A Gist of Workshop on Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019

[Shripada Hegde]

The Directorate General of Taxpayer Services Bengaluru in association with NACIN Bengaluru had organised a workshop on Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 in order to create awareness about the scheme. The program also had Q&A session. The important questions asked by the Trade, Industry and Professionals are listed below along with the answers given by the panel which consisted Principal Chief Commissioner, Retired Principal Chief Commissioner, A practising Lawyer, A practising Chartered Accountant and a representative of trade union. One of the questions also contains note of my personal view.

1. Cases where audit, investigation or enquiry is initiated after 30/06/2019 eligible?

Ans: No.

2. Whether Amount deposited will be deducted at arrive at amount payable?

Ans: Yes.

3. If SCN issued on 3-4 grounds and payment was made w.r.t. one ground other grounds are being objected, will the deposit towards that ground be adjusted towards amount payable on all grounds under the scheme?

Ans: Yes. SCN would be looked as a whole and not issue-wise.

4. Can the scheme be opted for a specific part of the demand and the other parts be contested?

Ans: No.

5. Audit/enquiry started after 30/06/2017. Whether eligible under scheme for voluntary declaration?

Ans: No.

6. Audit/enquiry started before 30/06/2017 but no report issued. Eligible?

Ans: No.

7. For EOU, both customs and central excise has been demanded in an SCN. Whether eligible to go for the scheme to the extent of central excise?

Ans: Panel was divided. Panellists from trade and industry were of the opinion that the same is eligible to the extent of CE as it is levied under Central Excise Act and not under Customs Act. However, the panellists from department were of the opinion that the scheme considers SCN as a whole so a part of SCN cannot be dealt under the scheme.

8. Tax amount quantified in the SCN is disputed but the taxability is agreed. What will be the “tax due” for the purpose of this scheme?

Ans: The tax quantified in the SCN or the written document is to be considered as “Tax due” even if it is erroneous as per assessee.

9. Personal Penalty (say for example under Section 78A of Finance Act 1994) eligible for the scheme?

Ans: Yes. Personal penalty is Eligible for the scheme. But separate application might have to be filed by the person on whom it is imposed.

10. Can the co-noticee opt for the scheme without the main noticee opting the scheme? (Say for example a company is issued a notice for evasion of tax, and its director/some other person has been imposed personal penalty, can the person opt for the scheme without the company opting for the scheme?

Ans: The departmental panellists were strictly of the opinion that the co-noticee cannot opt the scheme without the main notice opting it for the scheme.

(However, neither the Finance Act nor the rules or regulations seem to impose this restriction. Person has been defined to include even the individuals)

11. Amount paid during the course of audit/otherwise not considered in the order. Will the credit for such payment be given if the scheme is opted?

Ans: There was again a divided view. The panel expressed an opinion that the committee for the scheme will not sit and adjudicate the facts. It will only decide and quantify the amounts as per the document (audit note/SCN/Order etc.) However, the Principal Chief Commissioner was of the opinion that the eligibility or admissibility of the payment can be decided only after full set of facts are looked into and the decision is left to the committee’s discretion. The panel more or less seemed to agree that there is a lack of clarity in this area.

12. If an SCN for a period is settled under this scheme, will the adjudications for the rest of the schemes be prejudiced? Will it be considered as agreeing with the views of department?

Ans: No. The action will be restricted to only the period for which the scheme has been opted and the same will not prejudice the other period although related to same grounds.

13. Demand during the adjudication was deposited using CENVAT Credit. Will it be considered for setting off while arriving at the amount payable under Scheme as the same is not a cash payment or will the payment have to be made not considering the deposit made using CENVAT?

Ans: Most of the panel was of the opinion that the deposit made using the CENVAT is also eligible for deduction while arriving at the net amount payable under the scheme. Any payment which is to be made henceforth towards the scheme will necessarily have to be made through cash. However, the Principal Chief Commissioner told the department is writing to the board for a clarification on this matter.

14. Series of SCN disposed off through one common order. Will the application have to be filed separately for each SCN or on application for all the SCN covered under the common order will suffice?

Ans: The panel told that the issue will be clarified in the meantime or a clarification will be sought from the Board.

15. There was some non-payment. Later the same was discovered and part has been paid via challans. The department has not noted the issue yet and no notice has been issued for investigation or otherwise. Can the voluntary declaration be made for entire amount or can it be made towards only that part which is not paid yet?

Ans: Clarity is awaited. However, Principal Chief Commissioner was of the view that even the payment made through GAR-7 challan is a form of communication to the department and hence, cannot get covered under Voluntary Declaration. The part on which the tax is yet to be paid can only be declared voluntarily and interest and penalty benefit will be restricted only to that amount. (However, there seems to be not section/any other provision which reflects this view. It has to be agreed that the scheme lacks clarity in this regard)

16. A liability is disclosed in the return and not paid. Will they be eligible for the scheme? Does the Section 124(1)(f)(ii) of the Finance Bill 2019 restricts or makes the cases ineligible?

Ans: Panel as well as the audience were divided on this point. Some of the Commissioners present were strictly of the opinion that the scheme will not give any option (however, the views seemed to be result of lack of understanding). However, the ADG, DGTS Bangalore was of the opinion that the scheme benefit would be available as it qualifies as “Amounts in Arrears”. Although the Act restricts an assessee to make voluntary declaration with regard to the liability disclosed in a return it can be subjected to the benefit of the scheme as “amounts in arrears”.

My personal opinion on this issue is as below

• Section 120(c) of the Finance Bill defines the term “Amount in arrears” and vide sub-clause (iii) the amounts declared in a return and not paid is included in the said definition.
• Section 122(e) of the Finance Bill includes amounts in arrears within the meaning of “Tax Dues”. Also, a separate clause has been inserted to include voluntary declarations vide clause (d). Hence, both are different.
• Section 123(1)(c) of the Finance Bill gives relief to amounts in arrears and clause (e) gives relief to amounts disclosed voluntarily. Different treatment is given here as well.
• Further, Section 124(1)(f) of the Finance Bill puts restriction on voluntary disclosures when the amounts are declared in the return and not paid. However, said restriction is only on voluntary declarations and not on ‘amounts in arrears’. The restriction would apply only to Section 122(d) and Section 123(1)(e) and not with respect to any other provisions.
• Hence, the argument that the scheme benefit is not available for ‘the amounts disclosed in the return and not paid’ is baseless in my view. Although it cannot be routed through voluntary declaration, there is no restriction to get the benefit of the scheme as “Amounts in Arrears”.
• However, the intention of the legislature in inserting Section 124(1)(f)(ii) of the Finance Bill is not clear and it is not known what scenarios it intends to cover.

It may please be noted that the answers given by the authorities has no binding value as this is not a notification or a clarification from board. The workshop was intended only to create awareness and would only help the trade and industry to understand the departments view and the way tax officials look at the scheme. This would help the assessee to correct his view or help be prepared with defence.