Taxpayers can seek the benefit of amnesty scheme for pre-GST dues even if the final liability isn't quantified or determined via a notice by the revenue department, the Bombay High Court has held. This as long as there's a written communication of the amount of duty payable by the taxpayer, the court clarified.

For the purpose of eligibility under the scheme, completion of investigation is not necessary as a condition precedent. 

"None of the provisions under the said scheme contemplate that the investigation should be completed and tax liability should have been finally determined." – Bombay High Court

The high court order comes in the case of Nabeel Constructions Pvt., which sought to settle its service tax liability under the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019. 

The scheme provides taxpayers with a 40-70% reduction in payment of disputed tax amounts, along with a full waiver of interest and penalty. For availing the scheme, the tax liabilities should have been quantified by June 30, 2019.

In the case of Nabeel Constructions, the dispute arose on whether the liability was quantified before the cut-off date. 

The company relied on the statement made by its director in the course of investigation. On Feb. 28, 2019, the director had declared and admitted the total tax liability of Rs 1.28 crore, the company argued. 

The tax department denied the company's application to settle the liability under the scheme on grounds that the investigation was still going on. And that the department was yet to quantify the tax liability, which means the amount admitted in the statement cannot be said to be final. 

The high court didn't agree with the department's view.

First, it noted, the company was never given an opportunity of a personal hearing before its application was rejected. The denial leads to adverse civil consequences as the company would have to face the outcome of subsequent enquiry, investigation or audit.

If personal hearing would have been rendered, the company could have pointed out admission of the quantification of tax dues during the course of recording statement of the director by the investigating officer and not disputed by the respondents [tax department].

Bombay High Court

Second, the court didn't agree that the liability should've been precisely quantified before the cut-off date. The figures on admission of tax liability need not have mathematical precision or be the exact same amount to the subsequent quantification by the tax authorities post June 30, 2019, the court noted. 

What is relevant is admission of tax dues or due liability by the declarant before the cut off date.

Bombay High Court

This requirement, the court noted, was fulfilled by Nabeel Constructions, making it eligible under the scheme, the court said. 

Pointing to the scheme's objective, the court said, the attempt was to make it a huge success since the government noted high pendency of indirect tax disputes even two years after the introduction of the goods and services tax law. 

It noted the finance minister's statement when the scheme was introduced that more than Rs 3.75 lakh crore were blocked in litigations in service tax and excise. There was need to unload this baggage and allow the business to move on. So, a Legacy Dispute Resolution scheme was proposed to allow for quick closure of those litigations.

The object of the scheme is to encourage persons to go for settlement who had bonafidely declared outstanding tax dues prior to the cut-off date of June 30, 2019, the high court concluded.