Mandatory Verification and Adjustment of Pre‑Deposits under SVLDRS:
Commentary on Evershine Enterprises v. Union of India, Bombay High Court (3 November 2025)

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1. Introduction

The judgment in Evershine Enterprises v. Union of India & Ors (Bombay High Court, 3 November 2025) is a significant addition to the jurisprudence on the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (“SVLDRS”). While earlier decisions had already clarified the broad objectives and mechanics of the Scheme, this decision sharpens the obligations of the designated committee when issuing the final statement in Form SVLDRS‑3.

At its core, the Court holds that:

• The statutory duty under Section 124(2) of the Finance Act, 2019 to deduct pre‑deposits and recovered amounts while computing the amount payable under SVLDRS is mandatory.
• The designated committee must actively verify challans and departmental records (including its own show‑cause notice indicating earlier recoveries) before issuing SVLDRS‑3.
• Even an assessee’s admission of tax liability does not amount to a waiver of the right to have:
  • pre‑deposits; and
  • amounts recovered during investigation
  adjusted under Section 124(2).

The case sits at the intersection of:

• Service tax legacy disputes pending before the CESTAT, and
• Implementation of SVLDRS, a one‑time amnesty/settlement scheme intended to clean up past indirect tax disputes.

The decision reaffirms and operationalises the principles earlier set out by a co‑ordinate Bench in Code Engineers Pvt. Ltd. v. Union of India, 2021 (46) G.S.T.L. 400 (Bom), particularly concerning the meaning and scope of “verification” by the designated committee.

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2. Factual and Procedural Background

2.1 Parties

• Petitioner: Evershine Enterprises – an assessee under the service tax regime.
• Respondents:
  • Union of India through the Secretary, Ministry of Finance, and
  • Departmental authorities, including the service tax Commissionerate (Respondent No. 3) responsible for adjudication and SVLDRS processing.

2.2 Service Tax Proceedings

1. First Show‑Cause‑cum‑Demand Notice – 13 June 2013
   Demanded service tax of ₹ 2,25,31,804 for FYs 2008‑09 to 2011‑12. The Petitioner’s reply (9 December 2013) specifically stated that a major portion of the demand had already been remitted before the notice was issued.
2. Second Show‑Cause‑cum‑Demand Notice – 28 March 2014
   Demanded service tax of ₹ 17,04,400 (plus interest and penalty) for the period 1 April 2012 to 31 March 2013.
3. Order‑in‑Original – 27 March 2018
   Respondent No. 3 confirmed the demands proposed in both notices. The assessee contended that:
   • Amounts already paid or treated as pre‑deposits/recoveries were not properly accounted for in the adjudication.
4. Appeal to CESTAT – 4 July 2018
   The Petitioner challenged the Order‑in‑Original before the CESTAT; thus, the dispute became a “pending litigation” suitable for SVLDRS.

2.3 Entry of SVLDRS

• SVLDRS came into force: Chapter V of the Finance Act, 2019, notified with effect from 21 August 2019.
• Petitioner’s Declaration:
  • 27 November 2019 – Petitioner applied under SVLDRS (SVLDRS‑1), disclosing that its appeal was pending before CESTAT.
• Submission of Payment Details and Challans:
  • 9 December 2019 – Petitioner wrote to the department, providing details of service tax payment to the tune of ₹ 1,89,28,966, supported by an affidavit and challans.
  • 11 December 2019 – Department called the Petitioner for a personal hearing on 16 December 2019, noting that the pre‑deposits claimed were not readily co‑relatable with departmental records and asking the Petitioner to produce original challans.
  • 16 December 2019 – Petitioner placed on record further communication with detailed challans for the relevant period.
• Issuance of SVLDRS‑3:
  • 26 December 2019 – The impugned SVLDRS‑3 was issued, determining that the Petitioner was required to pay ₹ 1,12,65,902, being 50% of the amount determined as due under the Scheme (consistent with the “litigation” category relief structure).

2.4 Closure of the Scheme

The SVLDRS was a time‑bound scheme and, as noted in the judgment, came to an end on 15 January 2020. This finality formed a key plank of the Respondents’ defence – they argued there was no legal mechanism to reopen or extend the Scheme.

2.5 Writ Petition

The Petitioner filed the present writ petition under Article 226 of the Constitution, principally seeking:

• Quashing of the SVLDRS‑3 dated 26 December 2019; and
• Re‑determination of the amount payable under SVLDRS after:
  • adjusting the amounts paid as pre‑deposit; and
  • adjusting amounts recovered during investigation, as noted even in the department’s own show‑cause notice.

