TIOL-DDT 1543
04.02.2011
Friday

THE Customs Tariff [Determination of Origin of Goods under the Preferential Trade Agreement between the Governments of Member States of the Association of Southeast Asian Nations (ASEAN) and the Republic of India] Rules, 2009, in Annexure IV specifies 7 countries namely, Malaysia, Singapore, Thailand, Vietnam, Myanmar, Indonesia and Brunei Darussalam. Now Lao PDR is added as the eighth country.

NOTIFICATION NO. 115/2010-CUSTOMS Dated: November 01, 2010

Bring Out Black Money - One More Amnesty Scheme

CAG, CBI, PAC, Supreme Court - all together will not be able to bring in even a fraction of the black money stashed away in foreign banks and for that matter not even the black money in gunny bags in the backyard of almost every politician. We should seriously think of an amnesty scheme to unearth at least the black money lying around in India. The Finance Minister should also seriously think of putting an end to unwanted litigation and try to recover a little of the allegedly evaded taxes.

In Central Excise and Customs alone there are lakhs of cases pending from the level of Assistant Commissioners right up to the Supreme Court of India. It takes about a year or two for an Assistant Commissioner to decide a case, then another year for the first appellate stage, three to six years for the Tribunal and five to ten years for the higher courts. Sometimes by the time a case is decided by the highest court, the issue is no more relevant! We also have cases pending with COD, settlement Commission and revision authorities. In Customs and Central Excise matters(for that matter any matter), the interests of the assessee is in postponing the liability as far as possible and that of the department in getting as much as possible as quickly as possible. In these contradictory goals, it is the lawyers and consultants who ultimately reap the benefits.  Service Tax has already started flooding the judicial system.

While every body agrees that it is futile to be engaged in a long drawn out legal battle, nobody seems to prepared to get out of the legal wrangle, especially in fiscal matters. They say in a war, the first casualty, is Truth. It is true of many of our legal battles. A lot of money, time and paper are wasted in thousands of pending cases at various levels. Tons and tons of printed orders are delivered often repeating the same old decided cases, sometimes over ruling sometimes distinguishing, sometimes just referring and almost always surely confusing everybody.

It was once believed that simplification of procedures and simple language of the laws would reduce litigation. The department has been on a long course of simplification and simple laws. And surely and steadily every simplification has provided an opportunity to the legal fraternity to reap rich harvests. Thirty years ago there was no CESTAT, there was a Commissioner (Appeals) for three or four states, one fourth the present number of Commissioners, no publications, no web sites and the laws were tough to understand and implement. All the simplification has only added to litigation and all the adjudicating and appellate authorities are always busy churning out orders. And nobody is able to clear the arrears of pending cases. The amount of money spent in monitoring these pending cases is also quite huge. Several reports are called for and compiled about cases pending in various stages and even Parliamentary Committees scrutinise the alarming growth of pending litigation. Dutifully, periodical reports on amount of duty locked up in litigation are prepared, analysed and action plans devised to reduce pending litigation and realise arrears of revenue. But the mountain has been growing steadily from strength to strength and all efforts to reduce pending litigation have not met with any reasonable success, except with increased number of posts for arrears recovery.

WHY?

1. Perhaps basically, we are a litigation loving country.

2. Laws' delays are axiomatic in any country, but we thrive on only the delaying capacity of the judicial institutions.  Many of our assessees go in appeal to Tribunal and courts not because they have any hopes of winning the case, but the very fact of delaying payment would help them and who knows what will happen tomorrow? May be there will be a Kar Vivad Samadhan or some such scheme which are meant more for the benefit of law breakers than the ones who obey the laws!

3. On the other hand the departmental officers are trained and tuned to the music of ‘err on the right side".

4. The departments are more litigation lovers than the assessees. The Commissioner (Appeals) is just an intermediate product, never an end. If the Commissioner's order is against the assessee, he will surely go in appeal. If it is in his favour, the department will promptly appeal. All the strictures against frivolous appeals by department go almost un noticed.

5. So given an opportunity we will not let go of an opportunity to appeal. No wonder the appellate forums are full to the brink and overflowing.

In spite of a very apparently profitable proposition of waiver of penalty, interest and prosecution for a 50% payment of duty demanded, the earlier Kar Vivad Samadhan was not very successful. Department only lost cases where their cases were very strong and they would have certainly won. Other cases remained and these other cases constituted the major chunk. The Settlement Commission only offered yet another forum and litigation continues merrily. 

Reports are published that thousands of crores are locked up in court cases. Actually this figure is highly exaggerated. Every rupee locked up in litigation is not revenue. Actually what we may ultimately get is only a fraction of the amount under litigation and that too after years of agonising court room battles and may be a little retrospective legislation!

Is there no way out? There is; if we are prepared to take some drastic realistic measures. There is no point in the blaming game for arrears. We should have another Kar Vivad Samadhan Scheme which should kill most of the pending arrears of cases.

