Tamil Nadu Settlement scheme, 2023 – is the intent actually achieved?

[Veenaa Venkatesh]

The introduction of Samadhan Scheme for settlement of long pending disputes is not new to Indian Taxation regime. Be it the SABKA VISHWAS (LEGACY DISPUTE RESOLUTION) SCHEME, 2019  for settling erstwhile service tax and excise cases or Direct Tax Vivad se Vishwas Act, 2020 for settlement of income tax cases, the intent has always been to reduce on going disputes.

With the increase in the number of cases pending before the Departmental Authorities, Tribunal and the Courts, the Tamil Nadu State Government thought it fit to introduce a settlement scheme to put an end to such pending cases in relation to 11 enactments.

Similar to any other scheme, the Tamil Nadu Taxes (Settlement of Arrears) Act, 2023 also provides for mechanism whereby the eligible dealers[1] can file an application, pay the specified percentage of tax, interest and penalty amount and discharge themselves from any further liability in respect of such pending cases.

True to its intent, the provision for waiver of the accrued interest does seem to be a blessing in disguise especially in cases where the Assessment Order was passed prior to 5 years. While this substantial benefit cannot be disregarded, in cases where appeal is pending before the appellate forum, there is no whisper about the amount already paid as pre deposit viz 25% of the disputed tax amount or any other amount paid during the pendency of the first appeal.

The pertinent point that merits consideration is whether this amount deposited while filing the appeal can be claimed as credit/ reduction while arriving at the amount to be paid now as per Section 7 of the Settlement Act.

From a bare perusal of the definitions of “arrears of tax[2]” and “disputed tax[3]”, it does seem difficult to arrive at a conclusion especially in view of settled position of law that the amount paid as pre-deposit is in the nature of only a deposit for availing the right of appeal and does not partake the character of tax or duty[4]. Further, the express restriction as regards adjustment of any excess amount paid or refund of arrear amount is a cause of concern.

Another doubt surrounding this scheme is the eligibility to file an application in cases where the assessment has been made prior to 31.03.2021 but where the demand has been subsequently revised through an Order passed thereafter.

Although the intention seems to be that of mitigating litigation by mutually settling the pending disputes, whether the same has been achieved by the said Scheme continues to remain a question in itself.

Therefore, clarity is required in terms of the above cited queries. A communication from the Department clarifying the above positions and also extending the timeline for claiming the benefit under the above scheme would act as a welcome relief to the aggrieved tax payers and also assist the Department in putting an end to the long pending disputes thereby generating more revenue.

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(The views in this Article are personal. The Author can be reached at cavveenaa@gmail.com)

 

[1] A dealer in respect of arrears of tax, interest or penalty pertaining to AYs up to 2017-18 where assessment has been made on or before 31.03.2021 and no appeal, revision or review is pending before any authority or tribunal or any court or in case of pending appeal, the same is withdrawn on the date of application

[2] arrears of tax, penalty or interest” means-             

(i) tax including ST, AST, SC, ASC, VAT, CST, luxury tax, advertisement tax, entertainments tax, entry tax or betting tax, payable by an applicant upon assessment under the relevant Act;       

(ii) penalty payable by an applicant under the relevant Act; or

(iii) interest payable by an applicant under the relevant Act,             

as the case may be, pertaining to the assessment years up to 2017-18, for which assessment has been made on or before 31.03.2021 under the relevant Act, and pending collection on the date of filing of application under this Act

[3] “disputed tax” means the whole or part of tax determined by the assessing authority under the relevant Act against which appeal, revision or review is pending before any authority, tribunal or court, as on the date of commencement of this Act

[4] Otis Elevator Company (India) Limited. Versus Commissioner of Value Added Tax, & Ors. 2023 (8) TMI 932 - Delhi High Court