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3. Issues Before the Court

The Bombay High Court addressed, in substance, the following legal and factual issues:

1. Obligation to adjust pre‑deposits and recoveries:
   Whether, under Section 124(2) of the Finance Act, 2019, the designated committee was mandatorily required to deduct:
   • pre‑deposits made at any stage of appellate proceedings; and
   • deposits/recoveries made during inquiry, investigation or audit,
   when computing the final payable amount in SVLDRS‑3.
2. Scope of “verification” by the designated committee:
   Whether the committee, before issuing SVLDRS‑3, was obliged to:
   • examine the challans produced by the Petitioner on 9 December 2019 and 16 December 2019, and
   • consider departmental records, particularly its own show‑cause notice acknowledging recovery of approximately ₹ 80.95 lakhs during investigation.
3. Effect of assessee’s admissions:
   Whether the Petitioner’s admissions of tax liability of ₹ 2,25,31,804 in various correspondences prevented it from claiming adjustment of deposits and recoveries under Section 124(2).
4. Effect of SVLDRS closure:
   Whether the closure of the Scheme on 15 January 2020 barred the High Court from interfering with SVLDRS‑3 and directing fresh verification.

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4. Summary of the Judgment

The Division Bench (M.S. Sonak & Advait M. Sethna, JJ.) allowed the writ petition in material part and held:

• The impugned SVLDRS‑3 dated 26 December 2019, insofar as it determined the amount payable by the Petitioner at ₹ 1,12,65,902, was vitiated because:
  • The designated committee did not verify or even consider the challans and other documents submitted by the Petitioner on 9 and 16 December 2019; and
  • It failed to consider the department’s own show‑cause notice that recorded recovery of approximately ₹ 80.95 lakhs during investigation.
• Under Section 124(2), any amount paid as pre‑deposit or as deposit in the course of inquiry/investigation must be deducted while computing the payable amount in SVLDRS‑3.
• The Petitioner’s admission of tax liability did not amount to a waiver of its statutory right to have such amounts adjusted.
• The Court therefore:
  • Quashed and set aside the SVLDRS‑3 form to the extent it determined the payable amount at ₹ 1,12,65,902; and
  • Directed constitution of a designated committee to:
    • verify the Petitioner’s claims of pre‑deposits and recoveries, by scrutinising:
      • the challans furnished on 9 December and 16 December 2019; and
      • the statements in the show‑cause notice dated 13 June 2013 regarding recovered amounts;
    • hear the Petitioner; and
    • re‑determine afresh the SVLDRS‑3 amount.
• This exercise must be completed within three months from the date of uploading of the order.
• The Court expressly clarified that it had not itself accepted as proved the quantum of pre‑deposits or recoveries. All such questions were to be determined by the designated committee upon verification.

The Rule was made absolute in these terms.

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5. Precedents and Authorities Cited

5.1 Statutory Provisions

(a) Section 124(2), Finance Act, 2019

Section 124(2) lies at the heart of the case. It provides that:

• Relief calculated under Section 124(1) shall be subject to the condition that:
  • Any amount paid as pre‑deposit at any stage of appellate proceedings, or
  • Any amount paid as deposit during inquiry, investigation or audit,
  shall be deducted while issuing the statement indicating the amount payable by the declarant.
• The proviso clarifies that:
  • If the pre‑deposit/deposit already paid exceeds the amount payable indicated in SVLDRS‑3, the declarant is not entitled to any refund.

The Court treated the duty to deduct pre‑deposits and deposits as mandatory and non‑derogable.

(b) Section 126(1), Finance Act, 2019, and Rule 6

Section 126(1) requires the designated committee to verify the correctness of the declaration. Rule 6 of the SVLDRS Rules prescribes how this verification is to be done.

Drawing from Code Engineers, the Court emphasised that the central word in Section 126(1) and Rule 6(1) is “verify”, whose meaning, in ordinary and legal dictionaries, is:

• “to make sure or demonstrate that something is true, accurate or justified” (Concise Oxford Dictionary);
• “to prove to be true; to confirm or establish the truth or truthfulness of; to authenticate; to confirm or substantiate by oath or affidavit” (Black’s Law Dictionary, 8th Ed.).

