SABKA VISHWAS (LEGACY DISPUTE RESOLUTION) SCHEME, 2019 – AN OVERVIEW

[Mr. M. GOVINDARAJAN]

Introduction

As on date 3.75 lakh crore is involved in pending cases of service tax and excise duty which have been subsumed in GST with effect from 01.07.2019.  To unlock these amount the Finance Minister proposed,  in her budget, a dispute resolution cum amnesty scheme.   The relief proposed under the scheme varies from 40 per cent to 70 per cent of the tax dues for cases other than voluntary disclosure cases, depending on the amount of tax dues involved.  The scheme also provides for relief from payment of interest and penalty.

Scheme

Chapter V of the Finance (No.2) Bill, 2019 (‘Bill’ for short)  deals with Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (‘Scheme’ for short) which will come into effect into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

Applicability of the Scheme

This scheme is applicable to the following enactments-

• the Central Excise Act, 1944 and the rules made there under;
• the Central Excise Tariff Act, 1985;
• Chapter V of the Finance Act, 1994 and the rules made there under;
• the Agricultural Produce Cess Act,1940;
• the Coffee Act, 1942;
• the Mica Mines Labor Welfare Fund Act, 1946;
• the Rubber Act, 1947;
• the Salt Cess Act, 1953;
• the Medicinal and Toilet Preparations (Excise Duties) Act, 1955;
• the Additional Duties of Excise (Goods of Special Importance) Act, 1957;
• the Mineral Products (Additional Duties of Excise and Customs) Act, 1958;
• the Sugar (Special Excise Duty) Act, 1959;
• the Textiles Committee Act, 1963;
• the Produce Cess Act, 1966;
• the Limestone and Dolomite Mines Labor Welfare Fund Act, 1972;
• the Coal Mines (Conservation and Development) Act, 1974;
• the Oil Industry (Development) Act, 1974;
• the Tobacco Cess Act, 1975;
• the Iron Ore Mines, Manganese Ore Mines and Chrome Ore Mines Labour Welfare Cess Act, 1976;
• the Bidi Workers Welfare Cess Act, 1976;
• the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978;
• the Sugar Cess Act, 1982;
• the Jute Manufacturers Cess Act, 1983;
• the Agricultural and Processed Food Products Export Cess Act, 1985;
• the Spices Cess Act, 1986;
• the Finance Act, 2004;
• the Finance Act, 2007;
• the Finance Act, 2015;
• the Finance Act, 2016;
• any other Act, as the Central Government may, by notification in the Official Gazette, specify.

Tax dues

The scheme calculates the tax dues payable under various aspects which are to be declared by the declarant.  The declarant will be eligible for tax relief as per the case of the declarant.  The tax dues is, where-

• a single appeal arising out of an order is pending as on the 30.06.2019 before the appellate forum, the total amount of duty which is being disputed in the said appeal;
• more than one appeal arising out of an order, one by the declarant and the other being a departmental appeal, which are pending as on the 30.06.2019 before the appellate forum, the sum of the amount of duty which is being disputed by the declarant in his appeal and the amount of duty being disputed in the departmental appeal;
• the above clauses shall be applicable where such an appeal has been heard finally on or before the 30.06.2019;
• a show cause notice under any of the indirect tax enactment has been received by the declarant on or before the 30.06.2019, then, the amount of duty stated to be payable by the declarant in the said notice;
• if the said notice has been issued to the declarant and other persons making them jointly and severally liable for an amount, then, the amount indicated in the said notice as jointly and severally payable shall be taken to be the amount of duty payable by the declarant;
• where an enquiry or investigation or audit is pending against the declarant, the amount of duty payable under any of the indirect tax enactment which has been quantified on or before the 30.06.2019;
• where the amount has been voluntarily disclosed by the declarant, then, the total amount of duty stated in the declaration;
• where an amount in arrears relating to the declarant is due, the amount in arrears.

