The Hindu Business Line : `Trade facilitation' may not reduce litigation

`Amnesty scheme'
The amendment is effective from July 13.
Alternative window available for avoiding adjudication is: settlement proceeding before the Settlement Commission.

Chennai , Sept. 15

Earlier this month, the taxman was in the news, talking about an amnesty scheme of sorts. Mr V.P. Singh, Chairman of the Central Board of Excise and Customs (CBEC) elaborated upon a scheme to avoid adjudication. Assessees who have been served with show-cause notices in cases involving fraud or misstatements can opt for a scheme that provides for voluntary payment of duty along with interest and penalty, he said.

This `trade facility', one learns, relieves the assessees of the need to go through the rigours of adjudication or even hire a consultant. The penalty under the scheme shall be 25 per cent of the duty, provided the assessees make the entire payment within 30 days of the receipt of the show-cause notice. A recent amendment, this is, effective from July 13.

`Quick disposal'

"The change is aimed at a quick disposal of Customs, Central Excise and Service Tax cases, and is certainly welcome because of the consequent reduction in litigation," says Mr S. Madhavan, Executive Director, PricewaterhouseCoopers. However, he draws attention to several aspects of the amendments, so that one may assess the merits of the scheme in perspective.

First, the facility is only applicable to situations where the Department alleges serious acts of omission/ commission, by invoking the extended period of limitation of five years, says Mr Madhavan. The more common situations, that is, where the normal period of limitation for issuance of notices of one year is invoked, don't come under this. "Therefore, it may not be appropriate to term the amendment as a `trade facilitation' measure, given its limited application," opines Mr Madhavan.

He presents an interesting insight, based on an analysis of the ultimate outcome of the `extended period demand notices'. It seems a majority of such notices is set aside on appeal, as being without merit.

Alternative window

"Unless such notices are better founded on facts/ points of law, the scheme will not achieve the desired result, since the assessees would be well advised to litigate, as their chances of success in appeal would be very high," foresees Mr Madhavan.

Would it be cost-effective for assessees to benefit from the scheme? "The duty demands in such notices are typically very significant; and hence the penalties, even at the reduced 25 per cent level of such duties, would be material," alerts Mr Madhavan. "Assessees would therefore necessarily have to evaluate the case on merits and only if they feel their case is very weak would there be an incentive to opt for this scheme."

He draws readers' attention to an alternative window that is already available for avoiding adjudication in such matters: settlement proceeding before the Settlement Commission. "In this, if the Commission so decides, payment of penalty is entirely obviated upon payment of the accepted duty demand and interest."

In sum, Mr Madhavan is of the view that though the amendments are certainly welcome, it is debatable as to whether these are `trade facilitation' measures in the real sense and whether they would have the desired result in the form of reduced litigation.

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