Legacy Dispute Resolution Scheme

The Finance Minister of India, Smt. Nirmala Sitharaman, declared the Legacy Dispute Resolution Scheme/Sabka Vishwas Scheme while presenting the Union Budget of 2019. The Scheme serves dual functionality. It serves as a dispute resolution as well as an amnesty scheme. This Scheme is introduced to resolve and settle legacy cases of the Central Excise and Service Tax. The proposed Scheme would cover all the past disputes of taxes which may have got subsumed in GST; namely Central Excise, Service Tax and Cesses. Therefore, this Scheme has been developed on the sidelines of previous schemes under direct and indirect taxes. This article talks about the Legacy Dispute Resolution Scheme in detail.

Overview

The Legacy Dispute Resolution Scheme was declared as a dispute resolution cum amnesty scheme. The scheme is bought about for the resolution of legacy disputes related to Central Excise, Service Tax and Cesses, which were all absorbed by the Goods and Services Tax (GST) in 2017. While offering relief of a certain percentage from tax dues, the Scheme provides for waiver of interest and penalty as well. The rate provided as relief may range anywhere from 40% to 70%. Furthermore, the declarant will not be liable to any prosecution for the matter. However, it should be noted that where the taxes are due and payable on account of voluntary disclosure by the declarant, relief shall not be available with respect to the tax dues. The Finance Bill of 2019 states that every person will be able to make a declaration under this Scheme with a few exceptions. It also mentions that any amount paid under this Scheme cannot be paid through the input tax credit account and will not be refundable under any given circumstances. The provisions of the Scheme also states that such an amount paid will not be available as an input tax credit.

Eligibility Criterion

Every individual and entity is eligible for this Scheme with a few exceptions. The exceptions are as follows:

Those whose appeals or proceedings against an SCN have been heard finally on or before the 30th of June, 2019.
Those who have been subjected to an enquiry/investigation/audit of any kind and where the disputed amount, in such proceedings, has not been quantified on or before 30th of June, 2019 as well.
Those who have been convicted for any punishable offence as per the provisions of the enactment related to the matter for which the amnesty or relief is intended.
Those who have been issued an SCN for a refund or an erroneous refund.
Those who have filed an application for the settlement of a case in front of the settlement commission of the concerned authorities.
Those seeking to make declarations with concern to excisable products of tobacco/tobacco substitutes set forth in the Fourth Schedule to the Central Excise Act of 1944.

Relief under the Scheme

The relief offered under the Scheme shall be computed based on the amount of tax dues determined. The following table depicts the same:

Stage of Dispute	Tax Dues/Amount for Resolution
Appeal(s) arising out of an order (out of adjudication and appellate proceedings)	Total tax being disputed in all appeal(s) put together (whether by the taxpayer or the Revenue) against a given order.
SCN received	Tax stated to be payable as per the notice.
Enquiry/Investigation/Audit	Tax quantified in such enquiry/investigation/audit.
Arrears, defined as liabilities admitted in return but unpaid or confirmed in an appellate proceeding, which cannot be appealed against due to time limitation.	Tax in arrears

It should be noted that the relevant stage of dispute or pendency thereof in this context would be examined as of the 30th of June, 2019 for eligibility under the Scheme.

Determination of Tax Relief

The rates for tax relief under this Scheme are as follows:

Where Tax Dues Relatable to	Size of Tax Dues	Tax Relief
An SCN or one/more appeals arising out of such notice	More than INR 0.5 Crore	50% of the Tax Dues
An SCN or one/more appeals arising out of such notice	INR 0.5 Crore or less	70% of the Tax Dues
SCN for a late fee or penalty only with underlying tax/duty demand either being fully paid already or being NIL	Any	Entire amount of late fee and/or penalty, as the case may be
Arrears (as reported in the return)	More than INR 0.5 Crore	40% of the Tax Dues
	INR 0.5 Crore or less	60% of the Tax Dues
Arrears – others	More than INR 0.5 Crore	40% of the Tax Dues
	INR 0.5 Crore or less	60% of the Tax Dues
Enquiry or Investigation or Audit	More than INR 0.5 Crore	50% of the Tax Dues
	INR 0.5 Crore or less	70% of the Tax Dues

NOTE: Any amount already paid by the declarant as deposit or pre-deposit in appellate proceedings or in the course of enquiry/investigation/audit would be adjustable towards sums payable by the declarant. However, where such previously paid amounts exceed the amount payable after considering the tax relief, no refund of such amount would be allowed.

Procedural Aspects

The following are the steps that are involved while availing the benefits of the Legacy Dispute Resolution Scheme.

Declaration for seeking relief shall be made electronically in a prescribed manner.
All declarations will be examined by a designated committee, to be constituted, for the purpose of finalising the amounts payable by the declarant to avail the relief under the Scheme.
Where the designated committee’s estimates of the amount payable exceed the estimates made by the declarant, then the declarant would be given an opportunity of being heard before the amount payable is finalised.
The designated committee, upon finalising the amounts payable by the declarant, would issue a statement in this regard.
Adjudication/appellate proceedings concerning the matters covered by the declaration up to the Tribunal stage would be deemed withdrawn; while proceedings pending before the High Court and Supreme Court will have to be withdrawn through a written application in this regard.
The relief under the Scheme would be confirmed by way issuance of a discharge certificate once the declarant evidences the payment of the amount as per designated committee’s statement and the withdrawal of proceedings before the High Court and the Supreme Court.
Timelines for all actionable items by the designated committee and the declarant are also prescribed.
Any amount paid under the Scheme will neither be refunded nor be recovered in the form of input tax credit or in any form for that matter.
The tax dues cannot be paid through the utilisation of input tax credit.
Other administrative and procedural contours of the Scheme including without limitation start and end date of the scheme, manner of declaration and verification, constitution and functioning of the designated committee, and more, would be prescribed in due course of time.

Issuance of Discharge Certificate

The following are the effects of issuance of the Discharge Certificate.

No further payments of any amount by way of tax/duty, interest and penalty will be applicable.
No further proceedings and prosecutions will take place.
No re-opening of the matter under any circumstances.
However, the above consequences would be limited cumulatively to the matters and the time-period covered by the declaration under the Scheme.

Other Specifics

The scheme also discusses scenarios of voluntary disclosures. However, the scope of the Scheme qua voluntary disclosures and its overlap over other items need to be re-looked due to ambiguity and uncertainty. Without this aspect, at an in-principle level, for voluntary disclosures, there would not be any tax relief, but other benefits under the Scheme may be available. Moreover, a person making a voluntary disclosure would not be eligible for Scheme if the individual:

Is attempting to avail the benefits of the Scheme after being subjected to any enquiry, investigation or audit.
Has indicated the amount under a filed return but has not paid it.

The official release of document on Sabka Vishwas Scheme is provided below: [pdf-embedder url="https://www.indiafilings.com/learn/wp-content/uploads/2019/07/Sabka-Vishwas-Scheme.pdf" title="Sabka Vishwas Scheme"] The latest notifications and forms related to Legacy Dispute Resolution Scheme/Sabka Vishwas Scheme is provided below: [pdf-embedder url="https://www.indiafilings.com/learn/wp-content/uploads/2019/07/Sabka-Vishwas-Scheme_Forms.pdf" title="Sabka Vishwas Scheme_Forms"]

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