Pending Re‑Quantification Keeps Tax Dues in “Litigation” Category under SVLDRS, 2019: Commentary on Unique Enterprises v. Union of India, Bombay High Court (2 December 2025)

1. Introduction

The decision of the Bombay High Court in M/s. Unique Enterprises v. Union of India & Anr. (Writ Petition No. 2343 of 2021, decided on 2 December 2025) is another important addition to the growing body of jurisprudence on the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (“SVLDRS” or “the Scheme”).

The core dispute concerned whether the petitioner’s case under SVLDRS was to be treated under the “Litigation” category (Section 124(1)(a) of the Finance Act, 2019) or the “Arrears” category (Section 124(1)(c)). This classification is crucial because it directly determines the percentage of relief on “tax dues” and the net amount payable.

The Bombay High Court held that where a matter has been remanded for re‑quantification of duty and the show cause notice (“SCN”) remains pending in that sense, the case falls in the “Litigation” category and not the “Arrears” category. The Court also emphasized that pre‑deposit amounts must be given credit in computing tax dues under Section 124(2), especially where the department itself has earlier acknowledged such pre‑deposit.

This commentary sets out the factual background, summarises the judgment, explores the precedents cited, analyses the Court’s reasoning, simplifies key concepts, and evaluates the likely impact of this ruling on SVLDRS disputes and amnesty schemes generally.

2. Factual and Procedural Background

2.1 Parties

Petitioner: M/s. Unique Enterprises, a proprietary concern of Shri Fardoon Minoo Irani, engaged in manufacturing condensers and cooling coils.
Respondents:
- Union of India (through Secretary, Ministry of Finance, Dept. of Revenue)
- The Designated Committee under SVLDRS, 2019, CGST Commissionerate, Mumbai (East)

2.2 Originating Central Excise Dispute

Show Cause Notice (SCN): On 6 January 1993, a SCN was issued demanding Central Excise duty of ₹39,53,517, along with proposal to impose penalties under Rule 173Q and other provisions of the erstwhile Central Excise Rules, 1944.
Order-in-Original (OIO) (19 December 1997): The adjudicating authority:
- Confirmed duty demand of ₹39,53,517;
- Imposed penalty of ₹50,00,000;
- Imposed fines of ₹1,00,000 and ₹30,00,000.
Appeal to Tribunal and Pre‑deposit:
- Unique Enterprises appealed to the erstwhile CEGAT/Tribunal.
- By order dated 29 July 1998, the Tribunal directed a pre‑deposit of ₹10,00,000 as a condition for hearing the appeal.
- The petitioner claims (and later evidences by challans) that it paid this pre‑deposit, which the department initially acknowledged and adjusted in SVLDRS Form‑2.

2.3 Tribunal Orders and High Court Intervention

Tribunal Order of 30 December 2010 (Remand for Re‑quantification):
- The Tribunal substantially remanded the matter to the Commissioner (adjudicating authority) for re‑quantification of duty.
- It held that the burden lies on the manufacturer (the petitioner) to show that the prices charged included duty, and this exercise was to be carried out before the adjudicating authority.
- It also left open the question of penalty under Rule 173Q to be re‑examined in the remand proceedings.
High Court Order of 13 March 2012:
- A coordinate Division Bench of the Bombay High Court set aside the Tribunal’s order to the extent it had confirmed a duty amount of ₹7,19,997.
- The proceedings were remanded back to the Tribunal for de novo consideration.
Tribunal Order of 5 September 2014:
- Upon remand, the Tribunal dropped the duty demand of ₹7,19,997 as unsubstantiated.
- Thus, from the original SCN demand of ₹39,53,517, the dropped amount of ₹7,19,997 no longer survived.
- The balance amount of ₹32,33,520 (i.e. ₹39,53,517 – ₹7,19,997) remained to be re‑quantified/adjudicated in terms of the earlier remand directions.

