Gujarat High Court on Penalty Declaration in SVLDRS

Introduction

In a significant ruling, the Gujarat High Court addressed the issue of proposed penalties mentioned in declarations under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS). The court’s decision provides clarity on the scope of penalty declarations, especially when they arise from show cause notices (SCNs) yet to be adjudicated.

Case Background

The petitioner, Ultratech Cement, faced a show cause notice proposing penalties. They declared the penalty in their application under the SVLDRS, a scheme designed to resolve past tax disputes by offering amnesty for pending litigation. However, the authorities rejected their declaration, arguing that since the penalty had not yet been quantified or adjudicated, it couldn’t be considered under the scheme.

Court’s Interpretation

The Gujarat High Court took a more inclusive view of the scheme, stating that mentioning a proposed penalty, even if unadjudicated, is not incorrect under the SVLDRS. The court found that the petitioner’s declaration of the proposed penalty fell within the scheme’s provisions, as the penalty was outlined in the SCN.

Authorities’ Duty

The court emphasized that the authorities should have accepted the petitioner’s declaration, as the penalty was part of the ongoing dispute raised by the SCN. The refusal to accept the application on the grounds that the penalty was not yet determined was unfounded. The court highlighted that the scheme's purpose was to settle disputes and reduce litigation, and barring the petitioner's declaration would defeat its objective.

Court’s Decision

The court ruled in favor of the petitioner, directing the authorities to process the application and issue the necessary forms under the SVLDRS within 12 weeks. The decision underscores the broad application of the SVLDRS, providing relief to businesses facing tax penalties through the scheme.

Conclusion

The Gujarat High Court’s ruling clarifies that proposed penalties mentioned in SCNs can be validly included in declarations under the SVLDRS, even if they are yet to be adjudicated. This interpretation ensures a more comprehensive use of the scheme, enabling businesses to resolve legacy disputes more effectively.

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