quantified demand existed before 30 June 2019, the
petitioner was fully eligible under the Scheme.
Department’s
Response
1. Existence
of Notices
o The
department claimed that notices were issued in October and December 2019,
indicating a pending inquiry.
o But
it failed to produce any proof of:
§ Dispatch;
§ Delivery
to petitioner;
§ Any
actual investigation or audit conducted.
2. Non-Availability
of Records
o The
department acknowledged in court that original dispatch registers were not
available, and there was no service record on file.
3. Reliance
on Clauses 125(1)(e) & (f)
o Reiterated
that SVLDRS benefits could not be granted in the presence of an investigation.
Court’s
Findings and Judgment
1. No Investigation
Proven
The Court held that the
department failed to produce any proof of a pending investigation or
service of notices.
“There is no proof on
record that there was any investigation on the date when the Petitioner applied
to avail the benefit under the Scheme.”
2. Non-Speaking Rejection
Orders Are Invalid
The court found that both
SVLDRS application rejections were arbitrary and unreasoned, hence
unsustainable.
3. Clause 125(1)(f) Not
Attracted
- Since no tax was quantified
and no valid enquiry or audit existed as of 30 June 2019, the petitioner’s
case did not fall under disqualification clauses.
- The CBIC Circular supported
this view.
4. Relief Granted
- The court accepted the
petitioner’s declared liability under the Scheme: ₹11,26,937.
- Directed that if paid within one
month, the SCN dated 31 December 2020 shall be quashed.
- If not paid within time, the SCN
would revive, and petitioner would be allowed to contest it on
merits.
Final
Judgment
The writ petition was
allowed with the following directives:
- The petitioner shall pay ₹11,26,937
(as declared under SVLDRS) within one month.
- On such payment, the Show Cause
Notice dated 31.12.2020 shall be quashed.
- If not paid, the notice shall revive,
and the petitioner may file a reply and contest proceedings.
- All pending applications were also
disposed of.
Conclusion
This judgment is a
significant reaffirmation of taxpayer rights under legacy resolution schemes.
The Delhi High Court emphasized that:
- Statutory schemes like SVLDRS must be
interpreted liberally to achieve their objective of
dispute resolution;
- Denial of benefits must be reasoned
and substantiated with documentary proof;
- Courts will not uphold summary
rejections lacking transparency or evidence.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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