NOVEMBER 12, 2019

By Abhishek Panicker

THE last question in the second set of FAQs issued in September reads -

The FAQ brought out in October rephrases the question thus -

Kindly ignore the typo. By the way, the "by" should be "be".

Be that as it may, what is apparent is that even in those cases where the department has gone in appeal, the assessee can opt for the Scheme.

The first question that arises is as to whether it would be prudent to consider this clarification as not restricting to SCN and its dropping but also extend to even those cases where the assessee won, whether in whole or part, before the Commissioner(A) or CESTAT or the High Court and the department being aggrieved has filed an appeal before the higher authority.

The answer presumably is in the affirmative in view of the following Illustration appearing in Section 123(a) of the Finance (No.2) Act, 2019 -

Now, the next question would be the extent of relief that would be available to the assessee.

Let us refer to the sections which can throw light on this issue.

Section 124(1) reads -

124. (1) Subject to the conditions specified in sub-section (2), the relief available to a declarant under this Scheme shall be calculated as follows:-

(a) where the tax dues are relatable to a show cause notice or one or more appeals arising out of such notice which is pending as on the 30th day of June, 2019, and if the amount of duty is,-

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

(ii) more than rupees fifty lakhs, then, fifty per cent. of the tax dues;

[Emphasis supplied]

The words 'tax dues' is defined in section 123.

Section 123(a) reads -

For the purposes of the Scheme, "tax dues" means-

(a) where-

(i) a single appeal arising out of an order is pending as on the 30th day of June, 2019 before the appellate forum, the total amount of duty which is being disputed in the said appeal;

(ii) 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 day of June, 2019 before the appellate forum, the sum of the amount of duty which is being disputed by the declarant in his appeal and the amount of duty being disputed in the departmental appeal:

[Emphasis supplied]

So, in cases of the above kind given in the Illustration 3 and the one visualised in the FAQ(s) reproduced above, the declarant would be entitled to relief as provided in section 124(1)(a) of the Finance (No.2) Act, 2019 in view of s.123(a) above.

However, this does not solve the issue entirely.

Consider a case where a demand was made of Rs.10 lakhs against the assessee. The original authority confirmed a part demand of Rs.5 lakhs and dropped the remaining.

The assessee accepted the confirmation and did not challenge the order.

However, the department was aggrieved with the dropped portion of the demand and went in appeal.

The assessee opts to file a declaration under the SVLDRS, 2019 in respect of the demand confirmed (and which he has accepted by not choosing to file further appeal).

The said amount would acquire the status of "arrears" as defined in section 121(c) [reproduced below] -

c) "amount in arrears" means the amount of duty which is recoverable as arrears of duty under the indirect tax enactment, on account of-

(i) no appeal having been filed by the declarant against an order or an order in appeal before expiry of the period of time for filing appeal; or

(ii) an order in appeal relating to the declarant attaining finality; or

(iii) the declarant having filed a return under the indirect tax enactment on or before the 30th day of June, 2019, wherein he has admitted a tax liability but not paid it;

The said "arrears" also partake the form of "tax dues" in view of section 123(e) which reads -

123. For the purposes of the Scheme, "tax dues" means-

(e) where an amount in arrears relating to the declarant is due, the amount in arrears.

Since the said amount of confirmed demand acquires the status of "arrears", the declarant would be entitled to relief as computed in section 124(1)(c) i.e. -

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

(i) the amount of duty is, rupees fifty lakhs or less, then, sixty per cent. of the tax dues;

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

However, what would be the fate of the amount in respect of which the department has gone into appeal is the question that begs for an answer.

Obviously, the same cannot be treated as 'arrears' for the assessee and one may be required to again revert to section 123 which stipulates -

123. For the purposes of the Scheme, "tax dues" means-

(a) where -

(i) a single appeal arising out of an order is pending as on the 30th day of June, 2019 before the appellate forum, the total amount of duty which is being disputed in the said appeal;

And since the said amount in the departmental appeal is covered under the above provision, the relief against the said amount is required to be computed by applying section 124(1)(a) of the Finance (No.2) Act, 2019, that is, -

…if the amount of duty is,-

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

(ii) more than rupees fifty lakhs, then, fifty per cent. of the tax dues;

We, therefore, have a strange scenario wherein for the relief to be computed in respect of the "arrears" portion we need to apply s.124(1)(c) and in respect of the duty demand for which the department has gone into appeal, the relief is required to be computed by applying section 124(1)(a) of the Finance (No.2) Act, 2019.

But will all this computational jigsaw puzzles be left to the website designed for SVLDRS and its computing skills courtesy Artificial Intelligence (AI) or whether the wisdom of the designated committee be requisitioned, is the moot question?

Above all, what use are the monetary limits laid down for the appeals filed by the department if the quantum of duty involved in such appeals are to be reckoned for arriving at the figure of tax dues?

It would be in the interest of all the assessees applying for the SVLDRS that the CBIC first needs to ensure that its slate of pending appeals is wiped clean as far as possible by applying its Instruction dated 22 nd August 2019.

We are already in possession of a combined 165 FAQs and three Board Circulars and hope that the next set of FAQs or Circular addressing the above issue is also around the corner.

In parting: It is reported that declarations amounting to Rs.6000 crore have been received so far. And only fifty more days to go before the Scheme ends…

[The views expressed are strictly personal.]