2.4 Declaration under SVLDRS and Forms Issued

SVLDRS‑1 (11 December 2019):
- The petitioner filed a declaration in Form SVLDRS‑1 under the “Litigation” category under Section 124(1)(a).
- The declaration related to tax dues of ₹32,33,520 (i.e. original SCN demand minus dropped portion).
- Under the Litigation category for dues ≤ ₹50 lakhs, relief is 70%, so the petitioner claimed relief of ₹22,63,464, leaving ₹9,70,056 as payable.
- Since the petitioner had already pre‑deposited ₹10,00,000, it contended that no further amount was payable, subject to the bar on refund under the Scheme.
SVLDRS‑2 (7 January 2020) – Classification as “Arrears”:
- The Designated Committee (Respondent No. 2) issued Form SVLDRS‑2, but treated the case under the “Arrears” category under Section 124(1)(c), not Litigation.
- It:
  - Took total duty dues as ₹32,33,520;
  - Gave some relief as per Arrears category (ultimately 60% relief is reflected in Form‑3);
  - Adjusted the pre‑deposit of ₹10,00,000 and computed an estimated amount payable of ₹8,93,408 in this form;
- The petitioner responded by filing Form SVLDRS‑2A (same date), disagreeing with the categorisation and quantification.
Communication of Pre‑deposit Evidence (12 February 2020):
- Petitioner’s advocate emailed the Designated Committee, enclosing TR‑6 challans as proof of payment of ₹10,00,000 pre‑deposit.
SVLDRS‑3 (12 March 2020):
- Respondent No. 2 issued Form SVLDRS‑3 finally quantifying tax dues at ₹12,93,408, again under the Arrears category.
- It granted relief of ₹19,40,112 (i.e. 60% of ₹32,33,520) under Section 124(1)(c).
- Crucially, Form‑3 did not give effect to the earlier adjustment of the pre‑deposit of ₹10,00,000 as had been done in SVLDRS‑2.

2.5 Writ Petition

Aggrieved by:

the treatment of the case under “Arrears” rather than “Litigation” category, and
the failure to properly adjust the pre‑deposit in Form‑3,

the petitioner filed the present writ petition under Article 226 of the Constitution, seeking:

a writ of certiorari quashing Form SVLDRS‑3; and
a writ of mandamus directing the Designated Committee to:
- determine dues under the Litigation category, or
- in the alternative, correctly quantify the amount under Arrears category by properly accounting for relief and pre‑deposit.

3. Summary of the Judgment

The Division Bench of M.S. Sonak & Advait M. Sethna, JJ. allowed the writ petition and:

Quashed and set aside Form SVLDRS‑3 dated 12 March 2020.
Held that, on the facts, the petitioner’s case falls in the “Litigation” category under Section 124(1)(a) because:
- the SCN dated 6 January 1993 stood remanded for re‑quantification of duty and penalty;
- the quantification of duty and penalty had not attained finality as on 30 June 2019;
- therefore, tax dues were “relatable to a show cause notice … pending as on 30 June 2019”.
Held that Section 124(1)(c) (Arrears category) was inapplicable because the tax dues had not been finally confirmed.
Reiterated that under Section 124(2), pre‑deposit of ₹10,00,000 must be deducted from the amount payable, especially when:
- the petitioner produced challans showing payment, and
- the department itself had earlier adjusted this amount in Form SVLDRS‑2.
Directed the Designated Committee to re‑determine the correct amount treating the case under the Litigation category and complete this exercise within two months of uploading the order.

The Court grounded its reasoning in earlier Bombay High Court decisions in UCN Cable Network (P) Ltd. and Morde Foods Pvt. Ltd., and a purposive reading of Section 124.

