F.No.
137/96/2008-CX.4
Government
of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
***
New
Delhi dated the June 4th, 2008
To,
Chief
Commissioners of Central Excise & Customs (All)
Chief
Commissioners of Central Excise (All)
Director
General of Service Tax
Director
General of Central Excise Intelligence
Commissioners
of Service Tax (All)
Commissioner
(DPPR)
webmaster@cbec.gov.
in
Sir/Madam,
Sub: Guidelines in respect of the Dispute Resolution Scheme,
2008-reg.
The
Dispute Resolution Scheme, 2008 has been notified vide Chapter VI of the
Finance Act, 1994. This compounding
scheme has been notified as a one time measure for quick resolution of
disputes (a) involving small service tax amounts upto Rs 25000; and (b)
involving non-recovery of penalty or interest. However, cases involving
non-payment of service tax after having collected the same from
client/customer are not included in the Scheme.
2.
Salient feature of the Scheme: The salient features of this
Scheme are as follows:
(i)
The Scheme covers all such cases where tax arrears, including interest
and penalty, were payable or leviable under the Finance Act, 1994, but not
paid prior to 1.3.2008 and where a Show Cause Notice/order has been issued on
or before 1.3.2008.
(ii)
This Scheme would be in operation from 1.7.2008 to 30.9.2008.
The benefit, concession or immunity under the Scheme would only be available
in respect of the case in respect of which declaration is made under the
Scheme within this period;
(iii)
The Scheme shall not apply to (a) any show cause notice or order issued
under section 73A of the Finance Act, 1994, i.e., cases involving non-payment
of service tax after having collected the same from client/customer; and(b)
any case where tax arrears includes service tax amount of more than Rs 25,000;
(iv)
The order passed under the Scheme would be conclusive and would not be
subjected to any appeal. Any pending appeal in the matter shall stand
withdrawn. In such cases where the declarant has pursued a petition in a court
of law, he shall withdraw such petition for availing benefit of this Scheme in
respect of such matter;
(v)
The amount paid under the Scheme would not be refundable under any
circumstances;
(vi)
The Central Government
shall have power to make rules to implement this Scheme as well as for removal
of difficulties for implementation of this Scheme.
3.
Procedure to be followed: The Dispute
Resolution Scheme Rules, 2008 have been issued vide
notification No. 28/2008-ST, dated
4.6.2008. These rules prescribe
the manner of declaration to be made under the Scheme by the person (declarant)
opting for it. These rules read with the provisions of Chapter VI of the
Finance Act, 2008, provide the procedure to be followed for operating the
Scheme, which is as follows:
(1)
The Commissioner of Central Excise shall, for the purposes of this
Scheme notify, by way of an officer order, an officer not below the rank of
Assistant Commissioner of Central Excise as the designated officer.
(2)
The declarant, opting for the Scheme, shall make a declaration before
the designated officer in Form 1 (as prescribed under rule 3 of the aforesaid
Rules).
(3)
The designated officer shall get the declaration
verified. Upon verification of declaration, the designated officer shall,
within fifteen days, issue an order (as prescribed under section 96 (1) of
Chapter VI of the Finance Act, 2008), indicating the amount to be paid by the
declarant for resolution of dispute under the Scheme. The manner of
calculation of tax arrears and the amount payable under the Scheme has been
discussed in the subsequent paragraph along with illustrations. The format for
issuance of order under section 96 (1) is annexed herewith to ensure uniform
practice. Accordingly, the designated officer shall issue the order in the
specified format.
(4)
The declarant shall, within thirty days pay the sum determined by the
designated authority, vide order as mentioned above, and intimate the fact of
such payment along with an evidence of payment of amount. In addition, the
declarant shall also produce the evidence of withdrawal of case pending, if
any, in a High Court or the Supreme Court, in the matter being resolved under
the Scheme.
(5)
On receipt of information regarding payment of sum determined by the
designated authority and evidence of withdrawal of case pending in the matter,
if any, before a High Court or the Supreme Court, the designated authority
shall issue a certificate in Form 2 (as prescribed under rule 5 of the
aforesaid Rules), certifying full and final settlement of tax arrears in the
case in respect of which declarant had opted for this Scheme.
4.
Compounding amount: The compounding amount under the Scheme is
as follows:
(i)
In a case where a pending SCN involves a service tax amount upto Rs
25000/-, with penalty or interest relating there to, amnesty under the Scheme
would be available on payment of an amount equal to 50% of the service tax
amount involved in the SCN. The penalty and interest would stand waived.
