Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019- Comprehensive Analysis

SABKA VISHWAS (LEGACY DISPUTE RESOLUTION) SCHEME, 2019

(I) Introduction:

A dispute resolution cum amnesty scheme “the Sabka Vishwas Legacy Dispute Resolution Scheme, 2019” has been introduced for resolution and settlement of legacy cases of Central Excise and Service Tax. The Scheme has now been operationalized from 1^st September 2019 and would continue till 31^st December 2019.

The proposed Scheme covers past disputes of taxes which have got subsumed in GST namely Central Excise, Service Tax and Cesses. All persons are eligible to avail the scheme except a few exclusions.

(II) Brief about the Scheme:

√ The relief under the scheme varies from 40% to 70% of the tax dues for cases other than voluntary disclosure cases, depending on the amount of tax dues involved.

√ The scheme also provides relief from payment of interest and penalty.

√ For voluntary disclosures, the relief is regarding waiver of interest and penalty on payment of tax dues disclosed.

√ The person discharged under the scheme shall also not be liable for prosecution.

The two main components of the Scheme are dispute resolution and amnesty.

√ The dispute resolution component is for liquidating the legacy cases of Central Excise and Service Tax that are subsumed in GST and are pending in litigation at various forums.

√ The amnesty component of the Scheme offers an opportunity to the taxpayers to pay the outstanding tax and be free from any other consequence under the law. There is also a complete amnesty from prosecution.

(III) Eligibility Criteria for declaration under the Scheme:

As per Section-125 of Finance Act (No. 2), 2019, All persons shall be eligible to make a declaration under this Scheme except the following, namely:—

(i) who have been issued a show cause notice for an erroneous refund;

(ii) who have been issued a show cause notice (for matter other than erroneous refund) and the final hearing has also taken place, but Order in Original has not been passed till 30th June, 2019;

(iii) who have filed an appeal before the appellate forum and such appeal has been heard finally on or before 30th June, 2019, but Order in Appeal has not been passed till 30th June, 2019;

(iv) who have been subjected to an enquiry or investigation or audit and the amount of duty involved has not been quantified on or before the 30th June, 2019;

(v) who have been convicted for any offence, if such conviction is for the matter for which he intends to file a declaration

(vi) who have filed an application in the Settlement Commission for settlement of a case;

(vii) cases in respect of goods that are still subject to levy of Central Excise such as specified petroleum products and tobacco i.e.  goods falling in 4th Schedule to the Central Excise Act, 1944.

(viii) who is making a voluntary disclosure after being subjected to any enquiry or investigation or audit;

It is important to note that exception from eligibility is for ‘the case’ and not ‘the person’. In other words, if a person has been issued a show cause notice for an erroneous refund and at the same time, he also has other outstanding disputes which are covered under this scheme, then he will be eligible to file a declaration(s) for other case(s).

(IV) Relief available under the Scheme:

Cases (as on 30th June 2019)	Amount of Duty*	Relief Available
Cases pending in adjudication or appeal (at any forum) Cases under enquiry, investigation or audit where the duty involved is quantified and communicated	Up to Rs. 50 Lakhs	70% of “Tax Dues”
	More than Rs. 50 Lakhs	50% of “Tax Dues”
Cases where Tax dues are relatable to an amount in arrears i.e. confirmed duty demand, where there is no appeal pending	Up to Rs. 50 Lakhs	60% of “Tax Dues”
	More than Rs. 50 Lakhs	40% of “Tax Dues”
Tax dues are relatable to an amount in arrears and in a return, the declarant has indicated an amount of duty as payable but not paid it	Up to Rs. 50 Lakhs	60% of “Tax Dues”
	More than Rs. 50 Lakhs	40% of “Tax Dues”
Tax dues are relatable to a show cause notice for late fee or penalty#	If amount of duty has been paid or is nil	Entire Late Fee or Penalty
where the tax dues are payable on account of a voluntary disclosure by the declarant		No Relief from Tax Dues. Relief only from Penalty etc.

*Amount of Duty means amount of central excise duty, Service tax and Cess payable under the indirect tax enactment. Further CENVAT credit is also included within the definition of duty.

# Where the Tax Dues are relatable to a Show Cause Notice only for interest, then there is no relief available under the scheme.

Meaning of “Tax Dues”:

Cases	Tax Dues Means:
Where a single appeal arising out of an order, is pending as on the 30th June, 2019 before the appellate forum	Duty disputed in the appeal
Where 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 30th June, 2019 before the appellate forum	Duty disputed by the declarant in his appeal plus Duty disputed in the departmental appeal
where a show cause notice under any of the indirect tax enactment has been received by the declarant on or before the 30th day of June, 2019,	Duty stated to be payable in the said notice
where an enquiry or investigation or audit is pending against the declarant,	Duty payable which has been quantified on or before the 30th day of June, 2019
where the amount has been voluntarily disclosed by the declarant,	Duty stated in the declaration
where an amount in arrears relating to the declarant is due	Amount in arrears.

