JULY 19, 2019

By G Natarajan, Advocate, Swamy Associates

THOUGH, after introduction of GST the role of tax law making has been shifted from the Parliament to the GST Council, thereby making the budget bland, this year's Budget has brought a Tsunami by name "Sabka Vishwas".

On analysis of the relevant provisions relating to the scheme, it is observed that in the following areas, proper clarity, either in the form of amendment to the provisions or by way of issue of Circular is required.

1.0 As per clause (g) of Section 124 of the Finance Bill 2019, "who have filed an application in the Settlement Commission for settlement of a case" is not entitled to opt for the scheme.

1.1 It appears from the above that any person, who has ever in the past approached the Settlement Commission to settle any dispute, is disentitled to opt under Sabka Vishwas, for any other proceeding. It is not known whether such blanket prohibition is intended or only the cases for which application before Settlement Commission has been filed and pending are not entitled under this scheme. This needs clarity. When appeals pending before various forums can be withdrawn and opted under this scheme, the same facility must be extended to those who have approached the Settlement Commission, to withdraw the application and opt under this scheme.

2.0 Further, it is not clear as to whether a case, which has been sent back for adjudication by the Settlement Commission is eligible to opt under this scheme or not as the restriction refers only to filing of application and not about its treatment.

3.0 As per sub-clause (iii) of clause (c) of sub section (1) of Section 123 of the Finance Bill, 2019, the quantum of relief

where the tax dues are relatable to an amount in arrears and,-

(iii) 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,-

(A) rupees fifty lakhs or less, then, sixty per cent. of the tax dues;

(B) amount indicated is more than rupees fifty lakhs, then, forty per cent. of the tax dues;

3.1 But as per clause (f) of sub section (1) of Section 124 of the Finance Bill, 2019, the following persons are not entitled to opt for the scheme.

(f) a person making a voluntary disclosure,-

(ii) having filed a return under the indirect tax enactment, wherein he has indicated an amount of duty as payable, but has not paid it.

3.2 Though the above provisions seem to run contrary to each other, the proper purport of the provision appears to be that a person who has filed a return declaring his liability and not paid the liability, has to file the declaration only under the said category and not under "voluntary disclosure". This is required because inasmuch as there is no verification of the voluntary disclosure made, those who have unpaid declared liability may voluntarily disclose a lesser liability under the scheme and is sought to be prohibited.

4.0 There is a proceeding in which the tax demand is not contested but paid. Interest and penalties remain to be paid. Whether such proceedings are entitled to opt for this scheme or not is not clear.

4.1 As per clause (b) of sub section (1) of Section 123 of the Finance Bill, 2019,

(b) 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.

4.2 The presence of the word "only" above gives an impression that only when the proceedings are only for penalty or late fee, the same could fall under the above clause and if there is also a demand of interest, the same cannot be covered thereunder. This needs clarity.

5.0 Let us assume that an order was passed in the last week of June 2019. As per the relevant appeal provisions the assessee would have time to file appeal against this order. When such time for filing of appeal is still available, if he intends to file declaration under the scheme (presuming that the Finance Bill 2019 is enacted and the scheme is effective by that time), it is not clear under what category he would be entitled to claim immunity. If it is treated as appeal pending (which requires mere filing of appeal, though the assessee has decided to file declaration under the scheme) or as an arrears of revenue. In the former case, the amount to be paid would be 30 %/50 % as the case may be, whereas in the latter case, the amount to be paid would be 40 %/60 % as the case may be.

6.0 As per Section 124(1) (c) of the Finance Bill, a person who has been issued a notice and the final hearing has taken place on or before 30.06.2019 is not entitled to opt for the scheme. There are lot of cases pending at original adjudication level where the final hearing took place for more than 1 month to 1 year where no orders are passed, in spite of specific instruction by CBIC vide para 14.10 of Master Circular No. 1053/02/2017-CX dated 10.03.2017 which is reproduced below:-

14.10 Issue and Communication of order:  In all cases where personal hearing has been concluded, it is necessary to communicate the decision as expeditiously as possible as but not  later than one month in any case, barring in exceptional circumstances to be recorded in the file.

6.1 Because of the delay in issuing the order, such assessees are in a disadvantageous position. Hence, suitable clarifications may be given to the effect that where the orders are not passed within one month from the date of hearing, it cannot be treated as if the final hearing has been completed.

A detailed circular clarifying the above issues would avoid litigations around the scheme.

P.S. Though the scheme is likely to cause a big dent in the business fortunes of professionals dealing in indirect tax matters (including the author), from the country's point of view and from the assessee's point of view, this scheme is very lucrative and would certainly put an end to the ordeal of litigation in many cases. But, one issue which cannot be fathomed is that even in cases where the Excise duty/Service Tax has been specifically collected but not paid, if there is demand proceedings in such cases under Sections 11 A/11 D of the Central Excise Act, 1944 or Section 73 or 73 A of the Finance Act, 1994, such persons, who have already collected the tax from their customers, can also get away by paying only a part of such tax collected and pocket the balance. At least such of those cases, where the duty or tax has been specifically indicated in the invoice and collected, could have been kept out of the scheme.

(The views expressed are strictly personal.)