5.2 Code Engineers Pvt. Ltd. v. Union of India, 2021 (46) G.S.T.L. 400 (Bom)

This earlier Division Bench decision (Ujjal Bhuyan, J. – as he then was – and Abhay Ahuja, J.) is the principal precedent relied upon. Key principles from Code Engineers as reiterated and applied in Evershine include:

1. Beneficial and settlement‑oriented nature of SVLDRS:
   The “central focus” of the Scheme is to settle legacy disputes by offering incentives to the declarant, subject to eligibility. Interpretation of its provisions must, therefore, be consistent with this object.
2. Meaning and scope of “verification” by the designated committee:
   The designated committee’s role is:
   • Neither adjudicatory nor appellate; but
   • Nonetheless substantive – it must verify the correctness of the declaration.
   This verification:
   • Is not confined to the show‑cause notice or Order‑in‑Original; and
   • Must be conducted on the basis of:
     • particulars furnished by the declarant; and
     • records available with the department.
3. Contextual and purposive interpretation:
   Words and expressions in legislation must take their colour from the context in which they appear. SVLDRS must be read as a whole, keeping in mind its dispute‑settlement focus, rather than narrowly or technically.

Evershine does not create a new principle independent of Code Engineers, but it applies that precedent to a specific, factually rich situation where:

• the department’s own show‑cause notice acknowledged recoveries, and
• the assessee had produced challans within the time windows granted by the department itself.

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6. Court’s Legal Reasoning

6.1 Failure to Verify Challans and Departmental Records

The Bench noted (paras 15–18, 21, 26) that:

• The Petitioner had, on 9 December 2019 and 16 December 2019, produced challans purporting to show payments made as service tax/pre‑deposit/recoveries.
• These documents were submitted:
  • Before the expiry of the Scheme (15 January 2020); and
  • Before the issuance of SVLDRS‑3 (26 December 2019),
  and indeed, within the time period fixed by the department’s own hearing notice dated 11 December 2019.
• The impugned SVLDRS‑3 did not reflect any consideration of:
  • these challans; or
  • the department’s own earlier acknowledgement in the show‑cause notice that approximately ₹ 80.95 lakhs had been recovered during investigation.

The Court accepted that the department was entitled to scrutinise and verify the challans and was not bound to accept them at face value. However, it underlined that:

• The department could not simply ignore such documents.
• It had a duty to examine and verify whether the challans established pre‑deposits or investigation recoveries.
• If they did, Section 124(2) would require such amounts to be deducted when issuing SVLDRS‑3.

6.2 Significance of the Show‑Cause Notice’s Own Statements

A particularly important factual element was para 10 of the show‑cause notice dated 13 June 2013, in which:

• Service tax of ₹ 80,95,307 was proposed to be demanded; and
• The same amount of ₹ 80,95,307 was proposed to be appropriated as “the said amount recovered from the assessee during the course of investigation”.

The Court described this as at least prima facie suggesting that:

• a substantial amount had already been recovered from the assessee; and
• that there was a departmental decision to appropriate it towards the service tax liability.

The Bench held that these statements in the department’s own show‑cause notice were “vital material” which the designated committee was required to take into account when verifying the correctness of the Petitioner’s SVLDRS declaration.

6.3 Nature and Extent of Verification

Relying on Code Engineers and the statutory text, the Court concluded:

• Verification is not a full‑fledged adjudication or an appeal, but
• It is still a substantive duty – the committee must:
  • cross‑check the declarant’s particulars against departmental records; and
  • confirm or negate claims of pre‑deposits and recoveries on a reasoned basis.

Given these standards, the Court found that:

• There had been a complete failure to verify the material regarding pre‑deposits and recoveries; and therefore
• The determination of ₹ 1,12,65,902 as payable in SVLDRS‑3 was flawed and unsustainable in law.

6.4 Admissions Do Not Waive Statutory Adjustments

The department argued that:

• The Petitioner had repeatedly admitted its service tax liability of ₹ 2,25,31,804 in various correspondences; and
• These admissions implied that the Petitioner could not subsequently dispute the amount payable under SVLDRS or seek further adjustments.

The Court partly accepted the existence of such admissions but drew a critical distinction:

• Admission of total tax liability (e.g., ₹ 2,25,31,804) is one thing;
• Waiver of the statutory right to adjustment of:
  • pre‑deposits; and
  • recovered amounts under Section 124(2)
  is quite another.

The Court held that those admissions should not be construed as a waiver of the right to insist that whatever amount had already been paid or recovered must be adjusted while determining the net amount payable under SVLDRS. On the contrary, the documentary record showed that the Petitioner was consistently agitating the non‑adjustment of these amounts.