4. Detailed Analysis

4.1 Statutory Framework: Section 124 of the Finance Act, 2019

Section 124 of the Finance Act, 2019 (enacting SVLDRS relief provisions) classifies cases and specifies the percentage of relief:

Section 124(1)(a) – “Litigation” category:
- Applies where tax dues are “relatable to a show cause notice or one or more appeals arising out of such notice which is pending as on 30 June 2019”.
- Relief:
  - 70% of tax dues if amount ≤ ₹50 lakhs;
  - 50% if amount > ₹50 lakhs.
Section 124(1)(c) – “Arrears” category:
- Applies where tax dues are “relatable to an amount in arrears”, i.e., an amount that has been determined as payable (e.g., by adjudication order or return) and has attained finality but remains unpaid.
- Relief:
  - 60% of tax dues if amount ≤ ₹50 lakhs;
  - 40% if amount > ₹50 lakhs.
Section 124(2) – Adjustment of Pre‑deposit / Deposits:
- Requires that any pre‑deposit or deposit made during appeal, enquiry, investigation or audit be deducted while computing the amount payable under SVLDRS.
- If pre‑deposit exceeds the payable amount, no refund is permitted.

The key interpretive fault line in this case is the boundary between “Litigation” and “Arrears”, especially where there has been a remand for re‑quantification.

4.2 Core Issues Before the Court

The High Court essentially dealt with two interconnected issues:

Whether the petitioner’s case under SVLDRS should be treated as “Litigation” or “Arrears”?
- If “Litigation”: relief = 70% (for dues ≤ ₹50 lakhs).
- If “Arrears”: relief = 60%.
- The answer depended on whether the tax dues had attained finality as on 30 June 2019, or whether they remained pending for adjudication/re‑quantification pursuant to remand.
Whether the pre‑deposit of ₹10,00,000 must be given credit in computing the payable amount under SVLDRS?
- The petitioner produced challans and pointed out that SVLDRS‑2 had already adjusted this amount.
- The Designated Committee later asserted inability to verify the pre‑deposit online and effectively refused to give credit in Form‑3.

4.3 Court’s Legal Reasoning

4.3.1 Litigation vs. Arrears: The Status of the SCN and Re‑Quantification

The Court’s reasoning is anchored in two propositions developed in earlier Bombay High Court rulings and reaffirmed here:

A case falls under “Litigation” where the duty/tax has not been finally quantified or confirmed and the SCN or appeal is pending as on 30 June 2019.
A case falls under “Arrears” where the duty/tax has been confirmed and that confirmation has attained finality, and only payment is outstanding.

Applying these principles, the Court analysed the procedural history:

The Tribunal’s order dated 30 December 2010 remitted the matter to the adjudicating authority to:
- re‑quantify the duty; and
- decide afresh on penalty under Rule 173Q.
The Tribunal explicitly placed the onus on the manufacturer to demonstrate that the transaction value included duty, and held that this issue had to be tested before the lower authority.
Subsequently, by order dated 5 September 2014 (following the High Court’s 2012 remand), the Tribunal dropped the duty demand of ₹7,19,997, but the remainder of the SCN demand (₹32,33,520) still required re‑quantification/adjudication.

The Court stressed that, in these circumstances, as on the critical date of 30 June 2019:

the SCN dated 6 January 1993 remained pending in substance, because the quantum of duty and penalty had not been finally determined, and
no final adjudication bringing closure to the entire demand had been passed.

Consequently, the matter was squarely within the “Litigation” category under Section 124(1)(a), and not in “Arrears” under Section 124(1)(c).

4.3.2 Rejection of the Department’s “Arrears” Argument

The department argued that:

Out of a certain duty component (stated as ₹15,13,252 in submissions), only ₹7,19,997 was dropped by the Tribunal.
The balance (₹7,93,255) was allegedly “confirmed” and no appeal was filed against it; therefore, it constituted “amount in arrears”.
On this footing, the entire case was branded as falling in the Arrears category.

The Court rejected this approach for several reasons:

Inconsistency with the Remand Framework:
- The remand order of 30 December 2010 had expressly remitted the task of re‑quantification and penalty determination to the Commissioner.
- Thus, the whole SCN remained alive, subject to that re‑quantification exercise.
Show Cause Notice Still Pending:
- Because the quantification and penalty were yet to be finally adjudicated, the SCN could not be said to have culminated into a final, unchallenged demand.
- Therefore, within the statutory scheme of Section 124, this was a classic “litigation” situation.
Purposive Interpretation of SVLDRS:
- The Court emphasised that the departmental interpretation would render the Scheme “redundant” or “unworkable”, as it would unduly narrow the availability of the Litigation category.
- SVLDRS, being a dispute resolution and amnesty scheme, must be given a construction that furthers its objective of settling legacy disputes, not one that artificially restricts its benefit.

