OCTOBER 24, 2019

By B. N. Gururaj & M. S. Srinivasa, Advocates

THE Union Budget of 2019 has introduced the much-awaited dispute resolution scheme for putting an end to the mass of pending litigation under the Central Excise Act and the Service Tax law. Going by the provisions of law, the Scheme itself is quite fair and attractive for the assessees who do not want to be burdened with past disputes. This scheme became operational from 1 st September 2019. It will run its course upto 31 st December. In a way, this is a continuance of the policy of successive governments to reduce tax litigation through National Litigation Policy. The Central Government has been steadily increasing the floor limit for filing of tax appeals and withdrawing the Revenue appeals below these limits. During the last nine to ten years, tens of thousands of Revenue appeals have been withdrawn from various appellate forums and courts.

In keeping with the spirit of Digital India, the Sabka Vishwas Scheme operates completely on-line. Starting with applying under the scheme, until the discharge certificate is issued by the Designated Committee, entire process is online. Briefly stated a litigant who is facing litigation files a declaration agreeing to pay the prescribed portion of tax or duty to gain the benefit of full waiver of balance tax, interest and penalty. In every Commissionerate, a Designated Committee is constituted to verify and accept/reject the declarations. The Scheme is indeed very generous. In cases where the taxpayer has already paid a part of the tax either during investigation, or later, it is deducted out of the tax due payable under the Scheme. Thus, the tax due payable under the Scheme is further reduced.

Understandably, the government had very little time to implement the online platform. The budget was tabled on 5th July. The scheme became operational on 1st September, leaving barely seven weeks for developing the platform. However, now, it is about fourteen weeks. The scheme is facing varieties of hurdles - both technical and administrative. An attempt is made here to highlight both aspects. A well-conceived scheme is in the danger of failing disastrously.

The portal which has been hosted by the Central Board of Indirect Taxes and Customs (CBIC) is highly unfriendly. It takes ages to log in and upload declaration. Error messages are legion. These messages direct the applicant to contact a Helpdesk. Is it practically possible when someone is in the process of uploading the declaration? Do government help desks respond so spontaneously? It is naïve to believe so. After the declaration is uploaded, the applicant is not intimated as to whether the declaration has been accepted at all. One has to keep logging in every day to check the status.

The Designated Committee may either accept the sum payable, as admitted by the litigant, or modify it or reject it. In case the applicant does not agree with the modification or rejection, the declarant can seek personal hearing through the electronic platform itself. The Designated Committee has to grant a personal hearing to the declarant.

Even the mode of payment of tax due approved by the Designated Committee is cumbersome. The electronic platform has been developed on the presumption that the declaration will be filed by the assessees themselves. But, most often, the assessees need professional help to file the declaration. The mode of payment requires generation of challan online and involves procedural wrangle. Even six weeks after the Scheme has become operational, no attempt seems to have been made to make the electronic platform more user-friendly.

Regrettably, India's tax bureaucracy has not changed its attitude since the days the British left India. A taxpayer is not respected in our country. He is viewed as a crook or worse, a thief. Under the Scheme, neither the declarant, nor the Designated Committee can go into the merits of the duty/tax demand. Both sides have to simply accept the demand on record as undisputed. However, the Designated Committee tries to go into the merits of the declaration and attempts to modify the declaration so that the declarant is saddled with higher tax due under the Scheme. In a case where the dispute included both duty on final product and disputed input tax credit, the Designated Committee refused to allow deduction of disputed tax credit, even though the declarant had already paid back the disputed tax credit. Consequently, where no tax due was payable, the declarant is saddled with substantial tax due under the scheme.

While the Government is making honest attempt to reduce tax litigation, the tax bureaucracy is working at cross purposes.

Even though the Scheme is expected to completely operate in an impersonal manner on an electronic platform, almost every declarant is contacted by the departmental officers on some pretext or the other. Very often, the Central Excise and Service Tax departments would have no record of the case declared by the assessee. No one openly seeks favours from the declarant. But, the very fact that the departmental officers needlessly contact the declarant or his counsel is alarming.

The CBIC itself is not helping the matters much. Recently, it has issued Circular No. 1072, dated 25.9.2019, contrary to its earlier view, advising that in cases of arrears of tax/duty (cases where the time to file appeal against order adverse to the litigant has expired), the tax/duty already paid by the assessee has to be excluded while determining the tax due under the scheme. For example, in anarrears of Rs.100, under the Scheme, the declarant has to pay only Rs.40. If the declarant has already paid Rs.30, then he is required to pay balance sum of Rs.10 only. However, this Circular requires the declarant to further pay 40% of balance Rs.70 (Rs.28). Such advise of the Board is plainly contrary to its earlier view and the spirit of the Scheme. It is regrettable that the Apex Body responsible for implementing this Scheme is working against its success.

While framing the scheme, the Government seems to have lost sight of Revision Applications pending before the Central Government itself. Disputes concerning rebate of duty/tax, duty on shortage of goods, duty on loss of goods goes to the Government itself by way of Revision Application, instead of going in appeal before the Tribunal or courts. Such cases have not been brought under the Scheme, for no conceivable reason. Even now, it is possible for the Central Government to issue Removal of Difficulties order and include pending revision applications to be brought under the Scheme.

The Finance Minister had declared that close to Rs.3.75 lakh crores are tied up in indirect tax litigation. All the tax cases (except the cases of refund claims) are commenced by the Government. But, government's success rate is abysmal. It was admitted in a reply to the parliamentary question in 2013, that before the CESTAT (tax Tribunal), the High Courts and the Supreme Court, Revenue succeeds in less than 20% of the cases. Thus, it can be seen that if the CBIC makes an honest attempt to make the Scheme a success, the Government can collect huge sums as tax dues under the scheme, which it can never recover in the normal course of litigation. But, the implementation of scheme is accursed, both technically and bureaucratically.

It is still not too late. The scheme has another ten weeks life. If the decision makers in the CBIC apply their collective minds and work for the success of the scheme, SVS may still be a big success. First step to be taken is to improve the electronic platform for SVS so that the declarants are not frustrated with technical glitches. Secondly, the CBIC has to advise its officers to work for ending litigation keeping the letter and spirit of the Scheme. Third step would be to withdraw the Circular of 25th September, which seeks to burden the assessees with higher tax due in a manner contrary to law.

[The views expressed are strictly personal.]