Remand Keeps the Dispute Alive – Not Arrears: Bombay High Court Holds SVLDRS Relief Must Be Computed Under Litigation Category

“Remand to Show Cause Stage Means Case is Not Final – Petitioner Entitled to 70% Relief, Not 60%” – Bombay High Court delivered a crucial decision clarifying the categorisation of tax disputes under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS). Bench of Justices M.S. Sonak and Advait M. Sethna held that proceedings remanded to the adjudication stage do not amount to ‘arrears’ under the scheme and must be treated as ‘litigation’, thereby entitling the declarant to a higher relief of 70% under Section 124(1)(a) of the Finance Act, 2019.

“The Tribunal’s remand order had clearly kept the issue of duty and penalty quantification open. Therefore, the duty had not attained finality as of 30th June 2019. The Petitioner’s case falls squarely within the Litigation category,” held the Court, quashing the Form SVLDRS-3 issued under the Arrears category.

Show Cause Still Pending After Tribunal’s Remand – Can’t Be Classified As “Arrears”

The controversy centred around the classification of the petitioner’s case under the wrong category in the SVLDRS scheme. The Petitioner, a manufacturer of cooling coils, had received a show cause notice in 1993 demanding ₹39.53 lakhs in Central Excise duty, followed by a complex trail of appellate and remand proceedings before the Tribunal and the High Court.

Though the Tribunal initially confirmed a partial duty, this order was set aside by the Bombay High Court in 2012. The matter was remanded back to the Tribunal, which ultimately dropped a portion of the demand (₹7,19,997) in 2014. However, re-quantification of the remaining amount was still pending.

Despite this, the Respondents (Union of India and the Designated Committee) treated the case as “Arrears” under Section 124(1)(c) — a classification reserved for tax dues that have attained finality — and computed only 60% relief, issuing a Form SVLDRS-3 dated 12.03.2020 demanding ₹12.93 lakhs.

The Court, however, rejected this categorisation as legally flawed: “Section 124(1)(a) applies when tax dues are relatable to a pending show cause notice or appeal as on 30.06.2019. In this case, quantification was clearly pending due to the remand — the duty amount had not attained finality.”

Coordinate Bench Decisions Support Litigation Category for Remanded Matters

The Court placed strong reliance on its earlier judgments in UCN Cable Network Pvt. Ltd. and Morde Foods Pvt. Ltd., which had addressed similar factual scenarios.

In UCN Cable, the Nagpur Bench had observed: “A litigation category case would be one wherein the amount of duty has not been confirmed and has not attained finality. An arrears category case is where the amount of duty has been confirmed and has attained finality.”

In Morde Foods, where the appeal was remanded post-30 June 2019, the Court had similarly held that the petitioner reverted to show cause notice stage, and was thus entitled to file under the litigation category.

Justice Sethna, writing for the Bench, noted: “If the Petitioner was at the show cause stage without a fresh adjudication order, then certainly, it would be eligible to file a declaration under the Litigation category.”

Pre-deposit of ₹10 Lakhs Must Be Adjusted – SVLDRS-2 Already Acknowledged It

The Respondents further objected to the Petitioner’s claim for adjustment of ₹10 lakhs paid as pre-deposit, citing lack of verifiable online records. This argument too was rejected by the Court, which noted that Form SVLDRS-2 issued on 07.01.2020 itself recorded the adjustment of ₹10 lakhs.

“The Respondents themselves in Form SVLDRS-2 have adjusted ₹10 lakhs while computing the dues. There is no material on record to cast doubt on the authenticity of the payment. Thus, the Petitioner is entitled to have it deducted under Section 124(2).”

Arbitrary Classification Under Arrears Category Defeats Scheme’s Beneficial Purpose

The Court condemned the arbitrary and mechanical issuance of SVLDRS-3, calling it a non-application of mind and a misreading of the scheme. It stressed that SVLDRS is a beneficial legislation, intended to resolve legacy disputes and reduce litigation, and must be interpreted purposively.

“If the stand of the Respondents is accepted, it would render the scheme redundant and unworkable. The show cause notice was pending as on 30.06.2019 and quantification had not occurred — it is not open to shift the category to Arrears to dilute the relief available.”

Writ Jurisdiction Justified – SVLDRS-3 Quashed and Direction Issued

Finding manifest arbitrariness and procedural unfairness, the Court invoked its writ jurisdiction under Article 226 to grant relief. The Form SVLDRS-3 dated 12.03.2020 was quashed, and the Respondents were directed to recompute the Petitioner’s dues under the Litigation category, allowing for 70% relief under Section 124(1)(a), and adjusting the ₹10 lakh pre-deposit accordingly.

“This exercise shall be completed within two months. The Petitioner’s declaration under the Litigation category is valid and enforceable under the Scheme,” the Court concluded.

SVLDRS Interpretation Must Reflect Reality of Pending Proceedings

This judgment reinforces a key principle: when proceedings are remanded or pending re-adjudication, the tax dues have not attained finality, and the declarant is entitled to the higher relief available under Litigation category. The ruling safeguards the integrity of SVLDRS, ensuring that taxpayers are not penalised due to procedural misunderstandings or rigid classifications.

Date of Decision: 2 December 2025