legacy dispute resolution scheme• ‘written communication’ will include a letter intimating...


Excise & Service Tax Litigation – Pendency

Pendency of Excise/ Service tax litigation as per CAG Report tabled in parliament in Feb 2019

Forum No. of Matters

Pursued by Department

Pursued by Taxpayer

Total

Supreme Court 1,555 866 2,421

High Court 6,434 3,744 10,178

Tribunal 27,996 24,660 52,656

Appellate Commissioner

9,936 14,389 24,325

Total 45,921 43,659 89,580

MORE THAN INR 3.75 LAKH CRORE IS BLOCKED IN LITIGATIONS IN SERVICE

TAX AND EXCISE - Finance Minister in Budget Speech 2019

Forum Department Succeeding in Appeals (Past Trends)

Pursued by Department

Pursued by Taxpayer

Tribunal & above

22% 23%

Appellate Commissioner

47% 49%

Success in Appeal – Performance Overview

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Past Amnesty Schemes

Sr No

Scheme Relief granted Actual Collection

(Cr)

1 Income Tax VDIS (1997) - 50% of applicable tax- No interest and penalty

9,760

2 Service Tax VCES (2013) - No interest and penalty 7,750

3 Income Tax IDS (2016) - Interest and partial penalty 29,362

4 Various State VAT amnesty schemes

Partial waiver of tax, interest and penalty

Ongoing

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Amnesty Schemes - Validity

Key jurisprudence

• All India Federation Of Tax Practitioners vs Union Of India [1998 236 ITR 1 Delhi, 1998]; • R.K. Garg v. Union of India [(1981) 4 SCC 675]

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Potential arguments on Constitutional validity of the Scheme

Aspect Grounds against the Scheme Grounds in favour of the Scheme

Article 14 –classification and discrimination

- Classification between assesses engaged in same activity

- Discriminatory treatment to honest taxpayers

- No discrimination in tax assessment and liability, but in tax realization

- Recovery of tax not an essential component of concept of tax

- Discrimination to achieve object of the Scheme

Extent of relief - Discrimination in quantum of relief eligible based on stage of litigation is unconstitutional

- Extent of relief to be granted is a matter of administrative decision


Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019


FILINGS EVALUATION DISPOSAL

Notification issued appointing START DATE as 01.09.2019 and END DATE as 31.12.2019

FINANCE BILL

FINANCE ACT

Passed by Parliament followed by Presidential assent

Designated Committee constituted

Rules issued & Forms notified

Circular* and FAQs issued clarifying issues

Operation

*Circular no. 1071/4/2019-CX. dated 27.08.2019

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Coverage – key aspects

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Central Excise

- CE Act

- CETA, 1985

- Goods of Fourth Schedule not covered under the Scheme (tobacco, petroleum products)

Service tax

- All matters under Ch. V of FA, 1994

Cess & Other

related levies

Other misc. central levies subsumed into GST

Pending litigation under the various Central tax laws subsumed into GST covered under the Scheme

Customs duty disputes not covered under the SchemeCustoms duty disputes not covered under the Scheme


Coverage – cesses and other levies…

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Tobacco Cess Act, 1975Additional Duties of Excise (Goods of Special Importance) Act, 1957

Finance Act, 2016 (Krishi Kalyan Cess & Infrastructure Cess)

Additional Duties of Excise (Textiles and Textile Articles) Act, 1978

Finance Act, 2004 (Education cess) Finance Act, 2007 (Secondary & Higher Secondary Education cess)

Agricultural Produce Cess Act,1940 & Agricultural and Processed Food Products Export Cess Act, 1985

Medicinal and Toilet Preparations (Excise Duties) Act, 1955

Finance Act, 2015 (Swachh Bharat Cess)

Limestone and Dolomite Mines Labour Welfare Fund Act, 1972

Coal Mines (Conservation and Development) Act, 1974

Sugar (Special Excise Duty) Act, 1959 Textiles Committee Act, 1963

Spices Cess Act, 1986

Produce Cess Act, 1966


…Coverage – cesses and other levies

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Sugar Cess Act, 1982 Jute Manufacturers Cess Act, 1983

Coffee Act, 1942 Bidi Workers Welfare Cess Act, 1976 Mica Mines Labour Welfare Fund Act, 1946

Rubber Act, 1947Iron Ore Mines, Manganese Ore Mines and Chrome Ore Mines Labour Welfare

