SEPTEMBER 19, 2019

By G Jayaprakash, Advocate

THE new Finance Minister in her maiden Budget speech announced an amnesty scheme to get rid of the legacy cases pertaining to Central Excise and Service Tax. The scheme is made applicable to a wide range of cases pending as on 30.06.2019.

Section 125 of the Finance Act, (No.2), 2019 provides an exception provision to exclude certain category of persons-

125. (1) All persons shall be eligible to make a declaration under this Scheme except the following, namely:-

(a) who have filed an appeal before the appellate forum and such appeal has been heard finally on or before the 30th day of June, 2019;

(b) who have been convicted for any offence punishable under any provision of the indirect tax enactment for the matter for which he intends to file a declaration;

(c) who have been issued a show cause notice, under indirect tax enactment and the final hearing has taken place on or before the 30th day of June, 2019;

(d) who have been issued a show cause notice under indirect tax enactment for an erroneous refund or refund;

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

(f) a person making a voluntary disclosure,-

(i) after being subjected to any enquiry or investigation or audit; or

(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;

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

(h) persons seeking to make declarations with respect to excisable goods set forth in the Fourth Schedule to the Central Excise Act, 1944.

This write-up examines the unique problem being faced by a group of assessees due to Section 125(1)(a) & c) of the Act and the righteousness of the exclusion provided therein from the scheme. By virtue of the provisions of Section 125(1)(a) of the Act, if the final hearing in an appeal before an appellate authority is concluded but no order has been issued before 30.06.2019 the case will be outside the ambit of the scheme. Likewise as per Section 125(1) (c) of the Act, if the final hearing in Show Cause Notice is concluded but no order has been issued before 30.06.2019, the case will be outside the ambit of the scheme.

The Board in its Manual in Chapter 13, Part-II titled "Adjudication" [2. Adjudication and determination of duty] mentions-

Although such a prescription exists, the same is not put into practice and a large number of cases stand evicted from the present scheme for no fault of the assessee. It does not appear to be an exaggeration that cases are awaiting orders after more than one year from the day of conclusion of the final hearing.

FAQ on the subject matter is as follows:

It appears that the discrimination of the above two categories of assessees and denial of the benefits of the scheme to them are not in tandem with the reasonable basis of classification as provided under the "equal protection of law" guaranteed by the Constitution of India.

Do the two specified classes of assessee constitute a different class from those whose cases are not taken up for final hearing and concluded?

Is it fair to deny them the benefit for failure on the part of the competent authorities to issue the order on time?

The SCNs as well as the impugned orders under appeals exists in both the cases. The SCN or the impugned order exists the same way for both the parties as on the designated date. Any favourable order issued after the designated date of 30.06.2019 is not available to the assessee is a totally different issue. There appears to be no reasonable basis for different classification of these two categories of assessee whose cases are finally heard and the assessee whose cases are not taken up for final hearing or hearing is not concluded. As on 30.06.2019, the liability computed or determined, as the case may be, for the two sets of assessees, are either as demanded in the SCN in the case before the original authority or determined in the impugned order in the case of appeals.

The Government should have a re-think on this so as to give a level-playing field for all assessees.

Another issue relates to:

In the above case, the filing of appeal or not does not appear to have any impact on the subject matter with respect to the designated date 30.06.2019. If the assessee is not filing an appeal, the amount of duty/tax confirmed would be treated as "amount in arrears" [s.121(c) of the Finance (No.2) Act, 2019 refers] and such an assessee will become eligible for the scheme [s.124(1)(c) of the Finance (No.2) Act, 2019 refers]. This discrimination is quite baffling.

It is, therefore, felt that necessary amendments be made in the law to remedy the inconsistencies pointed out above.

Once done, the SVLDRS, 2019 is certain to attract assessees in droves to derive the whirlwind benefits prescribed therein.

(The views expressed are strictly personal)