(ii)
Similarly, in the case of
a confirmed demand, where service tax arrears amount as on 1.3.2008 is upto Rs
25,000, with unpaid interest or penalty
relating
there to, amnesty under the Scheme would be available on payment of an amount
equal to 50% of the service tax arrears. The penalty and interest would stand
waived.
(iii)
In a case where an SCN is pending only for imposition of both, penalty
and interest, amnesty under the Scheme would be available on payment of 25 %
of the interest payable plus 25% of the ‘maximum’ prescribed penalty
leviable. If maximum penalty leviable exceeds the service
tax amount, the penalty amount would be taken as equal to service tax amount
for computation of compounding amount under the Scheme. Thus, in such case the
compounding amount would be 25% of interest payable plus 25% of the penalty
involved (taken as equal to service tax amount, if penalty exceeds service tax
amount) in the offence.
(iv)
In a case where a confirmed demand involving only interest or penalty,
amnesty would be available on payment of 25% of the unpaid amounts towards
interest or penalty. In such
cases too, if the penalty imposed is more than the service tax involved, for
the purposes of the scheme, the penalty would be taken to be equal to tax
amount.
4.1.
Illustrations as regards manner of computation of amount payable:
A few illustrations showing the manner of computation of amount payable under
the Scheme are given below:
A.
Cases
where Show Cause Notice has been issued but not adjudicated:
Illustration
1:
The
show cause notice involves (i) a demand of service tax of Rs 20,000;
(ii) interest at the applicable rate; and
(iii) penalty as applicable under various sections of the Finance Act.
The service tax amount has not been paid on the date of declaration under the
Scheme:
The
tax arrears
as per section 94 (b) of the Finance Act, 1994:
(i)
Service tax: Rs 20,000
(ii)
Education cess: as applicable (as mentioned in the show cause notice)
(iii)
Interest: as applicable (as mentioned in the show cause notice)=I
(iv)
Penalty: not decided
The
compounding amount shall
be @ 50% of service tax amount plus education cess payable thereon= Rs
10,000 plus education cess on Rs 10,000.
Penalty
and interest shall be waived off.
Illustration
2:
The
assessee has already paid the service tax amount of Rs 20,000 along with
education cess. However, a show cause notice has been issued demanding
(i)
interest at the applicable rate; and (ii) penalty as applicable under various
sections of the Finance Act, 1994.
The
tax arrears
as per section 94 (b) of the Finance Act, 1994:
(i)
Service tax: Nil
(ii)
Education cess: Nil
(iii)
Interest: as applicable (as mentioned in the show cause
notice)= say Rs 5000
(iv)
Penalty: not decided. However, for the purposes of this Scheme, the maximum
penalty that is leviable as per the show cause notice will be taken as tax
arrear subject to the condition that in case the penalty leviable exceeds the
service tax amount involved, the maximum penalty leviable shall be taken as
equal to service tax. Therefore,
(a) suppose the maximum penalty leviable is twice the service tax
amount i.e., Rs 40,000. The penalty amount shall be taken as Rs 20,000.
The compounding amount shall be @ 25% of Interest +25% of penalty
= 0.25X5000 + 0.25X 20000 =1250+5000=Rs 6,250.
(b)
Suppose the maximum penalty
leviable is Rs 5000 ( which is less than the service tax amount). The penalty
amount shall be taken as Rs 5000
The compounding amount shall be @ 25% of Interest +25% of penalty
=
0.25X5000 + 0.25X 5000 =1250 +1250=Rs 5,000.
B.
Cases where an order has been passed, including the cases where orders
have been passed in appeal
Illustration
3:
The
order confirms (i) a demand of service tax of Rs 25,000;
(ii) interest at the applicable rate; and (iii) penalties of Rs 10000.
The service tax amount, interest and penalties have not been paid on the date
of declaration under the Scheme:
The
tax arrears
as per section 94 (b) of the Finance Act, 1994:
(i)
Service tax: Rs 25,000
(ii)
Education cess: as applicable
(iii)
Interest: as applicable = say Rs 2000
(iv)
Penalty: Rs 10000
The compounding amount shall be @ 50% of service tax amount plus education cess payable thereon
=
Rs 12,500 plus education cess on Rs 12,500.
Penalty
and interest shall be waived off.