(V) Eligibility & Relief available under the Scheme Summarized in Tabular Form:

Table (1): Proceedings initiated with Show Cause Notice (SCN):

Sr No	Matter of Show Cause Notice	Status of Final Hearing–   till 30.06.2019	Status of Final Order–   till 30.06.2019	Status of Appeal against Final Order– till 30.06.2019	Status of Final Hearing against appeal–   till 30.06.2019	Status of Appeal Order–   till 30.06.2019	Eligibility for declaration	Quantum of Relief  (Note-1) (If Eligible)
1	Issued for an erroneous refund	–	–	–	–	–	Not Eligible	–
2	Issued for matter other than erroneous refund	Final hearing not taken place	–	–	–	–	Eligible	70%/ 50% of duty amount
3		Final hearing has taken place	Order has not  been passed	–	–	–	Not Eligible	–
4			Order has been passed	Appeal has not been preferred	–	–	Eligible	60%/40% of duty amount
5				Appeal has been preferred	Final hearing has not taken place	–	Eligible	70%/ 50% of duty amount
6					Final hearing has taken place	Order has not  been passed	Not Eligible	–
7						Order has been passed, no further appeal preferred	Eligible	60%/40% of duty amount
8						Order has been passed, further appeal preferred	Steps will be repeated from Sr. No. 5 to 8 for each of the further appeal

Note-1

• If Amount of Duty is upto Rs. 50 Lacs- relief of 70%/60% of tax dues as the case may be;
• If Amount of Duty is more than Rs. 50 Lacs-relief of 50%/40% of tax dues as the case may be;
• Complete waiver of interest, penalty and late fees;
• Complete waiver from prosecution in the matter and time period declared under scheme;
• Complete waiver from reopening for the matter and time period declared under scheme.

Table (2): Other Matters/ Proceedings:

Sr. No.	Case	Status as on 30.06.2019	Eligibility for declaration	Quantum of Relief (Note-2)
1	Enquiry/Investigation/ Audit	Amount of Duty has not been quantified and communicated	Not Eligible	–
		Amount of Duty has been quantified and communicated	Eligible	70%/ 50% of duty amount
2	Matter in respect of which an application has been filed for settlement before the Settlement Commission	Matter is pending with Settlement Commission	Not Eligible	–
		Matter is not pending at settlement commission either it is rejected by the commission or order has not been issued within prescribed time	Eligible	70%/ 50% of duty amount
		Appeal is filled against the order of settlement commission	Steps will be same as given in Sr. No. 5 to 8 of Table (1) for each of the appeal
3	Matter in respect of which person is convicted for any offence which is punishable under indirect tax law	–	Not Eligible	–
4	Declaration in respect of goods which are still excisable i.e. petroleum product and tobacco product as mentioned in fourth schedule to Central Excise Act, 1944	–	Not Eligible	–

Note-2

• If Amount of Duty is upto Rs. 50 Lacs- relief of 70% of tax dues;
• If Amount of Duty is more than Rs. 50 Lacs-relief of 50% of tax dues;
• Complete waiver of interest, penalty and late fees;
• Complete waiver from prosecution in the matter and time period declared under scheme;
• Complete waiver from reopening for the matter and time period declared under scheme.

Table (3): Cases involving Voluntary Disclosures:

Sr. No.	Particular	Case	Eligibility for declaration	Quantum of Relief
1	Where a person is making a voluntary disclosure	after being subjected to any enquiry or investigation or audit	Not Eligible	–
		Disclosed in return filled on or before 30th June 2019	Eligible	60%/40% of duty amount
				Relief from interest, penalty and late fees
				Relief from prosecution
				Relief from reopening for the matter and time period declared under scheme
		Disclosed under this scheme only	Eligible	No relief with respect to duty amount
				Relief from interest, penalty and late fees
				Relief from prosecution
				Relief from reopening for the matter and time period declared under scheme

(VI) Allow-ability of Pre-deposit/ deposit of duty made at any stage of proceeding:

√ any amount paid as pre-deposit at any stage of appellate proceedings is allowed to be deducted from amount payable under the scheme.

√ any amount paid as deposit during enquiry, investigation or audit,is allowed to be deducted from amount payable under the scheme.

√ It is clarified that the amount already paid through input credit shall also allowed to be deducted from amount payable under the scheme.

√ However where the amount of pre-deposit or deposit already paid by the declarant exceeds the amount payable by the declarant under the scheme, the declarant shall not be entitled to any refund.