In short, the Court held that the department’s attempt to carve out a portion of the demand as “arrears” on a technical reading of prior orders was contrary to both the statutory text and the object of the Scheme.

4.3.3 Treatment of Pre‑Deposit under Section 124(2)

On the question of pre‑deposit, the Court focused on three key factual and legal aspects:

Documentary Proof by Petitioner:
- The petitioner had produced TR‑6 challans showing payment of the statutory pre‑deposit of ₹10,00,000 pursuant to the Tribunal’s 29 July 1998 order.
Department’s Own Conduct:
- In Form SVLDRS‑2 dated 7 January 2020, the Designated Committee had itself adjusted this pre‑deposit while computing the tentative amount of tax payable.
- This made it difficult for the department to later argue that the pre‑deposit was unverified or doubtful.
Statutory Mandate of Section 124(2):
- Section 124(2) mandates deduction of any pre‑deposit or deposit from the payable amount under the Scheme.
- The Court rejected the department’s contention that “online verification” difficulties justified denying credit of pre‑deposit.
- Given the documentary material and the earlier adjustment in SVLDRS‑2, there was no basis to disbelieve the payment.

Accordingly, the Court held that credit of ₹10,00,000 must be given towards the tax dues of the petitioner when the final quantification is done under the Litigation category.

4.3.4 Reliance on Earlier Precedents

The Court’s reasoning is closely aligned with and reinforced by two earlier decisions:

UCN Cable Network (P) Ltd. v. Designated Committee, Nagpur, 2022 (58) G.S.T.L. 407 (Bom.).
Morde Foods Pvt. Ltd. v. Union Of India, 2021 (50) G.S.T.L. 43 (Bom.).

These are discussed in detail in the next section.

4.4 Precedents Cited and Their Influence

4.4.1 UCN Cable Network (P) Ltd. v. Designated Committee

The Nagpur Bench in UCN Cable Network analysed the distinction between “Litigation” and “Arrears” categories under Section 124. Paragraph 18, quoted by the Court in Unique Enterprises, crystallises the principle:

“… there is a clearly discernible distinction between the reliefs available under Section 124(1)(a) and those under Section 124(1)(c). This distinction is between amount of duty not yet finalized as show cause notice is pending for some reasons on one hand and the amount of duty having attained finality for the reason of no appeal having been filed … or an order passed in appeal having attained finality or the declarant having admitted his tax liability … and not having paid it on the other. In other words, a ‘litigation’ category case would be one wherein the amount of duty has not been confirmed and has not attained finality and whereas an ‘arrears’ category case would be the one where the amount of duty has been confirmed and has attained finality.”

The Bombay High Court in Unique Enterprises applies this clear dichotomy to the facts:

Because re‑quantification and penalty determination remained pending, the duty had not been confirmed in a final sense.
Therefore, the case was in “Litigation” and not in “Arrears”.

This reasoning directly supports the Court’s conclusion that Section 124(1)(a) (70% relief) governs, not Section 124(1)(c).

4.4.2 Morde Foods Pvt. Ltd. v. Union Of India

In Morde Foods, the petitioner’s appeal was:

heard on 10 May 2019 (before 30 June 2019),
but disposed of on 8 November 2019 by the CESTAT by remanding the matter for de novo adjudication on the SCN.

The Court held that the remand meant that the assessee was effectively reverted back to the stage of show cause notice at the adjudication stage. Paragraph 30 (quoted in the present judgment) clarifies that:

“… though the appeal was heard on 10.05.2019, by the subsequent order of CESTAT dated 08.11.2019 the said hearing held on 10.05.2019 was rendered redundant reverting the petitioner back to the stage of show cause notice at the stage of adjudication. This was the position when petitioner No. 1 filed its declaration under the litigation category… If petitioner No. 1 was at the stage of show cause notice with no fresh adjudication order then certainly it would be eligible to file declaration under the litigation category.”

