CA Vasant K Bhat
Issues in Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 [SVLDRS]
There are many issues in this proposed Amnesty Scheme. Hope such issues get addressed favorably in the Rules and other clarifications to be issued in this regard.
Some of the issues which may not be in favour of the declarant are as under.
1. Quantum of benefit: As it is best known, with regard to the cases at CESTAT, High Courts and Supreme Court, majority of cases (around 85%) are decided in favour of the assessee. Under this scenario how many assessees would like to get out of the long legal battle is the first question. The success of this Amnesty Scheme depends on how much number of pending cases comes down and how much revenue is realized by the government? Even in those cases where the assessee is confident to win, paying 30% to 50% of tax to get rid of legal hassles is big loss to the assessee.
2. As per clause 122 of the Finance Bill 2019 (“Bill’), tax dues includes, interalia, amount of duty quantified on or before 30.06.2019 in case of enquiry or investigation or audit. The provision does not require any written communication to be received by the assessee with the quantified demand. How to ascertain the amount quantified and date of quantification may be an issue in some cases. An enquiry or investigation include search, summons, letter requesting production of accounts, documents and evidence and recording statement. Whether mere asking some information is also covered? Ascertaining the fact that the tax due has been quantified on or before 30.06.2019 is going to be a concern in many cases.
3. If the tax/duty was paid during the investigation under protest and this amount is in excess of the actual liability or more than the prescribed amount to be paid under the Scheme, such excess amount paid shall not be refunded under the scheme. In the cases of payment is made under protest, this amnesty scheme is not of any use.
4. Clause 123 of the Bill provides where the tax dues are payable on account of a voluntary disclosure by the declarant no relief shall be available with respect to tax dues. However, Clause 124 provides that where return is filed indicating the amount of duty payable, but the same has not been paid, then such person is not eligible to avail the Scheme. It appears that voluntary disclosure means disclosure by way of declaration under the Scheme. In other words the tax dues should not have been declared in the return also. However, the amount in arrears is eligible for the Scheme and definition of amount in arrears includes amount declared in the returns filed but tax is not paid. These provisions are confusing and needs more clarity.
5. It is provided that the voluntary disclosure is not possible once the premise is searched, audit is initiated or summons is issued or any letter is issued asking for accounts, documents or any evidence. Where show cause notice is issued and hearing is pending, relief upto 70% is given, whereas if an enquiry, investigation or audit is being initiated, such person is not eligible for the scheme if the amount is not quantified on or before 30.06.2019.
6. The person who have been convicted for an offence under the provisions of the Central Excise Act or Finance Act, 1994 is not eligible for the Scheme. Section 9, 9A and 9AA of the Central Excise Act, 1944 provides various penal provisions where for certain contraventions, the provisions of Code of Criminal Procedure is applicable. If a person is convicted for any penalty or imprisonment under the above provisions, he shall not be eligible for the Scheme. It appears that once he is convicted as above at any time in the past, he shall not be eligible for the Scheme. However, the important aspect here is that the ‘matter’ for which he is convicted, he shall not be eligible for the Scheme. It appears that for other matters, he is eligible.
7. The term ‘matter’ is used in Clause 128 of the Bill which provides certain immunity to the declarant. However, the meaning of matter is not specified in the proposed Bill. Hope the same may be specified in the Rules. Otherwise, ‘matter’ may be a matter of concern. It may may mean central excise, service tax or cess. It is also possible to say ‘matter’ means, in case of goods it is goods falling under a particular chapter heading (HSN) and in case of service, a service which fall under particular service accounting code.
8. In case of a person where an appeal or show cause notice is finally heard on or before 30.06.2019, he shall not be eligible for the scheme. Generally, even after final hearing, to pronounce the order the authorities take their own sweet time. This will cause real hardship to the assessee. No apparent reason is found to deny the Scheme to such persons. It appears to be biased where appeal or show cause notice is being heard and order is pending before 30.06.2019.
9. Computation of benefit: Where the amount to be declared is based on the amount demanded in the show cause notice, there could be many errors in the computation of demand such as arithmetical error, clerical error, wrong rate of tax/duty, exemptions not considered or part demand may fall beyond limitation period etc Such errors could be there in case of appeals also. Whether the designated committee shall be empowered to consider all these are to be seen?
10. Clause 128 provides that where there is a difference between the amount estimated by the declarant and the amount estimated by the designated committee, an opportunity of being heard shall be given to the declarant. In such cases, the power of the designated committee should be clearly spelt out in the Rules to assess the correct tax dues. They should have all the powers of the adjudicating authority. The composition of the designated committee is also crucial. It may be desirable to have someone outside the department also.
11. If the amount indicated in the statement issued by the designated committee is not acceptable to the declarant, whether the declarant can withdraw the declaration or not is not clear. Even High Court may also not entertain writ petitions in such cases.
12. Once the discharge certificate is issued by the designated committee 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. No prosecution shall be initiated on the same. In the absence of clear meaning of ‘matter’, the department may start action on the declarants wherever they feel so.
13. It appears, the scheme is applicable for show cause notice issued pending hearing, appeals filed pending hearing, arrears and voluntarily declared tax dues. Suppose, order in original or order in appeal was passed before 30.06.2019 or before the enactment of the Scheme but the time limit to file the appeal against such order is not elapsed, in such cases it may not be possible to treat this as amount in arrears and avail the benefit in the scheme.
Hope the difficulties experienced during VCES 2013 by the trade and industry are considered while framing the rules and procedure. The scheme should encourage more voluntary disclosure than the pending cases. The declarant who is confident of winning the case in the legal forums may not be interested in paying the tax dues and close the case. However, who has already paid the tax dues but case is pending for penalties and late fee may avail the scheme.