MARCH 01, 2016

By K P Singh

TO create favourable investment climate and to provide a stable and predictable taxation regime, Finance Minister Arun Jaitley in Budget 2016-17 came out with a ‘Direct and Indirect Tax Dispute Resolution Schemes' to resolve cases pending before the Commissioner (Appeal) of the respective departments. It is heartening to know that the Revenue Department has adopted a policy of lower tax regime with non-litigious approach.

It is said there are about 3 lakh tax cases pending with the first Appellate Authority of the Revenue departments with disputed amount being Rs 5.5 lakh crore. "Litigation is a scourge for a tax friendly regime and creates an environment of distrust in addition to increasing the compliance cost of the tax payers and administrative cost for the government," Jaitley said.

For the convenience of Netizens, I would stress upon analysis of Indirect Tax Dispute Resolution Scheme, 2016 (ITDRS) only pertaining to the Indirect Taxes.

Clauses 209 to 215 of Chapter XI of the Finance Bill, 2016 contain the enabling provisions of the new ITDRS on the Customs, Central Excise and Service Tax side.

The benefits of ITDRS are available only to the Declarant as defined in Clause 211 who has challenged the Adjudication Order before the Commissioner (Appeals). Moreover, clause 210 (g) has defined "indirect tax dispute" as a dispute in respect of any of the provisions of the Act which is pending before the Commissioner (Appeals) as an appeal against the impugned order as on the 1 st day of March, 2016;

The ITDRS scheme comes into force on 1st day of June 2016.The declarations are to be made up to the 31st December 2016. The declarant is required to pay tax due along with the interest thereon and penalty equivalent to 25% of the penalty imposed in the challenged order, within fifteen days of the receipt of the acknowledgment and intimate the Designated Authority (Assistant Commissioner) within seven days of making such payment. On payment of tax, interest and 25% penalty of amount involved, the Designated Authority shall within fifteen days of the receipt of such proof, pass an order of discharge of dues.

The Clause 212 of the ITDRS incorporates certain exceptions to the Scheme, like order relating to Search and Seizure; Prosecution initiated before 01.06.2016; Narcotic Drugs and other Prohibited Goods; Offences punishable under IPC, NDPS or Prevention of Corruption Act; Detention order under COFEPOSA.

After an order of discharge of dues from the Designated Authority, the appeal pending before the Commissioner (A) shall be treated as closed and the declarant shall get immunity from all proceedings under the Act in respect of the Indirect Tax dispute for which the declaration has been made. The Discharge Order shall be final and conclusive and no matter relating to the impugned order shall be reopened thereafter in any proceedings under the Act before any authority or court.

Any amount paid by the declarant under the Scheme cannot be refunded. The Discharge Orders do not have any binding effect in any other proceedings.

However, certain issues are not clear like, recovery of the tax, interest or penalty when the declarant fails to pay in scheduled time.

A Notification and Instruction is expected to be issued by the CBEC framing the rules for carrying out the provisions of this Scheme. I hope doubt and issues would be clarified in those Instructions.

However, the reach of the Scheme is limited since it only covers cases pending before the Commissioner (Appeal). Moreover, the potential Declarants would only seek resolutions to the serious cases where they have less chance of success before the first Appellate Authority in normal course. The large number of cases which are adjudicated with "Revenue bias" may still remain in the Pendency List of the Department.

Secondly, it is not clear whether Cases remanded by the CESTAT before the Commissioner (A) and pending as on the due date, would be covered.

Let us wait for more clarity on the Scheme. We believe that the Scheme should be really effective in promoting non-litigious CBEC and few hundred crores to the national exchequer.

(The author is former Commissioner of Customs, Central Excise and Service Tax.)