SVLDR Scheme Benefit Denied for Post Cut-Off SCN; HC Allows Statutory Appeal on Merits

The petitioner, Varner Retail Services South Asia Pvt. Ltd., had filed multiple refund applications between March and December 2017 seeking a refund of accumulated/unutilized CENVAT credit aggregating to Rs. 8,95,576 for the period January 2016 to June 2017. These refund claims were rejected by the Department on 7 September 2018. Thereafter, a show cause notice dated 18 October 2018 (SCN-I) was issued demanding service tax of Rs. 33,64,946 for the period October 2015 to September 2016 on the ground that the petitioner’s services did not qualify as export of services.

While the challenge to the rejection of refunds and SCN-I was pending before CESTAT, the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, was introduced. The petitioner applied under the Scheme in respect of SCN-I, which was accepted, granting relief of Rs. 23,55,462. Thereafter, a second show cause notice dated 19 December 2019 (SCN-II) was issued for the periods October 2016 to March 2017 and April 2017 to June 2017.

The petitioner’s application under the SVLDR Scheme in respect of SCN-II was rejected on 2 March 2020 on the ground that the SCN was issued after the cut-off date. SCN-II was later adjudicated, and by order dated 30 June 2023, a demand of Rs. 46,86,276 along with interest and penalties was confirmed. The petitioner challenged both the rejection under the SVLDR Scheme and the adjudication order.

Main Issue: Whether a show cause notice issued after 30 June 2019 could be covered under the Sabka Vishwas (Legacy Dispute Resolution) Scheme on the ground that it was a continuation of an earlier SCN issued before the cut-off date.

HC Decided: The High Court held that SCN-II dated 19 December 2019 was not eligible for coverage under the SVLDR Scheme, as the Scheme clearly prescribes 30 June 2019 as the cut-off date. The Court rejected the petitioner’s contention that SCN-II was merely a continuation of SCN-I, observing that SCN-II stood on its own footing and was the first instance where the demand for the relevant period was quantified. Mere reference to SCN-I or reliance on earlier proceedings could not extend the benefit of the scheme to a notice issued after the prescribed deadline.

Therefore, the rejection of the petitioner’s application under the SVLDR Scheme in respect of SCN-II was upheld. However, considering that the writ petition had remained pending since 2023, the Court granted liberty to the petitioner to file a statutory appeal against the adjudication order.

To Read Full Judgment, Download PDF Given Below