The scheme would work like this:-

++ Ask the litigants to pay just ten percent of the duty demanded and give them total immunity from all liabilities pertaining to that case. Cases pending at all levels should be covered in the scheme.

++ After the scheme is closed, if still there are a large number of cases pending, have an Excise and Customs Adalat, again at all levels. The adalat would constitute of members from the trade, department and an independent judge. Once the amount to be paid is determined, give the party one year to pay the amount, if needed in instalments.

There should be a Samadhan within the department also as follows:-

++ As a one time measure, close all the provisional assessments ordered before 1.1.2011 with absolutely no liability on either side.

++ Treat all the existing Audit paras, both internal and AG's as closed. Simply destroy all the audit files.

++ In all cases booked, if Show Cause Notices are not issued within six months from the date of seizure/detection, return all the seized goods and records with no liability to the assessee. Destroy all the case records.

++ Do away with the five year limitation for demands for the past five years. The five year period should apply prospectively from 1.1.2011.

Our offices and courts will have a better look with all those mountains of paper destroyed and with better looking officers having no worry about those pending arrears and audit objections. In another fifty years, we are bound to clog the system and all the ills will come back, but for now let there be Samadhan and let's start afresh.

A similar exercise should be done in the Direct Taxes side too.

This may make a lot of consultants lose their work, but consistency and clarity are far more important than consultancy.

We made these suggestions last year too and hope something of this sort will be done this year.

Singapore Sojourn for IRS Probationers

THE 61st batch of IRS probationers currently being moulded in NACEN had a Singapore sojourn as part of their training. Pray, what did they learn in Singapore? What training facility is there in Singapore which is not available in India? And NACEN is recognised as an international Centre of Excellence. Was the trip to Singapore at the cost of the nation a shopping trip or an excursion?

NACEN should include in its curriculum a compulsory attachment to an assessee/importer. The probationers should work in a firm/factory of an importer/manufacturer or Service Tax assessee for six months and do all the department related work there. Then they will have some practical experience of how the tax laws work and they will also understand the difficulties of the assessees over whom they are going to exercise their powers. This experience at practically no cost would be far more useful than a Singapore Sojourn!

Department Does not Know Where to File Appeal

"IGNORANCE of the Law is no Excuse" is an oft repeated cliché. Certainly there is no excuse for the unfortunate citizen, but does the principle apply to the Government? Almost with boring regularity, we come across cases, where the Revenue Department files an appeal in the wrong forum.

Recently we came across a case where the Customs Commissioner filed an appeal in the CESTAT in a case related to Drawback. The Tribunal observed,

The issue in this appeal against the order of the Commissioner (Appeals) relates to payment of drawback. Hence the jurisdiction of the Tribunal to hear this case is ousted in terms of proviso to Section 129A of the Customs Act, 1962. The appeal is therefore dismissed as not maintainable along with COD application and stay application and the papers are returned to the Revenue for presentation before the appropriate authority, namely, Joint Secretary (Revision).

The appeal to the Tribunal must have been prepared by a team of officers consisting of examiners, appraisers, Superintendents, Assistant Commissioner, Deputy Commissioner, Additional Commissioner and two Commissioners and none of them realized that they were approaching the wrong forum. Law makers and Law enforcers are allowed the luxury of being ignorant of the laws.

Please see 2011-TIOL-174-CESTAT-MAD

Jurisprudentiol - Monday's cases

BIFR /Central Excise

Delayed Appeal by Central Excise on inaccurate facts - Strictures against Department - Action to be taken against officers who perform their duties casually and without application of mind:  High Court

FAILURE to set out reasons for the delay in the application seeking condonation of delay shows complete callousness and dereliction of duty on the part of the Officer who had affirmed the application seeking condonation of delay. It is high time that appropriate action is taken against such officers who perform their duties casually and without application of mind.

Income Tax

Sec 158BC - Whether option of protective assessment is available to assessing officer even in block assessment cases - YES, says Delhi High Court

THE  issue before the Bench is - Whether the option of protective assessment is available to the AO even in the block assessment cases. YES, rules the Delhi High Court.

Service Tax/Central Excise

It is nobody's case that there is no connection between the manufacture of cement by appellant and pollution caused by such activity - Availment of CENVAT credit of Service tax paid by agencies conducting such certification is proper in law : CESTAT

THE appellant is engaged in the manufacture of cement, which is governed by the pollution control law. This law requires periodical certification of pollution level in the factory premises. As required by the law, the appellant availed the service of certification of pollution level in their factory premises, from two agencies during the period of dispute. The Service Tax paid by the said agencies was availed as CENVAT credit by the appellant treating the same as ‘Input Service'.

The jurisdictional authorities have objected to this availment on the ground that any service in relation to inspection or certification of pollution level was not a taxable service and consequently credit of any service tax on such service was not admissible.

See our columns Monday for the Judgements

Until Monday with more DDT

Have a Nice Weekend.

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