Illustration
4:
In
the above illustration (illustration 3), the assessee has paid the service tax
amount of Rs 25,000 along with education cess. However, (i) interest at the
applicable rate; and (ii) penalties have not been paid.
The
tax arrears
as per section 94 (b) of the Finance Act, 1994:
(i)
Service tax: Nil
(ii)
Education cess: Nil
(iii)
Interest: as applicable (as mentioned in the show cause notice)= say Rs
5000
(iv)
Penalty: Rs 10000.
The compounding amount shall be @ 25% of Interest +25% of penalty
= 0.25X5000 + 0.25X 10000 =1250 +2500=Rs 3,750.
Illustration
5:
The
assessee has paid the service tax of Rs 25,000 along with education cess.
However, interest and penalties as imposed by an order has not been paid. As
per the order interest liability is Rs 10,000 and the penalties imposed are Rs
30,000. The order confirms (i) a demand of service tax of Rs 25,000;
(ii) interest at the applicable rate; and (iii) penalties of Rs 30,000.
The interest and penalties have not been paid on the date of declaration under
the Scheme:
The
tax arrears
as per section 94 (b) of the Finance Act, 1994:
(i)
Service tax: Nil
(ii)
Education cess: Nil
(iii)
Interest =Rs 10,000
(iv)
Penalty: Rs 25,000 (Note: as the penalty imposed is more than the service tax
amount involved in the case, the penalty amount shall be taken as equal to the
service tax amount)
The compounding amount shall be @ 25% of Interest +25% of penalty
=
0.25X10,000 + 0.25X 25000 =2500+6250= Rs 8750
Illustration
6:
The
order only involves only a demand of interest of say Rs 100,000; and (iii)
penalties of Rs 50,000. Service tax and cesses have already been paid.
The
tax arrears
as per section 94 (b) of the Finance Act, 1994:
(i)
Service tax: Nil
(ii)
Education cess: Nil
(iii)
Interest =Rs 100,000
(iv)
Penalty: Rs 50,000
The compounding amount shall be @ 25% of Interest +25% of penalty
=
0.25X100,000 + 0.25X 50000 =Rs 25,000+Rs 12,500=Rs 37,500
5. As
stated above, the Dispute Resolution
Scheme Rules, 2008 have been issued vide
notification No. 28/2008-ST, dated
4.6.2008.
6.
The Commissioner of Central Excise and Service shall notify well in
advance, by way of an office order, the designated officer in respect of their
jurisdiction.
7.
This Scheme envisages culmination of pending litigation by quick
resolution of pending disputes which fall within the specified
Wide publicity may be given, in the form of trade notices,
advertisements, seminars and interaction with the trade associations to make
the stakeholders aware of the Scheme. Any
difficulty faced in implementing the above provisions may be immediately
brought to the notice of the undersigned.
8.
Receipt of the Circular may be acknowledged.
9.
Hindi version will follow.
Yours faithfully,
(Gautam
Bhattacharya)
Commissioner
(ST)
Encl:
As above
Annexure (Circular No.
102/5/2008-ST)
ORDER
ISSUED UNDER SECTION 96(1) OF THE FINANCE ACT, 2008, IN RESPECT OF THE DISPUTE RESOLUTION SCHEME, 2008
Whereas Mr./Mrs./M/s. ........................................................... (hereinafter referred to as the declarant) has filed a declaration under section 94 of the Finance Act, 2008;
And whereas the said declaration has been received on ___________ in the office of the designated authority.
Now, therefore, in exercise of the powers conferred by sub-section (1) of section 96 of the Finance Act, 2008, the designated authority after considering relevant material, hereby determines the following amount payable by the declarant towards the full and final settlement of his/her/their tax arrears covered by the said declaration under the Scheme.
|
Tax arrears |
Amount of tax arrears declared in Form 1 (as prescribed vide the Dispute Resolution Scheme Rules, 2008) (In Rs.) |
Amount
determined as payable under section 96(1) of the Finance Act, 2008 (In Rs.) |
Remarks |
|
(a)
Taxes (b)
Education cess (Primary) (c) Secondary and higher education cess (d)
Interest (e)
Penalty |
|
|
The
declarant is hereby directed to make payment of the sum payable within thirty
days from the date of this certificate.
Place
:
Date
: Name, signature and seal of the Designated Authority
CAclubindia
Aisha
Published in Service Tax