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Indirect Tax Dispute Resolution Scheme 2016 Overview

Budget - By: - Bimal jain - Dated:- 25-5-2016 Last Replied Date:- 27-6-2016 - 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). Re .....

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direct 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, which is applicable with a .....

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om June 1, 2016 to December 31, 2016; For the purpose of this Scheme, the Designated Authority means an officer not below the rank of 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-Or .....

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gs under the respective Acts, for Excise matter under the Central Excise Act, 1944, for Service tax matter under the Finance Act, 1994 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 for re-opening and also no refund will be granted of the amount paid under this Scheme; IDT DRS Scheme, 2016 - Not to apply in .....

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bstances Act, 1985 or the Prevention of Corruption Act, 1988; or Any detention order has been passed under the Conservation of Foreign 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: Scen .....

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) The IDT DRS Scheme, 2016 - Needs redressal for reducing pending litigation The drafting of the IDT DRS Scheme, 2016 is not in commensuration 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 suc .....

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ing ₹ 5.5 lakh crores. However, the quantum of the cases pending at the Appellate Level and before Courts are far higher than those 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 u .....

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ul mis-statement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made thereunder with 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 15% and 25% within 30 days of the receipt of Show Cause Notice/Order-In-Original respectively. For instance, under Service Tax, in fraud cases, where the penalty imposed under Sec .....

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ed on merits, the assessee will fight till the last resort. The present Scheme is less beneficial as compared to previous Service Tax Amnesty Scheme : The IDT DRS 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 prov .....

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te of assessment or re-assessment as the case may be, but, no such benefit is available under the IDT DRS Scheme, 2016. There should not have been any disparity between the Schemes and similar provisions should have been provided under the IDT DRS Scheme, 2016, to make it little attractive. Cum-duty/tax benefit not available: 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 .....

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er, perusal of the provisions contained therein, reveal that such Scheme may not be fruitful for mass asessees. Further there are bouquet of issues which lack clarification with regards to the IDT DRS Scheme, 2016, such as: Whether adjustment is possible for the amount paid during the course of investigation or as mandatory 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, 19 .....

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