Alternative statutory mechanisms for effective dispute resolution

By Lalit Kumar

Taxpayers were expecting some form of an SVLDRS -- Sabka Vishwas (Legacy Dispute Resolution) Scheme -- to be announced in the Union Budget targeted at disputes in service tax or Customs.

SVLDRS was widely acclaimed in providing relief to the taxpayers, reducing litigation as well as mobilising revenue. However, with the onset of the Covid pandemic in March 2020, a large number of taxpayers suffering physical as well as financial distress could not avail of a closure under the scheme due to failure in paying dues in time.

Now that there does not seem to be an intention of reviving the window, taxpayers need to focus on other statutory mechanisms for effective dispute resolution.

To give a big fillip to voluntary disclosures and reducing litigation, the government has re-activated the Customs, Excise & Service Tax Settlement Commission, which had not been functional since May 2021. The Department of Revenue has appointed a chairman and two members to the Settlement Commission. As per a public notice issued by the Commission in December 2022, all four benches at Delhi, Chennai, Kolkata and Mumbai are now functional.

As an alternate dispute resolution mechanism, the process of Settlement Commission has inherent advantages over all other statutory concessions under the Customs Act or Finance Act (Service tax).

Firstly, the order of the Commission is final and not subject to review by the department. This brings finality in ending a tax dispute from the government's side. Also, the powers of the Commission to grant immunity from prosecution and waiver of penalties and fines make for good and straight forward business economics.

Members of the Settlement Commission are very senior functionaries of CBIC, usually in the rank of Principal Chief Commissioner. Taxpayers get the fullest opportunity to make arguments in a formal court setting and can expect delivery of well-balanced orders. This addresses the often-repeated complaint of a revenue bias in departmental proceedings.

Over the last two months, the Chief Commissioners of Customs in Mumbai, Delhi, Chennai and Kolkata have all organised public seminars for advocacy of the settlement process.

Laudably, the Principal Chief Commissioner of Customs in Mumbai has issued a public notice creating a cell to assist and educate taxpayers about the provisions for settlement of cases before the Commission.

The only drawback of the settlement scheme is its time-limited window. The taxpayer must approach the Commission before the case is adjudicated, failing which the option is no longer available. It would be a progressive step towards alternative dispute resolution to allow taxpayers to approach the Commission at any stage of the dispute cycle, subject concurrence by the field formations. However, this will require a change in law, which can now only be considered during the budget exercise in 2024.

Source: IANS