Cess Act, 1976

Sugar Cess Act, 1982 Jute Manufacturers Cess Act, 1983

Coffee Act, 1942 Bidi Workers Welfare Cess Act, 1976

Salt Cess Act, 1953

Mineral Products (Additional Duties of Excise and Customs) Act, 1958

Mica Mines Labour Welfare Fund Act, 1946


Sr No

Where tax dues are in respect of Quantum of tax dues

Tax relief (as % of Tax dues)

Interest relief (as % of interest

payable)

Penalty (as % of penalty payable)

1 SCN or one or more appeals arising out of such notice

≤ 50 lakhs 70% 100% 100%

> 50 lakhs 50% 100% 100%

2 SCN for late fee or penalty only (where there is no tax liability or the same is already paid)

Any NA 100% of late fee 100%

3 Amount in arrears ≤ 50 lakhs 60% 100% 100%

> 50 lakhs 40% 100% 100%

4 Inquiry or Investigation or Audit ≤ 50 lakhs 70% 100% 100%

> 50 lakhs 50% 100% 100%

5 Voluntary disclosure Any NIL 100% 100%

Eligibility Relief granted

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SCN or appeals arising out

of SCN


Benefit and eligibility

Dispute ≤ 50 lacs = Pay only 30% tax dues | Dispute > 50 lacs = Pay only 50% tax dues

Eligibility Ineligibility

SCN pending on 30.06.2019 Final hearing concluded before 30.06.2019

One or more appeals arising out of SCN pending on 30.06.2019 (Scheme eligible only when opted for the entire matter, i.e. appeals filed by assessee + Revenue for matter arising out of an SCN)

Person who has been issued SCN for a refund or an erroneous refund

Application filed before the Settlement Commission

Partial declaration for one or more issues arising out of a single SCN, but not covering all the issues

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Relevant clarifications in the Circular / FAQ

• The Scheme is wide enough to cover all disputes, including call book cases (Circular, Para 6)

• Cases which are outside the purview of the Settlement Commission, such as rejection of application by theCommission or order of the Commission not being passed within prescribed time etc., shall be covered under theScheme (Circular, Para 10(f))

• Appeal/reference/writ petition or arrears arising out of the order of the Settlement Commission are covered underthe Scheme (Circular, Para 10(f))

• The Declarant shall be required to file a declaration for all the matters concerning duty liability covered in an SCNand hence, declaration cannot be filed for selected matters / issues covered in SCN (Circular Para 10(h))

• Any amount paid as pre-deposit at any stage of appellate proceeding under the indirect tax enactment or asdeposit during enquiry, investigation or audit, shall be adjusted while issuing the statement indicating the amountpayable by the declarant (FAQ 28)

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SCN for late fee or penalty

only



Waiver for entire amount of late fee or penalty


SCN for late fee or penalty only pending on 30.06.2019 where either there is no demand of tax or the tax has already been paid

Final hearing concluded before 30.06.2019

Application filed before the Settlement Commission

Are cases involving only dispute of interest or interest & penalty covered here? – Interest vs. late fee

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SCN issued to co-noticee for penalty

• The co-noticee (on whom personal penalty is imposed) cannot avail the benefit of the Scheme till the main noticee settles the tax dues (Circular, Para 10(i), FAQ 45)

• Co-noticee is an independent assessee and hence, a separate declarant

• Discrimination – co-noticee not eligible for the Scheme even if demand from him is only for penalty amount

• Section 124(1)(b) of the Finance Act does not provide any such restriction explicitly

Clarification in the Circular

Key aspects for consideration

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Amount in arrears


Scope, benefit and eligibility


Qualification as amount in arrears Tax liability admitted in return filed after 30.06.2019

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; oriii. 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.


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Appeals vs. Amount in arrears

Sr. no.

Due date for filing of appeal

Status of actual filing of appeal

Whether eligible under the Scheme

Relevant category under the Scheme

1 29.06.2019 Appeal filed on 28.06.2019

Yes Appeals

2 29.06.2019 Appeal filed on 01.07.2019

Yes Amount in arrears

3 02.07.2019 Appeal filed on 29.06.2019

Yes Appeals

4 02.07.2019 Appeal filed on 02.07.2019

No – As per FAQ 7Discriminatory?