The Unique Enterprises decision uses this reasoning to hold that a remand for re‑quantification or de novo adjudication preserves the “pending” status of the SCN. Hence:

Despite earlier partial orders, the case remains one of pending litigation rather than final arrears.
The petitioner is therefore eligible for Litigation category relief under SVLDRS.

4.5 Application of Principles to the Facts

Using the principles from UCN Cable Network and Morde Foods, the Court in Unique Enterprises made the following key applications:

Status on 30 June 2019:
- The SCN had been subject to remand; quantification of the balance duty and penalty was still not finalised.
- Thus, on the relevant cut‑off date, the SCN was effectively pending for adjudication.
Computation of Eligible Relief:
- Total surviving tax dues as per petitioner’s declaration: ₹32,33,520.
- Under Litigation category (Section 124(1)(a)) for dues ≤ ₹50 lakhs:
  - Relief = 70% of ₹32,33,520 = ₹22,63,464;
  - Balance 30% = ₹9,70,056 is notionally payable.
- Petitioner’s pre‑deposit: ₹10,00,000, which must be adjusted under Section 124(2).
- Since the pre‑deposit exceeds the payable amount, no additional payment is required, but no refund can be claimed (as per the proviso to Section 124(2)).
Error in Treating Case as Arrears:
- The Designated Committee’s classification under Arrears led to only 60% relief, increasing the payable amount.

5. Complex Concepts Simplified

5.1 Show Cause Notice (SCN)

A show cause notice in indirect tax is a formal notice by the tax department alleging tax short‑payment or non‑payment. It:

sets out the alleged liability;
asks the assessee to “show cause” why demand, penalty, etc. should not be imposed.

Until adjudication is complete and all appeals/remands are resolved, the dispute remains in the realm of pending litigation.

5.2 Remand and Re‑Quantification

A remand occurs when an appellate forum (such as the Tribunal or High Court) sends the matter back to a lower authority for:

fresh adjudication, or
specific exercise like re‑quantification of duty, re‑determination of penalty, or re‑examination of evidence.

In such cases, the earlier adjudication order does not achieve finality. The “pending” status of the dispute is preserved. In SVLDRS terms, the case remains within the Litigation category.

5.3 Litigation vs. Arrears under SVLDRS

Litigation Category (Section 124(1)(a)):
- SCN or appeal is pending as on 30 June 2019.
- The amount of duty has not been fully and finally confirmed.
- Relief: 70% or 50% of tax dues (depending on threshold).
Arrears Category (Section 124(1)(c)):
- Duty/tax has been finally confirmed (e.g. no appeal, or appeal decided and not further challenged).
- Only payment remains outstanding; there is no pending challenge to quantum or liability.
- Relief: 60% or 40% of tax dues.

The core distinction is between “not yet final” (Litigation) and “final but unpaid” (Arrears).

5.4 Pre‑Deposit

A pre‑deposit is an amount that an assessee must deposit (often a fixed percentage of demand or a specified sum) as a condition for:

maintaining an appeal before an appellate authority, and/or
obtaining a stay on recovery during pendency of appeal.

Under SVLDRS, any amount already paid as pre‑deposit must be deducted from the amount payable post‑relief. If the pre‑deposit exceeds the post‑relief liability, the assessee does not get a refund, but also does not have to pay anything further.

5.5 SVLDRS Forms (1, 2, 2A, 3)

Form SVLDRS‑1: Declaration by the taxpayer opting into the Scheme, stating category (Litigation, Arrears, etc.) and quantum of tax dues.
Form SVLDRS‑2: Estimate by the Designated Committee of tax payable, relief, and pre‑deposits; may invite clarifications.
Form SVLDRS‑2A: Assessee’s response if it disagrees with the computation in Form‑2.
Form SVLDRS‑3: Final statement of the amount payable under the Scheme, binding if not challenged.

