MAY 29, 2017

Dr. Awdhesh Singh

GST is around the corner and the whole nation is waiting for July 1, 2017, when the greatest economic reform since Indian independence is to be implemented. The GST Act is drafted by the government learning from its experience of the implementation of other indirect tax laws dealing with Central Excise, Service Tax and VAT. GST law is built over the strength of different laws and eliminates many weaknesses that jeopardized the successful implementation of the earlier laws.

One of the greatest changes in the GST Act is linking of the tax demands with adjudication rather than mere issue of demand notice. In the earlier laws of Central Excise and Service Tax, the time limit for issue of Show Cause (cum-demand) Notice (SCN) was the limiting factor for the tax demand. Therefore, in most cases, the tax officers would issue the demand notice within time to protect the revenue. Thereafter, they shall adjudicate the cases as and when convenient to them, though the department expected them to do the same within a period of one year from the issue of demand notice.

However, there are lakhs of cases in the CBEC formations which are pending adjudication not only from several years but even decades. These cases are not shown in the list of pending cases as they are kept in Call Book . Once the case goes to call book, it rarely comes back for the departmental adjudication. However, such demands continued to be shown in the balance sheets of the assessee as a liability. Such pending demands continue to put the assessee under pressure and also affects the perception of the company in the eyes of the shareholders and common public.

Call Book Provisions in CBEC

Call book provisions exist in Central Board of Excise & Customs (CBEC) since ages though no similar provision exist in its sister origination i.e. Central Board of Direct Taxes (CBDT) in the same department. There have been several circulars issued in the past regarding the call book. The latest circular of CBEC is the master Circular No. 1053/02/2017-CX Dated the 10th March, 2017 which provides following guidelines for transferring the cases to the call book. The circular states -

A call book of cases is maintained of such cases which cannot be adjudicated immediately due to certain specified reasons and adjudication is to be kept in abeyance. The following categories of cases can be transferred to call book:-

i. Cases in which the Department has gone in appeal to the appropriate authority.

ii. Cases where injunction has been issued by Supreme Court/ High Court/ CEGAT, etc.

iii. Cases where the Board has specifically ordered the same to be kept pending and to be entered into the call book.

iv. Cases admitted by the Settlement Commission

Similar Provisions in the GST Regime

As the limitation period of the demand and adjudication have been fixed under the GST Act, GST Act has made specific provisions for taking care of the issues arising out of delaying of the adjudications due to transferring the cases to call book, which it intends to carry forward in the GST regime as well. The relevant provisions are as following.

75. General provisions relating to determination of tax.

(1) Where the service of notice or issuance of order is stayed by an order of a court or Appellate Tribunal, the period of such stay shall be excluded in computing the period specified in sub-sections (2) and (10) of section 73 or sub-sections (2) and (10) of section 74, as the case may be.

….

(11) An issue on which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is prejudicial to the interest of revenue in some other proceeding sandan appeal to the Appellate Tribunal or the High Court or the Supreme Court against such decision of the Appellate Authority or the Appellate Tribunal or the High Court is pending , the period spent between the date of the decision of the Appellate Authority and that of the Appellate Tribunal or the date of decision of the Appellate Tribunal and that of the High Court or the date of the decision of the High Court and that of the Supreme Court shall be excluded in computing the period referred to in sub-section (10) of section 73 [ Three Years ] or sub-section (10) of section 74 [ Five Years ]where proceedings are initiated by way of issue of a show cause notice under the said sections.

Such a provision in the GST Act is unfair to the taxpayer, bad for the revenue and also prone to litigation for the following reasons.

1: Unfair to Taxpayers

When a taxpayer or the department files an appeal in any Higher Appellate Forum (HAF) [Appellate Authority, Appellate Tribunal, High Court& Supreme Court], the decision can go either of the two ways.

•  Decision goes in favour of Revenue

•  Decision goes in favour of taxpayer

According to the law of the judicial discipline, such decisions would be binding on all lower authorities which shall now be, at the most, of the rank of Additional Commissioner of Central or State Tax. Hence, the consequential actions shall be as following:-

•  If the decision of Higher Appellate Forum is in favour of the Revenue, department can immediately decide all the pending adjudication accordingly and proceed to recover the amount unless the party gets a stay from the higher forum.

•  If the decision is in the favour of taxpayer, instead of giving all the consequential benefits during the adjudication, it can delay adjudication indefinitely by transferring all such cases in call book

Thus the taxpayer is a loser in either way the case is decided in the HAF. Such a law is unfair to the taxpayers as it harms them both ways. In order to win the confidence of the taxpayers, we must have fair laws for both the taxpayer and the tax collector.

2: Justice Delayed

It is a common practice in the department that all cases, which go against the revenue, an appeal is filed in the HAF. There will always be some Commissioner somewhere in India, who would have filed the appeal at the HAF on every issue and that would permit any other Commissioner of the department to transfer the case to the call book and deny the benefit of the favourable judgment to the assessee.

The assessee would have to wait till the matter is final settled in the Honourable Supreme Court of India. This process may take several years and even decades. Till such time, the taxpayers shall be liable to pay the interest on the tax demanded in the SCN till the matter is adjudicated.

The tax department would also lose in the process since the provisions of time-bound adjudication can be made redundant using the provisions of call book.

3: Prone to Litigation

The aforesaid provisions for the exclusion of such time for adjudication is also prone to litigation. Suppose, there is a demand on 10 different issues of an amount of Rs.10 crores. There is one issue for which an appeal is filed before HAF where the amount involved is merely Rs.50,000/-. The departmental officers would be able to transfer the whole case into call book on that ground thus delaying the justice to the assessee for several years.

Will it not be better if the case is adjudicated even by dropping the demand of Rs.50,000/- and realize rest of the revenue for the Government?

If the assessees take the case to the Courts and establish that the grounds are not identical or the delay in the adjudication on such ground is not justified, the entire demand of notice can be quashed on the ground of limitation.

Suggestions to FM

In order to give justice to the taxpayers and improve efficiency of the revenue department, it is requested that the aforesaid provisions and other similar provisions must be deleted from the Act. If the judgements of HAF are in favour of the taxpayers, let them have the same benefits as the departments have due to favourable judgments.

In case, the government wishes to keep the provisions in the law book in exceptional cases, the transfer of cases to call book should be permitted only on the direction of the Government/Board on the advice of the GST Council. In such cases, the assessee shall get the same advantages as available when injunction has been issued by Supreme Court/ High Court/CEGAT.

It can also be provided that if the case is not adjudicated within a period of 3/5 years as proposed in the Act, the liability to pay the interest beyond this period shall stand waived off by the law as the assessee should not be punished for the delay on the part of Government to pass the adjudication order in the hope of getting a favourable judgment from the HAF.

( Dr Awdhesh Singh is the author of the books "Practising Spiritual Intelligence" and "The Secret Red Book of Leadership". He has done is B Tech and M Tech from IIT Varanasi & Delhi and PhD from IIITM Gwalior. He joined Indian Revenue Service (Customs & Central Excise) in 1991 and took voluntary retirement after serving the Government for over 25 years. He was conferred World Customs Organization Certificate of Merit in 2011 and Presidential Award from Government of India in 2015.)