JANUARY 22, 2020

By Manish Gaur, Executive Partner & Narendra Singhvi, Joint Partner, Lakshmikumaran & Sridharan, Attorneys, New Delhi

IN her maiden budget six months ago, the Finance Minister had proposed to boost revenue collection by 13% and to achieve USD 3 trillion by March, 2020. Apart from various other measures in this regard, the Finance (No. 2) Act, 2019 enacted the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The Scheme was enforced from 01.09.2019 and the last date for filing declarations thereunder expired on 15.01.2020. The reliefs provided under the Scheme, particularly withdrawal of prosecution, are handsome and it has attracted a lot of taxpayers settling their matters under the Scheme. This article is aimed at highlighting certain peculiar aspects of the Scheme including the ill-effects thereof.

One peculiar feature of the Scheme is that in its implementation, the Board has shown a forward approach in issuing clarifications, giving beneficial interpretation to provisions of the Scheme. For illustration, vide Circular No. 1071/4/2019-CX dated 27.08.2019, it was clarified that any amounts paid as pre-deposit/ deposit, whether in cash or by utilizing Cenvat credit, are to be adjusted by the Designated Committee while issuing its statement.

In context of matters involving penalty/ late fee only, Section 124(1)(b) referred to only Show Cause Notices, in contrast to Section 124(1)(a), which referred to both Show Cause Notices and appeals. However, vide the aforesaid Circular, it was clarified that the scope of the Scheme extends even to appeals involving only penalty/ late fee. Such beneficial clarification of the Scheme seems to have gone beyond the plain language of the Scheme.

Vide Circular No. 1072/05/2019-CX dated 25.09.2019, it was clarified that though cases, where final hearing has taken place on or before 30.06.2019 either in appeal or under adjudication, are excluded under Section 125(1)(a) and 125(1)(c), the same may still fall under the 'arrears' category, if the final order thereafter is passed and has attained finality. Even where the time-limit for filing appeals against orders had not expired, the circular facilitated that a declaration may be filed that no appeal against such order will be filed, for covering it under the 'arrears' category. Similarly, Circular No. 1073/06/2019-CX dated 29.10.2019 further clarified that where appeal is filed after 30.06.2019, the same may be considered under the 'arrears' category, if the same is withdrawn.

However, some of the clarifications issued by the Board are not being followed in spirit by the field formations. For illustration, Circular No. 1073/06/2019-CX dated 29.10.2019 clarified that any deposits, which were not appropriated in the litigation proceedings, are also to be considered for issuance of statements by the Designated Committee. However, in many cases, the deposits made in the course of litigation proceedings, which are not appropriated, are not being considered by the field formations. In certain cases, even the amounts appropriated in the orders under appeal are being questioned, as if the appropriation by another officer of the same department is incorrect, though not challenged. Further, in certain cases, where payment of pre-deposit for filing appeals before CESTAT was made under the code of 'other payments' and duly accepted by CESTAT as pre-deposit, the same is not being considered for purposes of issuance of estimate statement. In certain cases, where one appeal pending disposal involves more than one show cause notice, the field formations are insisting on filing of as many applications as the number of show cause notices, ignoring the fact that the 'case', for which declaration is filed, is the appeal and not show cause notices.

The honest intention of the Government, while introducing the Scheme, was to reduce litigation and liquidating the legacy cases. The approach followed by field formations, however, is contrary to such legislative intention and by interpreting the Scheme in the above manner, the very purpose of the Scheme is being defeated by inviting more litigation.

While the Scheme is aimed at dispute resolution and amnesty, it has also resulted in conferring undue benefits ignoring honest taxpayers. For illustration, in a SCN involving demand of Excise Duty on clandestine removal of excisable goods, the litigant can settle the matter by paying 30%/ 50% of the principal demand, while he may actually have removed the goods clandestinely collecting the Excise Duty from its customers. Similarly, in SCN involving denial of Cenvat credit, where admittedly credit was not admissible to the litigant, the matter can be settled by paying 30%/ 50% of the principal demand, pocketing the remaining amount of credit with it. The Scheme is actually a cheating with honest taxpayers, who have complied with legal provisions and not taken any benefit not due to them. It only reinforces the saying: 'Rules are for fools'.

The Scheme has come to an end on 15.01.2020 and with maximum time-period of 90 days allowed under the relevant rules for conclusion of proceedings, the picture should be clear by mid-April, 2020. The Scheme has, thus, made some people earn a lot of 'vikas', and many lose a lot of 'vishwas'.

(The views expressed are strictly personal.)