5 02.07.2019 Appeal filed on 05.07.2019

Potentially eligible as amount in arrears – clause (i) of the definition of ‘Amount in arrears’ doesn’t refer to 30.06.2019 as cut off date

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Inquiry, investigation or

audit


Scope, benefit and eligibility

Scope and eligibility

• Where an enquiry or investigation or audit is pending against the declarant• Where amount of duty involved is quantified on or before 30.06.2019


Term Definition

Quantified ‘‘quantified”, with its cognate expression, means a written communication of the amount of duty payable under the indirect tax enactment

Audit “audit” means any scrutiny, verification and checks carried out under the indirect tax enactment, other than an enquiry or investigation, and will commence when a written intimation from the central excise officer regarding conducting of audit is received;

Enquiry or investigation

‘‘enquiry or investigation’’, under any of the indirect tax enactment, shall include the following actions, namely:—i. search of premises;ii. issuance of summons;iii. requiring the production of accounts, documents or other evidence;iv. recording of statements;

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Ineligibility, key clarifications

Ineligibility

• Where tax dues are not quantified as of 30.06.2019

• Voluntary disclosure not eligible after having been subjected to enquiry, investigation or audit

Key clarifications

• ‘Written communication’ will include a letter intimating duty/tax demand or duty/tax liability admitted by the person during enquiry, investigation or audit or audit report etc. (FAQ 51)

• Any amount paid as pre-deposit at any stage of appellate proceeding under the indirect tax enactment or as deposit during enquiry, investigation or audit, shall be adjusted while issuing the statement indicating the amount payable by the declarant (FAQ 28)

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Voluntary disclosure



Pay 100% tax dues, interest & penalty waived


Voluntary disclosure (where matter is not covered or pending in any SCN, appeal, etc.)

Voluntary disclosure after having been subjected to enquiry, investigation or audit

Person making voluntary disclosure having filed the return showing tax payable but not paid

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Relevant clarifications in the Circular / FAQ

• A person, having filed a return declaring tax dues but not paid, cannot make a voluntary disclosure in respect of thesame. However, the declaration can be filed under ‘arrears’ category if return is filed on or before 30.06.2019. (FAQ13)

• A person who has received an intimation for audit/inquiry/investigation on or before 30.06.2019 cannot make avoluntary disclosure of his liability under the Scheme (FAQ 43)

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Key aspects

AMOUNT PAID UNDER THE SCHEME NOT AVAILABLE AS INPUT TAX CREDIT

AMOUNTS PAID NOT REFUNDABLE, IN ANY SCENARIO

NO ACQUIESCENCE BY THE DEPATMENTDECLARATION NOT TREATED ADMISSION OF TAX LIABILITY (Para 10(a) of the Circular)

ONLY CASH PAYMENTS ALLOWED UNDER THE SCHEME Pre-deposit paid or duty/tax paid earlier allowed as deduction even if paid by utilizing CENVAT credit

(FAQ 52)

PERSONS CONVICTED OF AN OFFENCE UNDER INDIRECT ENACTMENT NOT ENTITLED TO GO FOR THE SCHEME FOR THE SAME MATTER

However, declarations may be made for other matters

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Application to be filed electronically on

https://cbic-gst.gov.in

Designated Committee to issue statement in 60 days

a)Declarant to pay the amount in 30 days

b)Appeal to be withdrawn*

“Discharge Certificate” to be issued in 30 days

YES

Designated Committee to issue its estimate in 30 days

NO

Designated Committee agrees with the estimates of the amount payable declared

Proof of payment & withdrawal of appeal

* Appeal/reference/reply to SCN filed up to the Tribunal stage would be

deemed to be withdrawn; while proceedings pending before the High Court and Supreme Court will have to be withdrawn through a written application

Declarant to agree/disagree with the estimate and

opportunity of being heard is granted

Application process

Separate application to be filed for each case / matter

Submissions containing reasons for disagreement

can be made online

Declaration would lapse

Declarant decides to

make payment

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Any further remedy available to dispute decision of the Designated Committee?


No further payment of amount by way of tax/duty, interest and penalty for the matter and time period covered

Show cause notice can be issued for, i) different matter for the same time period or ii) the same matter for subsequent time period

No further proceedings and prosecution or re-opening of case for the matter and time period covered

In case where the voluntary disclosure is found to be false, within one year from issue of certificate, applicable proceeding will be initiated

Discharge certificate

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801, 8th Floor

Abhijeet III

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Ellisbridge

Ahmedabad 380 006

T: +91 79 6605 4480/1

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202, 2nd Floor

Vascon Eco Tower

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Pune 411 045

T: +91 20 49127400


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6th Floor

Rockline Centre

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Bangalore 560 025

T: +91 80 4168 5530/1


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T: +91 44 4210 4863


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