An Overview of New Legacy of Dispute Resolution Scheme

Narendra Kumar

05 Sep, 2019

On the 5^th day of July 2019, Finance Minister of India Ms. Nirmala Sitharaman during her maiden budget declared a scheme namely “Sabka Vishwas (Legacy Dispute Resolution) 2019. The main motive behind the scheme is to settle all the unresolved issues of taxes before Goods and Service Tax came into effect. Legacy Dispute Resolution Scheme will allow the quick closure of litigations pending of Service Tax & Excise. This will help the business and trades to be free from litigations.

Applicability of New Legacy of Dispute Resolution Scheme

Taxes due or litigations pending under following acts will be resolved under this scheme:

• Central Excise Act, 1944;
• Central Tariff Act, 1985;
• Agricultural Produce Cess Act,1940;
• Coffee Act, 1942;
• Mica Mines Labour Welfare Fund Act, 1946;
• Rubber Act, 1947;
• Salt Cess Act, 1953;
• Additional Duties of Excise (Goods of Special Importance) Act, 1957;
• Mineral Products (Additional Duties of Excise and Customs) Act, 1958;
• Sugar (Special Excise Duty) Act, 1959;
• Textiles Committee Act, 1963; (xi) the Produce Cess Act, 1966;
• Limestone and Dolomite Mines Labour Welfare Fund Act, 1972;
• Coal Mines (Conservation and Development) Act, 1974;
• Oil Industry (Development) Act, 1974
• Tobacco Cess Act, 1975; (xvi)
• Iron Ore Mines, Manganese Ore Mines, and Chrome Ore Mines Labour Welfare Cess Act, 1976;
• Bidi Workers Welfare Cess Act, 1976;
• Additional Duties of Excise (Textiles and Textile Articles) Act, 1978;
• Sugar Cess Act, 1982;
• Jute Manufacturers Cess Act, 1983;
• Agricultural and Processed Food Products Export Cess Act, 1985;
• Spices Cess Act, 1986;
• Finance Act, 2004;
• Finance Act, 2007;
• Finance Act, 2015;
• Finance Act, 2016;

Relief Granted Under this Scheme

As per the bill passed, following are the different stages of relief granted:

• Show Cause Notice or Appeals:

  Tax Burn:

  Tax is due as on 30th June 2019 due to Show Cause Notice or an appeal

  Relief:

  If the amount of duty is up to INR 50 Lakhs, it will be reduced to 70% of the taxes.

  If the amount of duty is more than INR 50 Lakhs, it will be reduced to 50% of the taxes.

• Arrears:

  Tax Burden:

  Tax due is the amount of arrears or finality of proceedings

  Tax due is the amount shown in return of indirect tax but it was not paid resulting in arrears.

  Relief:

  If the amount of duty is up to INR 50 Lakhs, it will be reduced to 60% of the taxes.

  If the amount of duty is more than INR 50 Lakhs, it will be reduced to 40% of the taxes.

• Inquiry/Investigation/Audit:

  Tax Burden:

  If there is any amount of tax pending on or before 30th June 2019, due to investigation or audit conducted against a declarant.

  Relief:

  If the amount of duty is up to INR 50 Lakhs, it will be reduced to 70% of the taxes.

  If the amount of duty is more than INR 50 Lakhs, it will be reduced to 50% of the taxes.

Non Eligibility of New Legacy of Dispute Resolution Scheme

Following persons are non-eligible for this scheme:

• In case any appeal filed before an Appellant and that appeal is disposed of or finally heard on or before 30^th June,
• Show Cause Notice under Indirect Tax which is finally disposed of on or before 30^th June,
• Intending to file a declaration for the conviction of an offense is punishable under Indirect Tax,
• Application pending before Settlement Commission,
• Declaration to be made for excisable goods under the Central Excise Act, 1944,
• Show Cause Notice issued under Indirect Tax for the refund,
• Any disputed amount pending as on 30^th June 2019 due to any proceedings of investigation/inquiry/audit,

Also, Read: Income Tax Deduction for Medical Expenses

Procedure of Availing Benefits of New Legacy OF Dispute Resolution Scheme

Following are the steps to be followed for availing the benefits of the Legacy Dispute Resolution Scheme:

• A declaration shall be filed online for seeking relief under this scheme.
• The designated committee shall verify all the declaration for its correctness in order to finalize the amount payable by the declarant for seeking the relief.
• In case the amount mentioned in the declaration is equaled to the amount estimated by the designated committee, a statement will be issued in an electronic form.
• In case the amount mention in the declaration is lower than the amount estimated by designated committee, then an estimate will be issued in an electronic forum and a declarant will be given an opportunity of being heard.
• Only one adjournment is allowed in the proceeding of hearing only in case sufficient reason and the proof is submitted.
• The designated committee would issue a discharge Certificate upon the finalization of the amount payable by the declarant.
• Appellate Proceedings which are on the Tribunal Stage would be deemed withdrawn.
• While proceedings pending before the Supreme Court or High Court needs to be withdrawn by filing an application.
• The relief under this scheme will be confirmed by the issuance of the discharge certificate once the payment is made as per Designated Committee’s Statement and all the proceedings before the High court and Supreme Court are withdrawn.
• Time limits for all the actionable items must be prescribed.
• Any amount paid under this scheme is not allowed to be claimed for a refund or it cannot be recovered in the form of Income Tax Credit (ITC).
• Tax dues are not allowed to be discharged by claiming ITC

Withdrawal Norms

1. In case any petition or appeal is pending before the High Court or Supreme Court against the order related to tax due, a declarant can file an application before such High Court or Supreme Court for its withdrawal.
2. The declarant has to submit proof of withdrawal and proof of payment made to the designated committee for the issuance of the Discharge Certificate.

Also, Read: Salaried? You need to file Income Tax Return!

FAQs

What are the effects of the issuance of the Discharge Certificate?

These are the following effects of Discharge Certificate:

• There need not pay any amount by way of tax or duty
• No interest or penalty will be applicable thereafter
• The matter will not be re-opened after it is disposed of under this scheme

Whether there is any interest or penalty payable?

No, the declarant is not liable for any penalty or interest.

Any Pre-Deposit made before filing an appeal is adjustable?

Yes, it is adjustable, however, no refund will be given in case the amount deposited is more than the amount due under this Scheme.

What is the final stage of the scheme?

Discharge Certificate is issued by the Designated Committee in an electronic form within thirty days of payment

Whether a declarant can avail ITC under this scheme?

No, an individual cannot utilize its Input Tax Credit to make any payment under this scheme.

What is the effective date of Sabka Vishwas Legacy Dispute Resolution Scheme, 2019? The effective date of this scheme is not yet notified.