6.5 Scheme Closure and Judicial Review

The Respondents correctly pointed out that:

• SVLDRS was a time‑bound scheme ending on 15 January 2020, and
• There was no statutory power to extend the Scheme’s life.

While accepting these propositions conceptually, the Court distinguished between:

• Creating a new window or extension to the Scheme (which courts cannot do); and
• Correcting a misapplication of the Scheme in an individual case where:
  • a declaration was filed in time; and
  • the department failed to perform its statutory duty of verifying and adjusting pre‑deposits/recoveries.

In Evershine, the Petitioner had:

• Filed the declaration in time;
• Produced challans within the timelines set by the department itself; and
• Faced a failure of verification by the designated committee before issuance of SVLDRS‑3.

Thus, the Court held that:

• Quashing the flawed SVLDRS‑3 determination and directing fresh verification was not an extension of the Scheme, but
• A lawful exercise of judicial review to ensure that the Scheme was correctly implemented in accordance with the statute.

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7. Complex Concepts Simplified

7.1 What is SVLDRS?

The Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 is a one‑time amnesty/settlement scheme introduced to resolve past disputes under various indirect tax laws (such as service tax and central excise) that subsisted even after the introduction of GST.

Broadly, the Scheme offers:

• Relief in tax dues (e.g., a percentage waiver of duty/tax, depending on category and amount);
• Waiver of interest and penalty; and
• Immunity from prosecution,

in return for the declarant paying a prescribed percentage of the tax dues and withdrawing litigation.

7.2 SVLDRS Forms – SVLDRS‑1, 2, and 3 (Conceptually)

• SVLDRS‑1: Declaration by the assessee opting into the Scheme and disclosing the dispute and tax dues.
• SVLDRS‑2: Statement issued by the department, indicating the estimated amount payable (can sometimes trigger further hearing/clarification).
• SVLDRS‑3: Final statement issued by the designated committee, indicating the definitive amount to be paid under the Scheme. Payment in terms of SVLDRS‑3 leads to discharge of the declared dispute.

7.3 What is a “Pre‑Deposit”?

A pre‑deposit is an amount that an assessee is required (or chooses) to deposit as a condition for:

• filing an appeal against a tax demand; or
• pursuing appellate remedies.

Under modern indirect tax law, a fixed percentage of the disputed tax amount is often prescribed as pre‑deposit to make an appeal maintainable. Under Section 124(2), such pre‑deposits must be deducted from the amount determined as payable under SVLDRS.

7.4 Deposits/Recoveries during Inquiry or Investigation

Sometimes, during:

• a tax investigation, or
• a tax audit, or
• even search and seizure proceedings,

amounts are paid by the assessee or recovered/coerced by the department, which are then:

• Held as “deposit” against likely liability; or
• Appropriated towards service tax or excise duty dues, as in the present case (₹ 80,95,307 referring to amounts “recovered during investigation”).

Section 124(2) treats such deposits on par with pre‑deposits for the purpose of deduction when calculating SVLDRS liability.

7.5 “Verify” – Why is the Word So Important?

As emphasised in both Code Engineers and Evershine, “verify” in Section 126(1) and Rule 6 means more than just:

• copying figures from the show‑cause notice; or
• mechanically confirming the adjudicated demand.

Instead, it obliges the designated committee to:

• cross‑check declarations with:
  • departmental records; and
  • documents and challans supplied by the assessee;
• apply judgment and scrutiny (though not to re‑adjudicate the tax issue); and
• arrive at a reasoned conclusion on:
  • whether the declarant is eligible; and
  • what amount remains payable after mandatory statutory deductions.

7.6 Order‑in‑Original (OIO)

An Order‑in‑Original is the decision passed by the primary adjudicating authority (e.g., Commissioner or Assistant Commissioner of Service Tax) on the basis of a show‑cause notice, determining:

• whether tax is payable; and
• the quantum of tax, interest and penalty.

In SVLDRS “litigation” cases, the amount “in dispute” is often based on such an OIO, subject to pending appeal.

7.7 Writ Petition and Judicial Review

A writ petition under Article 226 of the Constitution allows an aggrieved person to directly approach a High Court for relief against:

• illegal or arbitrary state action; and
• violation of statutory duties by public authorities.