Eligibility to the scheme

All persons shall be eligible to make a declaration under this Scheme except the following-

• who have filed an appeal before the appellate forum and such appeal has been heard finally on or before the 30.06.2019;
• who have been convicted for any offence punishable under any provision of the indirect tax enactment for the matter for which he intends to file a declaration;
• who have been issued a show cause notice, under indirect tax enactment and the final hearing has taken place on or before the 30.06.2019;
• who have been issued a show cause notice under indirect tax enactment for an erroneous refund or refund;
• who have been subjected to an enquiry or investigation or audit and the amount of duty involved in the said enquiry or investigation or audit has not been quantified on or before the 30.06. 2019;
• a person making a voluntary disclosure,-

• after being subjected to any enquiry or investigation or audit; or
• having filed a return under the indirect tax enactment, wherein he has indicated an amount of duty as payable, but has not paid it;
• who have filed an application in the Settlement Commission for settlement of a case;
• persons seeking to make declarations with respect to excisable goods set forth in the Fourth Schedule to the Central Excise Act, 1944;

• The declaration shall be made in such electronic form as may be prescribed.

Relief under the scheme

The relief available to the declarant under this scheme is calculated as below-

• where the tax dues are relatable to a show cause notice or one or more appeals arising out of such notice which is pending as on the 30.06.2019, and if the amount of duty is,-

• ₹ 50 lakhs or less, then, 70% of the tax dues;
• More than ₹ 50 lakhs, then 50% of the tax dues;

• where the tax dues are relatable to a show cause notice for late fee or penalty only, and the amount of duty in the said notice has been paid or is NIL, then, the entire amount of late fee or penalty;
• where the tax dues are relatable to an amount in arrears and-

• the amount of duty is, ₹ 50 lakhs or less, then, 60% of the tax dues;
• the amount of duty is more than ₹ 50 lakhs, then, 40% of the tax dues;
• in a return under the indirect tax enactment, wherein the declarant has indicated an amount of duty as payable but not paid it and the duty amount indicated is,-

• ₹ 50 lakh or less, then, 60% of the tax dues;
• amount indicated is more than ₹ 50 lakhs, then, 40% of the tax dues;

• where the tax dues are linked to an enquiry, investigation or audit against the declarant and the amount quantified on or before the 30.06.2019 is-

• ₹ 50 lakhs or less, then, 70% of the tax dues;
• more than R.50 lakhs, then 50% of the tax dues;

• where the tax dues are payable on account of a voluntary disclosure by the declarant, then, no relief shall be available with respect to tax dues.

Conditions

The conditions to be imposed in getting the relief by the declarant are as below-

• The relief shall be subject to the condition that any amount paid as pre deposit at any stage of appellate proceedings under the indirect tax enactment or as deposit during enquiry, investigation or audit, shall be deducted when issuing the statement indicating the amount payable by the declarant.
• if the amount of pre deposit or deposit already paid by the declarant exceeds the amount payable by the declarant, as indicated in the statement issued by the designated committee, the declarant shall not be entitled to any refund.

Designated Committee

Where the amount estimated to be payable by the declarant, as estimated by the designated committee, equals the amount declared by the declarant, then, the designated committee shall issue in electronic form, a statement, indicating the amount payable by the declarant, within a period of 60 days from the date of receipt of the said declaration.  Where the amount estimated to be payable by the declarant, as estimated by the designated committee, exceeds the amount declared by the declarant, then, the designated committee shall issue in electronic form, an estimate of the amount payable by the declarant within 30 days of the date of receipt of the declaration.

After the issue of the estimate, the designated committee shall give an opportunity of being heard to the declarant, if he so desires, before issuing the statement indicating the amount payable by the declarant.  On sufficient cause being shown by the declarant, only one adjournment may be granted by the designated committee.  After hearing the declarant, a statement in electronic form indicating the amount payable by the declarant, shall be issued within a period of sixty days from the date of receipt of the declaration.

