Companies facing probe get relief from HC for settling pre-GST disputes

Bombay HC paves the way for firms to settle disputes with tax authorities

The Bombay High Court has paved the way for settlement of pre-goods and services tax (pre-GST) disputes between companies and tax authorities under an amnesty scheme of the government. This is even for cases where investigations are on.

It quashed rejection of one such application by a committee of officers for settlement of tax disputes under Sabka Vishwas (Legacy Dispute Res­olution) Scheme (SVLDRS), 2019. The scheme had provided taxpayers relief in payment of disputed tax amounts ranging from 40 per cent (of the tax amount) to 70 per cent. It also provided for full waiver of interest and penalty.

The court gave the order in a case related to Thane-based real estate company Nabeel Construction. However, many companies such as JSW Steel have applied for the scheme but their applications were rejected by the committee.

Nabeel wanted to settle its pre-GST disputes related to the tax dues under SVLDRS, 2019, which came into force from September 1, 2019.  However, for availing the scheme, the tax liabilities must have been quantified by June 30, 2019. In the case of Nabeel Construction, it had already admitted its dues during an investigation before the cutoff date cited above, Abhishek Rastogi, counsel for the company and partner at Khaitan & Co, said. However, the committee of officers rejected the application of the company for settling the dispute on the ground that no show-cause notice was served till June 30, 2019. And hence, the tax dues were not quantified.

However, Rastogi argued that the amount of duty involved had been quantified in this case during the investigation before June 30, 2019.

The court held that the view taken by the committee is not only contrary to various principles of law but also to the objects and reasons and the intent of the government in introducing the scheme for the benefit of the assessee. “The view taken by the respondents thus deserves to be quashed and set aside with the order of remand,” the court held.

It remanded the matter back to the committee to consider the declaration by the company as a valid declaration and grant consequential reliefs to it. In February 2019, an investigation against the company was ordered by the Directorate General of GST Intelligence, Mumbai.

During the course of the investigation, the petitioner admitted the total tax liability of Rs 1.28 crore. A portion of the amount was subsequently confirmed at Rs 1.26 crore in the show-cause notice given on September 20, 2020.

EASING THE TERMS

• Bombay HC quashed rejection of an application by a committee of officers for settlement of tax disputes under Sabka Vishwas (Legacy Dispute Resolution) Scheme
• The scheme had provided taxpayers relief in payment of disputed tax amounts ranging from 70% (of the tax amount) to 40%
• Many companies have applied for the scheme but their applications were rejected by the committee
• To avail the scheme, the tax liabilities must have been quantified by June 30, 2019.