(VII) Form of declaration under the scheme:

√ The declaration under the scheme shall be made electronically in Form SVLDRS-1 at https://cbic-gst.gov.in.

√ A separate declaration shall be filed for each case.

√ On receipt of declaration, an auto acknowledgement bearing a unique reference number will be generated by the system.

(VIII) Verification of declaration by designated committee:

√ For the purpose of Verification of declaration, a designated committee is to be constituted under the scheme.

√ The designated committee so constituted shall verify the correctness of the declaration made by the declarant.

√ The verification shall be based on the particulars furnished by the declarant as well as the records available with the Department.

√ However no such verification is required to be made in case of a voluntary disclosure.

(IX) Issue of statement by designated committee:

Case-1:  Amount payable as estimated by designated committee matches with the amount declared by the declarant:

√ a statement indicating the amount payable by the declarant shall be issued in Form SVLDRS-3, within 60 days from the date of receipt of the declaration.

Case-2:  Amount payable as estimated by designated committee exceeds the amount declared by the declarant:

√ a Estimate of the amount payable by the declarant shall be issued in Form SVLDRS-2, within 30 days from the date of receipt of the declaration.

√ Along with the estimate, a notice of opportunity for personal hearing will also be given to the declarant.

√ The declarant will provide its Response against Estimate issued to him in Form SVLDRS-2A

√ On sufficient cause being shown by the declarant, only one adjournment may be granted by the designated committee through Form SVLDRS-2B.

√ Thereafter a statement indicating the amount payable by the declarant shall be issued in Form SVLDRS-3, within 60 days from the date of receipt of the declaration.

(X) Form and manner of making the payment under the scheme:

√ The amount payable as indicated in the statement issued by the designated committee, shall be paid electronically through internet banking within a period of 30 days from the date of issue of such statement.

√ If the declarant does not pay the amount within the stipulated time, due to any reason, the declaration will be treated as lapsed.

(XI) Issue of discharge certificate:

√ Discharge Certificate shall be issued by the designated committee electronically in Form-SVLDRS-4.

√ Such certificate will be issued on being satisfied that

• • the declarant has paid in full the amount as determined and indicated in Form SVLDRS-3, and
  • on submission of proof of withdrawal of appeal or writ petition or reference before a High Court or the Supreme Court, as the case may be

√ Such certificate will be issued within 30 days days of the said payment and submission of the said proof, whichever is later.

(XII) Some Important Clarifications issued by CBIC:

Some of the important clarifications as issued by CBIC vide Circular No. 1071/4/2019-CX.8 is as under:

1. It is clarified that a declarant cannot opt to avail benefit of scheme in respect of selected matters. In other words, the declarant has to file a declaration for all the matters concerning duty liability covered under the show cause notice.

2. In case of appeals, the applicant is ineligible to apply if the final hearing is concluded but the order is awaited as on 30.06.2019. The hearings in matters are typically rescheduled even after the final hearing due to new bench, change in officer or any other reason. It is clarified that final hearing will not said to be concluded in those cases of resehedulement of hearing.

3. In case of a show cause demanding duty/tax from main taxpayer and proposing penal action against co-noticees, it is clarified that the co-noticees can’t avail the benefits of the scheme till such time the duty demand is not settled. Once the main-noticee discharges the duty demand, the co-noticees can apply under this scheme.

4. A person shall not be eligible to file a declaration under the Scheme when adjudication order determining the duty/tax liability is passed and received prior to 30.06.2019, but the appeal is filed on or after 01.07.2019

(XIII) Conclusion:

This scheme is a bold endeavor to unload the baggage relating to the legacy taxes viz. Central Excise and Service Tax that have been subsumed under GST and to allow business to make a new beginning. It may be appreciated that the ambit of the scheme is wide enough to cover all kinds of pending disputes except for a few exclusions. This scheme offers substantial relief to the taxpayers and others who may potentially avail it. The scheme also focuses on the small taxpayers as would be evident from the fact that the extent of relief provided is higher in respect of cases involving lesser duty.

Thus “The Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 has the potential to liquidate the huge outstanding litigation and free the taxpayers from the burden of litigation and investigation under the erstwhile indirect tax enactments.

Sources:

(i) Chapter V of the Finance Act (No. 2), 2019

(ii) Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019 issued vide Notification No. 05/2019- Central Excise- NT dated 21^st August, 2019

(iii) Circular No. 1071/4/2019-CX.8 dated 27^th August, 2019

(Disclaimer: This write up is based on the understanding and interpretation of authors and the same is not intended to be a professional advice.)

[The authors are Chartered Accountants and can also be reached at goyalcanitin@gmail.com and aniket.m.goel@gmail.com]