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Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - A bird's eye view
Prasad Paranjape, Partner, PDS Legal
Mr. Sanjeev Nair (Senior Associate)
Tax amnesty schemes have always been a matter of debate on the ground of equity and fairness inasmuch as they appear to punish an honest or obedient tax payer by seeking to cover up administrative inefficiencies or court inadequacies. Whether amnesty should be introduced or not could be debated for ever, the government often falls prey to the temptation to get quick redressal of disputes and garner some revenue.
Be that as it may, we have one more amnesty scheme, introduced by the Hon'ble Finance Minister in the Union Budget presented on the 5th of July 2019, titled “Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019” (‘Scheme’). The Scheme will offer an opportunity to seek closure of inter alia Central Excise and Service tax litigation. Since Customs is outside the GST regime, disputes under Customs law cannot be settled under the Scheme. Similarly, certain excisable goods not moving into the GST are outside the Scheme.
The Government seems to be eying for a pie out of estimated Rs. 3.75 Lakh Crore Revenue currently blocked in pending litigation. With 2 years into the new tax regime of GST, the Government does not want to burden the administration and the courts in dealing with this past burden. If we leave aside the job of fixing responsibility for creating this undue pendency, the thought of getting rid of legacy disputes is certainly welcome. The industry and administration will be able to focus on managing the new tax era more efficiently than to spend time in dealing with the past litigation.
The table below gives a bird’s eye view of the relief offered by the Scheme:
Sr. No. |
Description |
Tax dues involved |
Amount payable (% of tax dues) |
(1) |
(2) |
(3) |
(4) |
1 |
Show Cause Notice (‘SCN’) or appeal pending as of 30 June 2019 |
Rs.50 |
lakhs or less
30%
More than Rs.50 lakhs
50%
2
No appeal filed within time or order reaching finality or amount declared in the return but not paid
Rs.50 lakhs or less
40%
More than Rs.50 lakhs
60%
3
Enquiry, investigation or audit quantifying amount on or before 30 June 2019
Rs.50 lakhs or less
30%
More than Rs.50 lakhs
50%
4
Voluntarily disclosed dues
Any amount
Full
5
SCN only for late fee or penalty
Tax paid
(interest may not have been paid)
Nil
Lower success rate of the government in litigation, probably justifies handsome relief offered to induce assesses to come forward and opt for the Scheme. Readers are advised to go through the Scheme document for more details.
Once the declarant pays the amount payable under column (4) above, he will be free from balance tax dues, interest, penalty and prosecution with respect to the settled dispute. What the Scheme makes more interesting is if the assessee has made any deposits during pendency of litigation, the same can be adjusted against the dues payable under the Scheme.
...There will be no refund however, even if such deposits happen to be higher than the dues payable under the Scheme. Further, the tax dues are required to be settled in cash and cenvat credit balance (or the ITC under GST) cannot be used to make payment of dues under the Scheme. Also, any dues paid under the Scheme will not be available as Cenvat credit/ITC of GST to the declarant.
While it is appreciated that in amnesty scheme it will be difficult to balance equity and fairness in toto, what is glaring in the present Scheme is the person making voluntary disclosure of his tax dues is at a significant disadvantage as compared to the person making disclosure after being issued notice or being investigated. Similarly, under the exception category, it would have been fair to cover a person who has collected the tax but not paid to the treasury. Otherwise, such persons will unduly enrich themselves with the tax collected and pocketed to the extent of relief granted under the Scheme.
More clarity is required on whether the person who has multiple issues in a show cause notice or order can opt for only one or some of the disputes issues and chose to contest the remaining.
Similarly, some clarification will be helpful with respect to cases where show cause notices or appeals have been heard as of 30 June 2019 and orders are reserved which will probably be passed after 30 June 2019 or matters will be relisted for hearing. This is because clause 124 (a) and (c ) states that where hearing is concluded prior to 30 June 2019, such persons will be ineligible to opt for the Scheme.
Another apparent disconnect is in Clause 124 which disqualifies a person who has filed a return indicating an amount of duty payable but not paid it. However, Clause 123(1)(c)(iii) grants relief to such category of persons. This disconnect needs to be clarified to avoid confusion.
With regard to co-noticees who have been involved in litigation only for penal action against them, whether they can seek relief under the Scheme unless the tax dues are settled by the main notice is something needs to be addressed.
...The Scheme suggests that issuance of discharge certificate will not preclude the issuance of SCN for the same matter for a subsequent period. This provision is silent about the previous period. Further, the Scheme envisages that the Revenue officer cannot be said to have acquiesced in the decision on the disputed issue. However, the Scheme is silent on whether the assessee can be said to have acquiesced in the decision on the disputed issue. To encourage more assessees to come forward and opt for the Scheme, it will be important to grant similar immunity to the assessee also.
Last but not the least, in the Scheme there is no clarity on whether designated committee can reject the application on any ground or the options available with the declarant if he does not agree to the amount payable determined by the designated committee.
While GST is still at its nascent stage, already a pile of litigation has started mounting up by way of advance ruling applications and appeals and Writs filed across the Country. The formal establishment and functioning of the GST Tribunals is only going to open the floodgates for litigation under GST. In this backdrop, the present move of the government to clear legacy litigation is indeed a welcome step.
As they say, the devil is in the details. Let us hope that the amendment to the Bill, if found necessary or the rules to be notified in due course with clarifications will probably address many of the concerns voiced above.
Comments
No
Is the Customs duty also can be settled in the Legacy Dispute Resolution ?