6. Impact and Broader Significance

6.1 Clarification of Category Choice under SVLDRS

The judgment cements a clear and taxpayer‑friendly test for distinguishing between “Litigation” and “Arrears”:

If any aspect of quantification or liability is still open due to remand, review, or pending SCN/adjudication, the case is Litigation.
Only once the demand has been fully confirmed and has attained finality (with no pending challenge or remand) can it be treated as Arrears.

This will have a direct bearing on numerous SVLDRS‑related writ petitions where:

part orders and remands existed; or
the department attempted to classify disputes as “Arrears” to reduce the percentage of relief.

6.2 Obligations of Designated Committees

The judgment sends important signals to Designated Committees:

They must undertake a substantive, not merely formalistic, review of the status of disputes.
They cannot rely on technical or partial readings of orders to avoid granting rightful relief.
They are duty‑bound to:
- verify and give due credit for pre‑deposit and other payments, and
- ensure internal consistency between successive forms (SVLDRS‑2 and SVLDRS‑3).

6.3 Purposive Interpretation of Amnesty/Resolution Schemes

By warning that the department’s interpretation would render the Scheme “redundant” or “unworkable”, the Court reinforces an important interpretive stance:

Amnesty and dispute‑resolution schemes must be interpreted purposively to further their objective of reducing legacy litigation.
Hyper‑technical constructions that artificially exclude taxpayers or minimize relief defeat the legislative intent.

This approach is likely to influence the interpretation of other similar schemes, whether under GST or future amnesty programmes.

6.4 Finality and Closure for Legacy Central Excise Disputes

Although SVLDRS has now closed for new declarations, a considerable number of cases remain pending in courts relating to:

category classification (Litigation vs. Arrears);
disputes over quantification and pre‑deposit credit; and
validity of SVLDRS‑3 forms.

The Unique Enterprises ruling provides a strong precedent within the Bombay High Court jurisdiction that:

leans in favour of granting Litigation category relief where the status is genuinely pending; and
mandates recognition of pre‑deposit adjustments.

This should assist in bringing greater uniformity and fairness to the resolution of remaining SVLDRS disputes.

7. Conclusion and Key Takeaways

The decision in Unique Enterprises v. Union of India establishes and reinforces several important legal propositions:

Remand = Pending Litigation When a matter is remanded for re‑quantification or de novo adjudication, and the quantum of duty and penalty is not finally settled, the dispute is in the “Litigation” category under Section 124(1)(a), not “Arrears” under Section 124(1)(c).
Finality is the Touchstone for “Arrears” “Arrears” presuppose final confirmation of liability with only payment outstanding. Any pending aspect of liability or quantification precludes classification as Arrears.
Mandatory Credit of Pre‑Deposits Under Section 124(2), pre‑deposits must be deducted from the amount payable, and Designated Committees cannot disallow such credit merely citing verification difficulties, especially where they have previously recognised the amounts.
Purposive, Not Technical, Interpretation of SVLDRS SVLDRS, as a legacy dispute resolution scheme, must be interpreted in a way that facilitates settlement and does not render the Scheme ineffective. Courts will resist narrow departmental interpretations that frustrate this aim.
Consistency with Earlier Bombay High Court Jurisprudence The judgment harmonises with UCN Cable Network and Morde Foods, strengthening a coherent line of authority in favour of a liberal, litigation‑oriented classification where appropriate.

In practical terms, Unique Enterprises will serve as a persuasive precedent for taxpayers who:

had remand orders or pending re‑quantification as of 30 June 2019, and
wish to assert their eligibility for the Litigation category and higher relief under SVLDRS (and analogous schemes), especially within the jurisdiction of the Bombay High Court.

The ruling underscores that form should not prevail over substance where the legislative objective is to clean up legacy disputes and provide a one‑time closure to tax litigation.

Pending Re‑Quantification Keeps Tax Dues in “Litigation” Category under SVLDRS: Commentary on Unique Enterprises v. Union of India