Interest settlement part of indirect tax scheme with some riders: HC

Tax authorities' order not allowing disputes arising out of interest payment for resolution quashed

The Madhya Pradesh High Court has quashed an order by the tax authorities to not allow disputes arising out of interest payment for resolution under a settlement scheme.

The authorities had earlier rejected an application for resolving a dispute arising out of interest payment under the Sabka Vishwas Legacy Dispute Resolution Scheme. The scheme was launched in 2019 to resolve all disputes relating to the erstwhile Service Tax and Central Excise Acts, which are now subsumed under GST, as well as 26 other indirect tax enactments including the Agriculture Produce Cess Act, 1940, the Coffee Act, 1942, specific finance Acts.

The application was rejected because it was considered that the interest part is not covered under the expression “tax dues” for seeking benefit under the scheme.

In another case earlier, the High Court had directed the Central Board of Indirect Taxes and Customs (CBIC) to dwell upon the issue and issue a circular to remove the ambiguity.

The CBIC examined the matter and said that it had already earlier clarified that assessees are eligible for waiver of interest in case they had filed the relevant form and paid full tax dues on or before June 30, 2019.

In view of the above explanation, the court quashed the decision of tax authorities to reject the application for interest settlement under the scheme. 

Abhishek Rastogi, who argued over the case in the court, said the objective of the scheme was to reduce litigation even in those cases where there is no tax liability and the waiver of interest and penalty is available. 

"As there was some confusion in several cases related to this aspect, the matter is now settled and a lot of such issues could be resolved to reduce litigation," said Rastogi, founder Rastogi Chambers.