In his Budget speech, the finance minister had said, "Litigation is a scourge for a tax-friendly regime and creates an environment of distrust, in addition to increasing the compliance cost on taxpayers and administrative cost for the government. There are about 300,000 tax cases pending with the 1st Appellate Authority, the disputed amount being Rs 5.5 lakh crore. To reduce this number, I propose a new Dispute Resolution Scheme."
Accordingly, Chapter XI of the Finance Bill proposed an Indirect Tax Dispute Resolution Scheme, taking effect on June 1.
The ministry notified the necessary Rules, prescribing the forms and procedures; the Central Board of Excise and Customs (CBEC) has issued the necessary instructions for implementation.
The scheme is applicable for all orders in respect of any of the provisions of the Customs Act, Central Excise Act or Chapter V of the Finance Act, 1994 (dealing with service tax), which were under challenge before the commissioner (appeals) as on March 1, 2016.
The Scheme is not available if the order was in respect of search and seizure proceedings or narcotic drugs or other prohibited goods or for any offence punishable under the Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act or the Prevention of Corruption Act. Or where prosecution for a punishable offence has been instituted or a detention order passed under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act.
Under the Scheme, any person can make a declaration to the designated authority before end-December this year, in the prescribed format, giving details of the dispute. A dated acknowledgment will be had within a week.
The declarant should send the copy of declaration and acknowledgement to the commissioner (appeals) in question within 15 days, to enable the latter to suspend the appeal proceedings for 60 days.
The declarant should pay the tax due, with interest, at the prescribed rate; plus an amount equivalent to 25 per cent of the penalty imposed in the original order within 15 days of the acknowledgement. He should intimate the designated authority in the prescribed form within seven days of making such payment.
On getting the proof of payment of tax, interest and reduced penalty, the designated authority must, within 15 days of the receipt of such proof, pass an order of discharge of the dues in the form and manner prescribed. The declarant should send the discharge order to the commissioner (appeals) before the expiry period for suspension of proceedings.
The latter must, within the next seven days, remove the appeal from the list of pending ones with him and intimate the declarant. Thus, the appeal would stand disposed and the declarant shall get immunity from all proceedings under the Act in respect of the indirect tax dispute for which the declaration has been made. CBEC has asked the commissioners to specify any officer not below the rank of assistant commissioner as the designated authority.
The Scheme gives a chance to those who do not expect to succeed in these legal forums to opt for escape.