After more than two years, Maharashtra announced the much-awaited scheme through a resolution on November 25, 1998. The Abhay Yojana is a complicated scheme. The object of granting amnesty to those who had not paid tax so far, from October 1, 1986 may, no doubt be a wholesome one; but the scheme is tagged with several conditions. If the scheme has to be described in one sentence it is "a premium to those who did not pay tax and a penalty to those who followed the law in letter and spirit and paid the tax on their transactions of works contract".

Need for reconsideration

The scheme is restricted to those who are in tax arrears under the Works Contract Act as on December 1, 1998. This means that contractors who had followed the law and paid taxes lawfully will not be able benefit from the scheme. This is contrary to the provisionsof Article 14 in the Constitution. Similar provision under the Karvivad Samadhan Scheme pronounced by the union government has been struck down by the Delhi High Court in a public interest litigation. The administrator of the Works Contract Act should take note of this and modify the scheme so that everyone would be able to take advantage of it.

Refundable amount not refundable: Note No.1 under Clause 3 is devastating because it does not provide for refunding the refundable amount as per the act. It has been provided that the refundable amount for any period would be adjusted towards tax dues for the later period and the balance amount that remains after such adjustment, would then be adjusted towards the interest and thereafter even penalty. This is contrary to the very object of the amnesty scheme.

Another aspect of Note No.1 is that if a contractor does not desire to take the benefit of the scheme for a specified year in which the amount may have been statutorily determined to be refundable,such refund is provided to be adjusted towards the tax liability, interest liability and penalties for subsequent years for which the contractor may have applied. This may prove to be a stumbling block for the success of the scheme.

Note 2 makes it clear that under no circumstance the amount that has been paid as tax interest or penalty prior to December 1, 1998 would ever be refunded. Note 3 notifies that no assessee could claim the benefits of the scheme partly. Therefore benefits will have to be in relation to the entire tax dues including the interest and penalties. The aforesaid Note 3 may in any cases, prove to be a disincentive to the contractors because it may be possible that the contractor would desire to get the benefits only in relation to tax or interest or penalty and not all the three. This calls for a fresh look at the note concerned.

Clause 4 refers to the benefits that may be available under the scheme and makes it clear that tax waival would be available only under the Works ContractAct meaning that though the amnesty scheme is under the Works Contract Act as well as Transfer of Right to use the Goods Act (Lease Act) there would be no waiver of tax under the Lease Act. In this connection it is provided that upon payment of the percentage that is applicable to a particular contractor, the rest of the tax that may have been determined as per order of assessment, would be waived off. The above provision when considered with condition No.2 under clause 5 makes it clear that unless there is an order of assessment passed by the sales tax authority for the period in question, no benefit would be available. How can an assessee force an authority to pass an order of assessment within the prescribed period, for enabling the contractor to get the benefits under the scheme?

In my opinion, the clause relating to the determination of tax as per order of assessment; should be done away with in entirety and it should be open to the contractor to decide the amount of tax that would be payable for aparticular year and seek the benefit of the tax as provided in the scheme.

It may however be added that one per cent or three per cent payable under the scheme is to be calculated on the total contract value and not on the value of goods utilised in the execution of works contract. Under the above circumstances where the contractor had effected purchases from registered dealers under the Bombay Sales Tax Act, will have no liability under the Works Contract Act for the period from January 1, 1992 to April 30, 1998.

Since the scheme covers the period up to March 31, 1998, such contractors will have no occasion to take advantage of the scheme. However contractors purchasing materials from other states will be in an advantageous position as they will get a waiver of the balance tax amount.

It would therefore be contrary to the provisions of Article 303 of the Constitution, which prohibits the state legislature to make any law giving preferential treatment to assessees from one state overanother.

Unwarranted formula: The formula for the purpose of determining the tax payable under the scheme may create several unintended results. According to me, the entire formula could have been done away with. That would have made the scheme more effective than the present one. Now turning to the conditions in clause five, the first condition provides that the scheme can be availed of by contractors who are registered under the Works Contract Act. Condition No.5 requires a certificate from departmental officers who gave the contract, to the effect that the contract did not provide for any payment of tax separately or the contract value dos not include any amount of tax nor will they sanction any payment to the contractor towards the tax.

Going by our past experience, the contractors will find it difficult to obtain the certificate in the manner provided in the scheme as many of the contractors may not have preserved the copy of the contract and the department as usual would claim that the records arenot readily available. This will result in denial of the benefit to the contractors eligible for complete relief in tax. The condition of obtaining certificate therefore should be done away with.

I hope the authorities who are the implementing agency for the scheme would reconsider the entire matter with the object of giving the desired benefit to the contractors. If that is done, I am sure the state revenue will gain enormous amount, much more than expected by the department.