Payment

The declarant shall pay electronically through internet banking, the amount payable as indicated in the statement issued by the designated committee, within a period of thirty days from the date of issue of such statement.

Deemed withdrawal of appeal

Where the declarant has filed an appeal or reference or a reply to the show cause notice against any order or notice giving rise to the tax dues, before the appellate forum, other than the Supreme Court or the High Court, then, notwithstanding anything contained in any other provisions of any law for the time being in force, such appeal or reference or reply shall be deemed to have been withdrawn.

Withdrawal of appeal

Where the declarant has filed a writ petition or appeal or reference before any High Court or the Supreme Court against any order in respect of the tax dues, the declarant shall file an application before such High Court or the Supreme Court for withdrawing such writ petition, appeal or reference and after withdrawal of such writ petition, appeal or reference with the leave of the Court, he shall furnish proof of such withdrawal to the designated committee, in such manner as may be prescribed, along with the proof of payment.

Discharge certificate

On payment of the amount indicated in the statement of the designated committee and production of proof of withdrawal of appeal, wherever applicable, the designated committee shall issue a discharge certificate in electronic form, within thirty days of the said payment and production of proof.

The issue of the discharge certificate with respect to a matter for a time period shall not preclude the issue of a show cause notice,-

• for the same matter for a subsequent time period; or
• for a different matter for the same time period;
• in a case of voluntary disclosure where any material particular furnished in the declaration is subsequently found to be false, within a period of 1 year of issue of the discharge certificate, it shall be presumed as if the declaration was never made and proceedings under the applicable indirect tax enactment shall be instituted.

No person being a party in appeal, application, revision or reference shall contend that the central excise officer has acquiesced in the decision on the disputed issue by issuing the discharge certificate under this scheme;

Modification of order

Within thirty days of the date of issue of a statement indicating the amount payable by the declarant, the designated committee may modify its order only to correct an arithmetical error or clerical error, which is apparent on the face of record, on such error being pointed out by the declarant or suo motu, by the designated committee.

Conclusive evidence

Every discharge certificate issued with respect to the amount payable under this Scheme shall be conclusive as to the matter and time period stated therein, and–

• the declarant shall not be liable to pay any further duty, interest, or penalty with respect to the matter and time period covered in the declaration;
• the declarant shall not be liable to be prosecuted under the indirect tax enactment with respect to the matter and time period covered in the declaration;
• no matter and time period covered by such declaration shall be reopened in any other proceeding under the indirect tax enactment.

Restriction

Any amount paid under this Scheme,-

• shall not be paid through the input tax credit account under the indirect tax enactment or any other Act;
• shall not be refundable under any circumstances;
• shall not, under the indirect tax enactment or under any other Act,-

• be taken as input tax credit; or
• entitle any person to take input tax credit, as a recipient, of the excisable goods or taxable services, with respect to the matter and time period covered in the declaration.

In case any pre deposit or other deposit already paid exceeds the amount payable as indicated in the statement of the designated committee, the difference shall not be refunded.

Discussions to this article

[Ganeshan Kalyani]

Sir, the dues can be paid through ITC or only by cash?

[DR.MARIAPPAN GOVINDARAJAN]

In my view only by cash not by ITC adjustment.

[Abhishek Katiyar]

if an inquiry or investigation or audit has started but the tax dues have been quantified by company(party, or director of company) whether the person is eligible to opt for the scheme??

[DR.MARIAPPAN GOVINDARAJAN]

In my view he is not eligible to apply.

[samir agrawal]

Sir, if the assessee has not paid the tax nor filed the returns. Also no enquiry or notice has been initiated by the department.

can he now pay the tax voluntarily and claim waiver of interest and penalty?

[DR.MARIAPPAN GOVINDARAJAN]

The relief for waiver of late fee and penalty is available only if show cause notice issued is only for late fee and penalty. In other cases relief on penalty is not available. In your case you can not avail the waiver of interest and penalty.