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THE INSIGHT

Asymmetry of Sabka Vishwas…
By I T Solanki
Oct 09, 2019

LAW is a profession of words” [This is the opening sentence in David Mellinkoff‘s monumental work, the language of the law.] underpins importance in choice of words in law-whether it is a piece of legislation, notification or circular. A scheme of “Sabka Viswas legacy dispute resolution scheme, 2019” introduced in the Finance (No.2) Bill, 2019 contained contradictions which was highlighted in the earlier write up “Sabka Vishwas Scheme - well, not exactly for everyone!”. That issues especially ineligibility of cases falling under law i.e. Section 125(1) (a) and (c) of the Finance (No.2) Act,2019 are clarified to be eligible by way of a circular whose scope it is to ensure uniformity in implementation of law by way of issuing of clarification where ever needed and that it cannot travel beyond law itself is a question I beg to pose to everyone in the rule of law regime. The matter once again comes to fore for discussion in light of the phrase “arrears due” and the way the term “due” is interpreted in para 2(iv) of the CBIC circular No.1072/05/2019-CX dated 25th Sept 2019.

 

Under the existing acts i.e Central excise Act, 1944 or chapter V of the Finance Act 1994, arrears meant amount confirmed or reduced in adjudication or appeal proceedings respectively where the amount so confirmed or reduced as the case may be, is not further disputed Amount in arrears due ultimately meant in its cognate expression amount due as reduced by the appellate order for there was no provision of part payment whatsoever except equated monthly installment in terms of CBEC circular NO. 996/3/2015-CX, dated, February 28, 2015, which was altogether a different connotation. If at all payment was made in case of arrears, it was during the appeal period which was a sort of obligatory gesture on the part of assessee. Shortly, amount in arrears due was always an amount confirmed or amount as reduced that was required to be recovered in full and not in part.  Dictionary meaning of words are preferred in classrooms and not in courtrooms or quasi-judicial proceedings where intention of legislation is quite apparent to the stake holders which is unloading of baggage of litigation from pre-GST regime thereby ensuring quick closure of the litigation. Accordingly, the trade has been urged to avail this opportunity and be free from legacy litigations. It would be worth to recall para 141 of Hon'ble FM speech as reproduced below for quick reference to understand the scheme & of course the term “Due”;

141. GST has just completed two years. An area that concerns me is that we have huge pending litigations from pre-GST regime. More than 3.75 lakh crore is blocked in litigations in service tax and excise. There is a need to unload this baggage and allow business to move on. I, therefore, propose, a Legacy Dispute Resolution Scheme that will allow quick closure of these litigations. I would urge the trade and business to avail this opportunity and be free from legacy litigations.

Further, it has also been provided that eligible person shall declare the tax dues as can be seen in the statement of object to the Finance Bill on Clauses 119 to 134 (Sabka Viswas (Legacy Dispute Resolution) Scheme, 2019 ) with the following object;

“The Scheme is a one time measure for liquidation of past disputes of Central Excise and Service Tax as well as to ensure disclosure of unpaid taxes by a person eligible to make a declaration. The Scheme shall be enforced by the Central Government from a date to be notified. It provides that eligible persons shall declare the tax dues and pay the same in accordance with the provisions of the Scheme. It further provides for certain immunities including penalty, interest or any other proceedings under the Central Excise Act, 1944 or Chapter V of the Finance Act, 1944 to those persons who pay the declared tax dues”

Now, relevant portion of the form SVLDRS-1 is extracted below for further clarity of the term “due” read with intent of the legislation;

9.2 ARREARS 9.2.1 Appeal not filed or appeal having attained finality Order No. and date of receipt Forum Duty/Tax/Cess Confirmed in the O-i-O or O-i-A Amount of Duty/ Tax/Cess Amount of Penalty Imposed in the O-i-O or O-i-A Amount of Late Fee Imposed in the O-i-O or O-i-A Amount of Predeposit or Any Other Deposit of Duty Tax Dues less Tax Relief
      A B C D E F G H
               

It can be seen that amount of pre-deposit or any other deposit was provided in the table at Sl. No. 8 of the SVLDRS Form-1 for consideration under the arrears category. If at all amount left to be considered as arrears due for purpose of calculation of tax relief as per the aforesaid circular dated 25 sept, 2019, then it would be apt to extrapolate one hypothetical situation.

            Amount in Rs.
Situation Amount of Duty/ Tax/Cess Amount of Predeposit or Any Other Deposit of Duty Tax Dues Relief (%) Tax payable Tax paid Net payable
A 5100000 110000 4990000 60 1996000 110000 1886000
B 5100000 110000 5100000 40 3060000 110000 2950000

Does Law i.e. Finance (No.2) Act,2019 ever contemplate situation like A? Further, as clarified in the aforesaid circular in para 2(iv) that the relief available under section 124 (1) (c) will be applied to the net outstanding amount arrived at. The circular further goes on to state that in respect of all other categories (other than arrears), amount paid before its appropriation is in the nature of deposit only.

However, it should not be lost sight of the fact that in the adjudication proceedings, any amount is paid prior to the adjudication is appropriated and amount left is confirmed and said amount unless further disputed become arrears due. Therefore, law envisages amount in arrears as amount due after its appropriation. Further, carving such interpretation as to the term “due” defeats intention of the law but also dilute the fundamental right of equality before law as enshrined in the Constitution of India.

To conclude, the scheme purports to liquidate past disputes of Central Excise and Service Tax and to ensure disclosure of unpaid taxes by a person eligible to make a declaration and the term “due” as appearing in clause (e) of section 123 of the Finance(No.2) Act of 2019, means amount confirmed after appropriation of amount paid if any prior to the adjudication or amount if reduced at the appeal proceedings read with a fact that there was no provision in the existing acts, of part payment once the amount is confirmed & the same is not further disputed. It is therefore tax dues and not the tax due for the “tax due” warrants separate legal course of action that may be in the form of notice where the assesse does not pay.

Going further down to para 2(vii) of the aforesaid circular for even further discussion on issue which is whether pending SCN where final hearing is held now requires adjudication solely for the purpose of eligibility of the scheme in respect of assessee wanting to go for the scheme- that he/she does not want to dispute. The said para as reproduced below mandates passing of an order;

“…….under Section 125 (1) (c) to cases under adjudication. It is clarified that such cases, however may still fall under the arrears category once the appellate or adjudication order as the case may be is passed and has attained finality or appeal period is over and other requirement or appeal is over and other requirements under the scheme are fulfilled.”

To the above, attention is drawn to question No. 5 appearing in the table below sl.No. 8 of the SVLDRS form-1 which is also extracted below for quick reference

Whether final hearing with regard to a matter in adjudication or appeal has taken place on or before 30.06.2019 for the matter for which this declaration is being made? [Note: If you answer YES to this question, you are ineligible to proceed further under the LITIGATION category.].

It can be seen that there is no requirement of passing order at the adjudication level where final hearing has taken place (where assessee submits declaration) as the same is allowed under the litigation category. The circular instead seeks to fasten requirement of order which is likely to result in discretion at the level of adjudication authority in the passing of order before 31.12.2019.

[The author is Superintendent of Central Tax, Division-XI, Vadodara-I Commissionerate and the views expressed are strictly personal.]