A pragmatic solution

An amnesty scheme is a provision that allows individuals or entities to voluntarily disclose and pay their dues in exchange for avoiding penalties. It is a pragmatic way to complete unfinished business.

Some departments like the property tax department develop amnesty schemes to allow defaulters to pay their dues with relaxation in the form of rebates for tax penalties, interest etc. Municipal departments often introduce such schemes to reduce the burden of additional charges on defaulters and as tax relief in the form of rebates offered by authorities to allow a window for the tax defaulters to clear their dues. GST too had announced an amnesty scheme giving a chance to defaulters.

One recent report mentions that the government has recovered about Rs. 852 crore under the amnesty scheme for exporters for one-time settlement of default, and was likely to increase further. This is the power of an amnesty scheme, it helps collect colossal amounts, yet gives relief to many.

A look at the history of the Amnesty Scheme for Employees State Insurance shows that it was introduced in the 1990s, to grant amnesty to those employers who had committed offences under the ESI Act, 1948, and were facing prosecution in Section 85 of the said Act. Prosecution of employers made it quite expensive and time-consuming apart from loss of goodwill. Amnesty Scheme in such cases provided great respite from such issues as well as loss of revenue to ESIC was curtailed.

In some cases of non-compliance, not all, there could be genuine unawareness. However, ignorance of the law is no excuse. In law, ignorantia juris non excusat (Latin for "ignorance of the law excuses not"), or ignorantia legis neminem excusat ("ignorance of law excuses no one"). It is a legal principle that a person who is unaware of a law may not escape liability for violating that law merely by being unaware of its content. However, when laws are so ambiguous, there needs to be middle path solutions for provisions which are multifarious, and complicated. Amnesty scheme is one such mid-way solution which has twofold benefits, i.e. reducing loss of revenue for concerned departments and freedom of mind of individuals/entities. This is even more important when it comes to individuals and small and middle-level employers.

Non-payments result in revenue loss for the government. Thus, amnesty schemes have been often introduced in the past to collect some of these unidentifiable taxes. The scheme enables taxpayers to voluntarily disclose and pay a specified tax amount in return for a waiver of tax liabilities like penalty, interest, etc. The schemes are generally valid for a limited time.

Failure to make payment of taxes and other statutory obligations includes legal implications involving the recovery of tax dues, additional fines and sometimes even imprisonment, based on the seriousness of the offence. Amnesty schemes help departments increase their annual recovery and, at the same time give peace of mind to citizens. For instance, under various legislations including Labour, there are provisions for criminal prosecutions such as under Employees Provident Fund and Miscellaneous Provisions Act, 1952, Building and Other Construction Workers Welfare Cess Act, 1996, apart from recovery of principal amount, interest, damages etc. Introducing an amnesty scheme for such provisions may provide relief, and reduce frivolous small litigations apart from benefitting authorities in the expeditious collection of amounts. Of course, any such provision which causes losses in payments to employees should be avoided.

One disadvantage of amnesty is that it may influence even citizens who had previously been scrupulous with their tax payments. Therefore schemes should be floated with great caution and not absolute exemption or with the permissibility of opting for schemes with limited defaults or inclusive of lesser rate of interest etc. It could be brought for complicated provisions, or where there is the possibility of mass violations owing to ignorance or exorbitant taxation, or where there is likelihood of genuine lack of knowledge, as well as ambiguous provisions, and not for usual compliances. Nor should there be such schemes when it comes to issues like payment of wages etc. Also, such schemes would be arbitrary if taken out to benefit a particular group of people. Needless, for senior citizens, schemes should be liberal.

Considering our vast number of statutes, huge population pragmatic schemes like amnesty are a way of allowing correct non-compliance. These must be designed and implemented cautiously. There needs to be a balance between encouraging non-compliant payers to pay well and retaining compliance from those who are generally compliant.

The writer is a practising Advocate in Supreme Court and High Court of Delhi. Views expressed are personal