Sabka Vishwas Scheme - Need to address a burning issue!
JANUARY 29, 2020
By CA Pritam Mahure
AS a one-time measure for liquidation of past disputes, Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS) was introduced and was operational till 15th January 2020. As per the Press Note dated 31.12.2019, it appears that more than 1.33 lakh taxpayers opted for the same.
At present, most of these applications are at different stages of adjudication including eligibility of the applicant to apply under SVLDRS. One of a debatable case about eligibility are cases where the entire Service Tax was deposited but after delay. In such cases, the question is being raised whether the applicant are eligible/covered under SVLDRS for getting waiver of interest, penalty and late fees?
Lets decode the issue in detail.
What's the issue?
For ease of reference, various possible scenarios (say service tax is paid or not paid etc.), can be summarized as below:
|
Sr.
|
Scenario
|
Service Tax paid?
|
Interest paid?
|
Penalty/ late fee due paid
|
Return filed showing tax dues?
|
|
1.
|
Service Tax not paid as well as return not filed
|
No
|
No
|
No
|
No
|
|
2.
|
Service Tax not paid but return filed showing service tax due
|
No
|
No
|
No
|
Yes
|
|
3.
|
Service Tax paid but return not filed
|
Yes
|
No
|
No
|
No
|
|
4.
|
Service Tax paid and return filed
|
Yes
|
No
|
No
|
Yes
|
In aforesaid cases, it may be noted that sr. no. 1 and 2 (refer table above) are specifically eligible to be covered under the SVDLRS (refer section 123 (d) and (e) of Finance (No.2) Act, 2019 ).
However, the issue that is arising is regarding cases where taxpayer has deposited the entire amount of taxes. To illustrate, say service tax liability of FY 15-16 was deposited in FY 16-17, however, interest and late fees were not deposited. In such cases i.e. sr. no. 3 and 4 (refer table above) as there is no 'tax due', there is a hanging sword on the applicant's head as to whether their application will be accepted or rejected!It needs specific mention that no SCN has been issued to the two situations mentioned at sr. no. 3 and 4.
What the Board says about such cases?
Amongst the four Circulars and FAQ's issued, the Circular No. 1073/06/2019 dated 29th October 2019 can be of relevance. In this Circular, Board clarified as under:
"2. The references received by the Board have been examined, and the issues raised therein are clarified in the context of the various provisions of the Finance (No.2) Act, 2019 and Rules made there-under, as follows:
…
(iii) A doubt has also been expressed whether a party who has filed an ST-3 return and has also paid the dues in FULL before filing the application but still wants to avail the benefits of the scheme for interest on the late paid dues is eligible . In this regard, attention is invited to illustrations (a) and (b) under Para 2(iv) of Circular No. 1072/05/2019-CX dated 25.09.2019, given in the context of arrears of confirmed demand. It is clarified that these also cover the cases of arrears of tax liability admitted under returns filed on or before 30.06.2019 ."
It can be observed that the Board has specifically stated that SVLDRS can be availed in cases where entire tax dues are paid but interest is not paid.
What the principle of interpretation say?
Even as per settled principle of interpretation it can be stated that the interest due in such cases will partake the character of tax/duty itself and thus, will get covered as 'tax due'. Further, 'voluntary disclosure' is not defined under SVLDRS and can be construed as a disclosure of a non-disclosed transaction and thus, even a non-filing of return can be covered under 'voluntary disclosure'.
Further, for voluntary disclosure section 123 (d) refers to 'amount' and section 124(1)(e) refers to where the tax dues are payable… '. On a cumulative reading of these provisions one can construe that in 'if tax dues are not payable' then the relief will be available to interest and penalty (and in-turn, sr. no. 3 and 4 of the aforesaid table should be eligible for SVLDRS).
Even otherwise, if the Scheme offers benefit to a non-payer of Service Tax (along with benefit by way of reduction in tax liability), denying the benefit (of interest and penalty) to the taxpayer whose only default is that he deposited service tax, may never be the intention of the Legislators. Even on principles of equality, a dishonest taxpayer cannot be given more benefit than the honest taxpayer (Article 14 of Constitution of India).
Certainly, a honest citizen/ taxpayer doesn't deserve a step-motherly treatment under SVLDRS just for being honest (as taxes were entirely paid)!
Way forward
It may be noted that the avowed objective of the SVLDRS was to resolve disputes and not to initiate new ones! This is evident from the Union Budget Speech of Hon'ble Finance Minister wherein it was mentioned that "141. … There is a need to unload this baggage and allow business to move on. … I would urge the trade and business to avail this opportunity and be free from legacy litigations."
Similar intent of resolution of disputes was echoed and carried forward in all the four Circulars as well as various FAQs issued by the CBIC.
Given the aforesaid discussion, to ensure that the applications(where taxes are paid in entirety) do not get rejected, CBIC should look into the aforesaid issue on priority basis and address the same through a clarification. This step will certainly re-instil confidence of the honest taxpayer in the tax system!
(The article is co-authored by CA Vaishali Kharde, Associate Director at Pritam Mahure and Associates. The views expressed are strictly personal.)
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