The scheme launched by the Central Government in Union Budget 2019 – Sabka Vishwas (Legacy Dispute Resolution Scheme) 2019 or SVLDRS was much touted for closing out the Service tax and Central Excise disputes. The scheme was introduced to conclude all disputes of the erstwhile regime which are now subsumed under GST. Though there are 28 indirect tax enactments which are covered under the said scheme, Central Excise and Service Tax are the prominent ones. This scheme aims at providing a fresh start to the taxpayers by cleaning their slate of the erstwhile regime. The said scheme came into effect on 1 September 2019 and covered cases of Show Cause Notice (SCN), appeals arising out of a SCN pending as on 30 June 2019; amount in arrears; an enquiry, investigation, or audit where the amount is quantified on or before 30 June 2019; and a voluntary disclosure. Amongst other things, the scheme waives off any interest, penalty, fines and provides partial duty relief and amnesty from prosecution proceedings.
Whilst the intention of the Central Government was
magnanimous and has helped many, the clouds of disputes are hovering on the
scheme since quite some time now. As noted above, there are eligibility
criteria which needs to be fulfilled for an assessee to avail the benefits of
the SVLDRS scheme. There has been an incessant debate on the eligibility of assesses to opt for SVLDRS scheme, the
circulars issued under the scheme, the rejections by the Designated Committee (DC)
etc. Therefore,
as complex it may sound but the dispute resolution scheme has given birth to
new certain disputes. Numerous writ petitions have
been filed in various High Courts on the various aspects of SVLDRS.
In the case of Seventh Plane Networks P. Ltd. v. UOI
The latest addition
to this
list of
writ petitions
and a
very revered judgement
was given
by the
Delhi High
Court (HC)
in the
case of Seventh Plane Networks P. Ltd. v. UOI [W.P. (c) 3934/2020].
The question before
the Delhi
HC was
to decipher
the meaning
of 'quantified on or before 30 June 2019'. The highlights
of the judgement are as below:
♦ The SVLDRS application of the petitioner was rejected
on the grounds that the audit
memo was issued to him on 2 July 2019; therefore, crossing the deadline
of 30 June 2019. However, the petitioner submitted that
the quantification of demand had happened on 28
June 2019 and was communicated and
accepted by the petitioner as well. Hence, the petition was preferred before
the Delhi HC.
♦
The Delhi HC noted that as per
the audit memo submitted, the audit was
concluded on 28 June 2019. Not only that, the liability was quantified,
communicated, and admitted on the same
day by the petitioner. Further, the HC observed that
though the
petitioner had
submitted to
reduce the
liability demand on 3 July 2019, the demand was never denied by the
petitioner.
♦ The Court opined that a
liberal interpretation should be adopted
for SVLDRS and its circulars as the objective the scheme is to let the
taxpayers make a fresh beginning.
Hence, the rejection order was quashed by the HC and the DC was directed to reassess the petitioner's
application in new light.
In this case, the term quantified has been interpreted liberally. On the contrary, in
the Circular
No. 1071/4/2019-CE dated
27 August 2019, quantified
has been
defined to
mean a
written communication
of the
amount of duty payable under the indirect tax enactment.
It is clarified
that such written communication will include a letter intimating duty
demand; or
duty liability
admitted by
the person
during enquiry,
investigation, or
audit; or
audit report
etc. Further,
in Circular
no. 1073/06/2019 CX dated 29 October 2019, it was clarified that the audit
shall be treated complete only when final audit report culminates
into a SCN. The
Delhi HC
opined in
the above
case that
the Circulars
are binding only on the departmental authorities.
Other judicial pronouncements
In a similar matter of Vaishali Sharma v. UOI [W.P.
(C) 473/2020], the Delhi HC opined that the petitioner had admitted her
Service tax
liability on
18 May 2018 itself.
Therefore, the
application should not have been rejected on the sole ground that the liability
was not quantified before 30 June 2019. The Court was of the view that the petitioner
should be given an opportunity of being heard and a liberal
interpretation must
be given
to scheme
as its
intent is
to unload
the baggage
of disputes.
In a special leave petition filed before the Delhi HC, the petitioner claimed that the condition to qualify under the scheme is that the final
hearing, communication, and quantification must have taken place on or before 30
June 2019 is
invalid as
the same
shall lead
to loss
of revenue
for the exchequer. The HC upheld the said circular and
dismissed the
said plea
noting that
the Court
expects the
Centre to scrupulously follow the provisions of the scheme and there is nothing
invalid in the scheme or the associated
circulars.
In the case of Assam Cricket Association v. UOI and 4 ors., The Central Board
of Indirect
Taxes and
Customs, the
Principal Commissioner, the Designated Committee, addl. Director
General [WP(C) 2149/2020, dated
4-5-2020], the petitioner's application was rejected
on the
grounds that
the penalty
imposed in the original proceedings wasn't mentioned on the SVLDRS application
form. The High Court held that this is an inadvertent
mistake and there is no provision under the scheme wherein it has been mentioned that a person on whom
penalty is
imposed cannot
avail benefits
of the scheme. Therefore, the High Court required the petitioner to revise the
application form with correct
details and respondents to pass
reasonable order on the same.
Author's note
The SVLDRS scheme
is a
momentous amnesty
scheme in
the sense
that the scheme has a wide coverage
as against its erstwhile
incarnations like
Kar Vivad Samadhan Scheme, the Voluntary
Compliance Encouragement Scheme etc. The said scheme is applicable
to disputes pending at all levels and allows voluntary
disclosures with no
questions asked.
Further, the
entire schema
being online,
there is no
need to
interact an
officer which
ensures transparency
and trust.
Furthermore, a
time limit
has been
provided for
completion of
each step leading to early closure of cases. Hence, there is no two ways about the goodness
of the
scheme. However,
the scheme
certainly suffers
some fallacies also. As noted above, there has been immense discussion on the term 'quantified before 30 June 2019'. The department
has been prompt enough to issue circulars in this regard, clarifying that a SCN must
have been
issued before
the said
date in
order to
avail the
scheme. However,
the High
Courts have
been interpreting
the term
rather liberally and allowing most of the cases where the demand was communicated in any way to the assessee before the said date stating
that Circulars are binding only on the authorities. Both the authorities
and Courts
seem to
be correct
in their
corners, as
the idea
behind introducing the scheme is to enable maximum assesses to start afresh;
however, every scheme has its rules and the same needs to be followed for
effective execution. Separately, due to no appeal mechanism
prescribed, the
High Courts
are swamped
with writ
petitions and
the grievances have increased the work load of the already burdened High
Court.
Having said this, there is no doubt about the success of the SVLDRS. The scheme
has been
a through
and through
winner and
has had 1,89,229 declarations filed
with a
whopping revenue
of 14821 crores going in the kitty of the Government. The statistics also revealed that approx. 70,000 litigations were closed in a single providing a relief to the judiciary system and the taxpayers as well.
Following the cue of the Centre, multiple states have
also introduced amnesty schemes to close the pending VAT and other state tax
assessments.
Both the Centre and States need to be commended for the efforts undertaken to provide 'ek naya savera' to both the department and taxpayers and reducing the weight on the judiciary
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