CALCULATION OF RELIEF UNDER SABKHA VISHWAS (LEGACY DISPUTE RESOLUTION) SCHEME, 2019

[Mr. M. GOVINDARAJAN]

Introduction

The Sabka Vishwas Scheme, 2019 is a scheme proposed in the Union Budget, 2019, and introduced to resolve all disputes relating to the erstwhile Service Tax and Central Excise Acts, which were subsumed under GST, as well as 26 other Indirect Tax enactments.  It came into force from 1st of September, 2019.   With a humongous 3.75 Lakh-Crores blocked in Service tax and excise, resolving and freeing the small taxpayers of their pending disputes with the tax administration was quintessential.

Calculation of Relief to assessees

Section 124(1) provides the reliefs that are available to assessees on the following occasions-

1. Where the tax dues are relatable to a show cause notice or one more appeals arising out of such notice which is pending as on 30.06.2019;
2. 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 NIL, then, the entire amount of late fee or penalty;
3. Where the tax dues are relatable to an amount in arrears;
4. In a return under the indirect tax wherein the declarant has indicated an amount of duty as payable but not paid it;
5. Where the tax dues are linked to an enquiry, investigation or audit against the declarant and the amount quantified on or before 30.06.2019; and
6. Where the tax dues are payable on account of a voluntary disclosure by the declarant.

For the sl. No. there is no relief available to the assessee.  In respect of Sl. No. the entire amount of late fee or penalty is waived.  For Sl. Nos. 1, 3, 4 and 5, if the amount of duty is-

• ₹ 50 lakhs or less then 60% of the tax is given as relief;
• If it is more than ₹ 50 lakhs then 40% of the tax due is given as relief.

Deduction

Section 124(2) provides that the above said relief is 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. 

No refund – when?

If the amount of pre 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.

Case law

In M/S. SOLAMALAI AUTOMOBILES PRIVATE LIMITED VERSUS THE DESIGNATED COMMITTEE, OFFICE OF THE COMMISSIONER OF GST & CENTRAL EXCISE, CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS, DEPARTMENT OF REVENUE AND UNION OF INDIA [2020 (12) TMI 234 - MADRAS HIGH COURT] the petitioner is engaged in sales and services of Maruti Suzuki cars on principal to principal basis.  The Department issued show cause notice demanding a sum of ₹ 5,10,91,364/- together with interest and penalty.  The petitioner submitted the reply to the show cause notice issued on 12.10.2015.  The Adjudicating Authority confirmed the demand since the reply given by the petitioner was not satisfied.  The petitioner applied for rectification mistake on the ground that it suffered from mistakes apparent on the face of the record.  The said application was also rejected on 05.03.2019.

The petitioner did not file appeal against the said order.  The petitioner availed the opportunity of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 vide sections 120 to 135 of the Finance Act (No.2) of 2019 by filing application in Form SVLDRS – 1.  The petitioner submitted that that no further amount is payable by them.  The Designated Authority rejected the submission of the petitioner and held that the petitioner has to pay a further sum of ₹ 90,70,581/-.  Against this finding the petitioner filed the present writ petition before the High Court.

The Revenue contended the following before the High Court-

• Out of the tax liability of ₹ 5,10,91,364/- the petitioner has paid ₹ 3,59,73,729/-. 
• The balance tax payable is ₹ 1,51,17,635/-.
• The petitioner is entitled to tax relief @ 40% on tax dues.
• The due comes to ₹ 60,47,054.
• Therefore the balance amount payable by the petitioner is ₹ 90,70,581/-.
• Circular No. F.No. 267/78/2019-CX-8, Pt.III, dated 25.09.2019 clarified that the tax due is the amount of duty which is outstanding against the declarant.  It is the amount after deducting the dues the declarant has already paid.
• Such payment may be in the form of pre-deposits appropriated or paid subsequently by the taxpayer voluntarily against the outstanding amount. 
• The circular further clarified that the relief available under section 124(1)(c)  will be applied to the outstanding amount so arrived at.
• In respect of all other categories any money paid before its appropriation is in the nature of deposit only.
• There is no merit in the petitioner’s case and it is liable to be dismissed.

The petitioner submitted the following before the High Court-

• The only question of law arising for consideration by the High Court is whether as per Section 124(2) of the Act relief should be calculated after adjustment of tax already deposited or before adjustment of tax already deposited.
• Adjustment of any amount as deposit must be made only at the stage of calculating the amount payable.
• The amount payable is quantified by deducting tax relief from the due.
• If the stand of the Department is considered, the very object of introducing the scheme of this nature would be defeated. 
• The circular relied on by the Department cannot prevail over the statutory provisions of the scheme and in any event, not binding on the High Court.

The High Court heard the submissions both parties the present writ petition.  The High Court analyzed the various provisions of the Finance Act.  The expression ‘tax dues’ is defined under Section 123 as where an amount in arrears in relating to the declarant is due, the amount in arrears.  The petitioner has paid ₹ 3,59,73,729/-.  The balance amount originally payable by the petitioner was only  ₹ 1,51,17,635/-.  The High Court held that the said amount alone can be called as the amount in arrears.  The High Court did not accept the contention of the petitioner that the amount paid by the petitioner is only deposit.  The High Court observed that the expression can only refer to those payments made by the declarant even while he is still contesting his liability.  If an amount of duty is paid without demur, then cannot be called as a deposit or pre-deposit.  The payment made by the petitioner is the voluntary payment of tax.  The appropriation of the above payment has been taken place.  The original authority had in fact directed the recovery officers to take into account the said claim.  Hence 40% of the said amount is ₹ 60,47,054/-.  The High Court held that the Designated Committee rightly applied the scheme provisions and granted relief to the petitioner.  The High Court dismissed the writ petition.

Conclusion

The above case law clearly indicated the way of calculation of relief in Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.  The said scheme is extended up to 31.12.2020.  The assessees may utilize this scheme and got free from the burden of further litigation, recovery proceedings etc.