In Evershine, the Petitioner invoked writ jurisdiction alleging that:

• The department had breached its statutory obligations under Section 124(2) and Section 126; and
• SVLDRS‑3 had been issued in a manner inconsistent with the scheme’s objectives and legal framework.

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8. Impact and Broader Significance

8.1 Reinforcement of SVLDRS as a Beneficial, Settlement‑Oriented Scheme

The judgment underscores that SVLDRS must be implemented:

• in a manner consistent with its dispute‑resolution objective, and
• not in a hyper‑technical or revenue‑maximising way.

By insisting on:

• proper verification of challans; and
• acknowledgment of amounts already recovered,

the Court pushes authorities towards a fair, balanced and purposive application of the Scheme.

8.2 Practical Guidance for Designated Committees

For designated committees across the country, the case sets out practical expectations:

• They must:
  • actively examine the declarant’s challans and supporting documents;
  • cross‑verify them with departmental records (returns, ledgers, SCNs, investigation files); and
  • check whether any amount has been:
    • recorded as “deposit”; or
    • appropriated; or
    • recovered during investigation.
• They cannot:
  • ignore such documents simply because they were produced close to the Scheme’s deadline; or
  • rely solely on the raw adjudicated demand figure without factoring in Section 124(2) deductions.

This has implications not only for pending writ petitions, but also for any future amnesty or settlement schemes where similar concepts are used.

8.3 Protection Against “Double Recovery”

By emphasising that:

• all pre‑deposits and recovered amounts must be adjusted,

the judgment protects assessees from a de facto double recovery scenario, in which:

• the department first recovers sums during investigation or as pre‑deposit, and then
• requires payment under SVLDRS calculated as if those sums had never been paid.

This approach makes the Scheme more legitimate and acceptable, and prevents it from becoming an instrument of inadvertent over‑collection.

8.4 Clarification on the Effect of Admissions

The ruling that admissions of tax liability do not automatically amount to waiver of statutory rights has broader relevance:

• Assessees can admit liability for certain amounts without losing their rights to:
  • credit already paid sums;
  • claim deductions to which they are statutorily entitled; and
  • insist upon lawful computation under settlement schemes or tax laws.
• Authorities must distinguish between:
  • admission of total tax due; and
  • the net amount payable after lawful adjustments.

8.5 Residual Role of Courts after Scheme Closure

Though the Scheme is closed, Evershine demonstrates that:

• Courts can still:
  • review the legality of actions taken while the Scheme was alive; and
  • order corrective steps, such as fresh verification and revised SVLDRS‑3 computations.
• This does not amount to reopening or extending the Scheme, but ensures:
  • that those who availed of it in time are not prejudiced by administrative lapses.

This is particularly important in maintaining confidence in one‑time settlement schemes: taxpayers are more likely to use them if courts show readiness to intervene when implementation goes wrong.

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9. Key Takeaways and Conclusion

1. Mandatory adjustment of pre‑deposits and recoveries:
   Section 124(2) of the Finance Act, 2019 requires that:
   • all amounts paid as pre‑deposits; and
   • all amounts deposited/recovered during inquiry, investigation or audit,
   must be deducted when determining the amount payable under SVLDRS. Non‑consideration of such amounts vitiates SVLDRS‑3.
2. Substantive verification duty:
   Designated committees must:
   • verify declarations not only against show‑cause notices and OIOs, but also against:
     • challans submitted by the assessee; and
     • all relevant departmental records (including prior acknowledgements of recoveries).
   • They cannot simply ignore such material.
3. Admissions do not waive statutory rights:
   An assessee’s admission of total tax liability does not equate to:
   • waiver of the right to have amounts already paid or recovered credited under Section 124(2); or
   • acceptance of a computation that fails to give such credit.
4. Judicial review survives scheme closure:
   Even though SVLDRS has ended, courts may:
   • quash erroneous SVLDRS‑3 statements; and
   • direct fresh verification and recomputation,
   where declarations were made and actions taken while the Scheme was in force.
5. Reaffirmation of Code Engineers:
   Evershine operationalises the principles of Code Engineers, underscoring that the Scheme is to be implemented as a dispute resolution mechanism, not merely as an additional revenue‑collection tool.

In sum, Evershine Enterprises v. Union of India stands as an important precedent on the procedural integrity and substantive fairness required in implementing SVLDRS. It protects declarants against double counting of liabilities, enforces the statutory mandate of Section 124(2), and strengthens the expectation that beneficial settlement schemes will be administered in a legally sound and purposive manner.