India’s indirect tax litigation is on the verge of a major refurbishment as the Government seeks to encourage ease of doing business with the introduction of schemes to accelerate dispute resolution. The CESTAT Pendency Report September 2019* reflects the grim state of the indirect tax litigation in the country. Banking on a total of 9 Benches across the nation, the CESTAT seems to be struggling with the staggering number of pending litigation cases which stood at 78,009 in the beginning of September 2019 and marginally lowered to 77674 (less than 0.5%), after considering the fresh institution/ restoration of cases and disposal during the month.
The fright has continued for the industry and revenue at large, manoeuvring through the ever mounting pile of tax litigations. Hence, with an intent to discard India’s reputation of being a country with an unflattering state of tax litigation, the Central Government has introduced the Sabka Vishwas-Legacy Dispute Resolution Scheme, 2019, which is the much needed respite at the moment. The Scheme has now been notified; is operational from 1st September 2019 and would continue till 31st December 2019. The Government of India expects the Scheme to be availed by a large number of taxpayers for closing their pending disputes relating to their legacy Service Tax and Central Excise cases. The applicants are entitled to relief in the nature of partial waiver of tax amount/ arrears (ranging from 40% to 70%) along with full waiver of interest/ penalty, subject to the conditions prescribed under the Scheme.
The amount paid under the scheme shall also qualify as “tax” for the purposes of Income tax Act and hence, shall be allowed as deduction u/s 43B in the year of payment, a win-win situation for the assessee both under the indirect tax as well as the direct tax.
The fundamental nature of the scheme is to unburden the courts and ensure quick disposal of arbitration cases to give a sense of certainty to the taxpayer. While CBIC may have reasons for the introduction of the scheme, as well as waiver of interests and penalty, it also needs to introspect and nip litigation in the bud which is often due to capricious or unreasonable demands raised by tax officers who are coping up with the need to enhance tax collections.
In conclusion, the need of the hour is for the Government of India to focus on GST which requires the legacy matters to be resolved at once. A settled GST, improved credit availability, levelled compliance mechanism and efficient revenue department are some of the key drivers that will help Indian economy grow expeditiously in coming future.