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Indirect Tax Dispute Resolution Scheme 2016 Clouds of doubt on success quotient

Budget - By: - Bimal jain - Dated:- 23-3-2016 Last Replied Date:- 30-12-1899 - Dear Professional Colleague, The Union Budget, 2016, has introduced number of measures for reducing litigation and providing certainty in taxation, considering the same as one of the key thrust areas of tax reform. In line with said objective, the Hon ble Finance Minister has announced Dispute Resolution Schemes for Direct and Indirect taxes for bringing down the litigation pending before the Commissioner (Appeals). R .....

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ndirect Tax Dispute Resolution Scheme, 2016 ( the IDT DRS Scheme, 2016 ), introduced in the Union Budget, 2016 as the Government s positive intent to reduce litigation in Indirect Taxation, embraces an important question on its success quotient, considering its not-so-lucrative provisions. Gist of the provisions of the IDT DRS Scheme, 2016 The enabling provisions of the IDT DRS Scheme, 2016 are formulated in Clauses 209 to 215 under Chapter XI of the Finance Bill, 2016; It shall comes into force .....

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Assistant Commissioner who is authorised to act as Assistant Commissioner by the Commissioner. Declaration filed by the Declarant shall be acknowledged by the Designated Authority. To avail the benefit of the Scheme, the Declarant will have to pay duty/tax liability along with interest and penalty equivalent to 25% as imposed in the Impugned Order i.e. Order-In-Original within 15 days of the receipt of the acknowledgement from the Designated Authority and intimate the Designated Authority withi .....

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4 and for Customs matter under the Customs Act, 1962, and Rules made thereunder, in respect of the dispute. The Discharge Order will not be considered to be an Order on merit and will not have any binding effect. It will not be permissible to re-opening and also no refund will be granted of the amount paid under this Scheme; IDT DRS Scheme, 2016 - Not to apply in certain cases In terms of Clause 212 of the Finance Bill, 2016, the provisions of the IDT DRS Scheme, 2016 is not applicable, if: The .....

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Exchange and Prevention of Smuggling Act, 1974. Illustration to understand the amount of Penalty to be paid under the IDT DRS Scheme, 2016: In order to understand the amount of Penalty to be paid under the IDT DRS Scheme, 2016, let us take an example covering three different scenarios viz. Penalty of 25%/50%/100% of duty amount imposed in the Impugned Order: Scenario Amount of duty Penalty imposed under the Impugned Order Amount to be paid under the IDT DRS Scheme, 2016 I ₹ 100/- 25% of d .....

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suration with the Hon ble FM proposal of reducing litigation pending before the Commissioner (Appeals). Still, there are lot of scope in the IDT DRS Scheme, 2016 which may be amended/removed for the success of this Scheme. Here, we would like to draw your attention towards some of the shortcomings in the IDT DRS Scheme, 2016, which puts a question mark on its success: Restricting the scope of the IDT DRS Scheme, 2016 only for the cases pending at Commissioner (Appeals) level, will minimise its i .....

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se pending at Commissioner (Appeals) levels. Further, only for the cases involving the duty/ tax amount upto ₹ 50 Lakhs, an appeal shall lie before the Commissioner (Appeals). In other cases, appeal shall lie directly to the CESTAT. Thereby, the IDT DRS Scheme, 2016 may not yield desired results in reducing litigation when maximum of the Revenue is locked up at higher levels with statistics revealing only around 20% success rate for the Department. Reduced penalty of 25% not likely to attr .....

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intent to evade payment of duty/tax) at the level of Show Cause Notice/ Order-In-Original respectively, if duty/ tax liability is paid along with interest and specified reduced penalty within 30 days of the receipt of Show Cause Notice/Order-In-Original. For instance, under Service Tax, in fraud cases, where the penalty imposed under Section 78 of the Finance Act, 1994, benefit of reduced penalty of 25% is available if Service tax is paid along with interest & reduced penalty @ 25% of tax a .....

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RS Scheme, 2016 encompasses payment of interest as well as 25% penalty, which may not attract assessees to come forward for resolution of cases. In previous Service Tax Amnesty Scheme , there was complete waiver of Interest and penalty also, which could attract reasonable number of assessees. However, the IDT DRS Scheme, 2016 has not provided for any type of such waiver benefit either for interest or for penalty, thus not being lucrative. IDT DRS Scheme, 2016 viz-a-viz DT DRS Scheme, 2016 - No p .....

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able: When the appeal is disposed off on merits allowing the statutory claim of Cum-duty/tax benefit, the duty/tax amount gets reduced along with penalties imposed under various Sections like Section 76 and 78 of the Finance Act, 1994 for Service tax, Section 11AC of the Central Excise Act, 1944 and various Rules made there under, etc. However, the IDT DRS Scheme, 2016 will compel the Assessee to pay the whole amount of disputed duty/tax along with interest and 25% penalty. In the Nutshell The I .....

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ndatory pre-deposit @ 7.5% at Commissioner (Appeals) level, in terms of Section 35F of the Central Excise Act, 1944 - Applicable to Service tax vide Section 83 of the Finance Act, 1994 and to Customs vide Section 129E of the Customs Act, 1962; What will happen to the proceedings initiated simultaneously against Co-Appellants - Whether there would be closure of proceedings against co-Noticees as well once the proceedings against the main Noticee have been closed; Whether 25% of the penalty impose .....

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