April 04, 2013

By B N Gururaj, Advocate 

IT is the common experience of the Assessees and Counsels in indirect taxes field that as the second half of the financial years commences, the zeal of the Revenue for recovery of dues raises its ugly head. The officers dust off the old files, look at obscure provisions and write to the assessees to either pay within so many days, or else....

This financial year, the Revenue officers have been gifted a very potent weapon in the form of Circular No. 967/1/2013-CX, dated 1.1.2013. Some, who are conversant with the Act have also found another statutory weapon which was suffering from atrophy, Section 35C(2A) of the Central Excise Act, 1944 and corresponding provision in Section 129B of the Customs Act, 1962. The Revenue officers have painstakingly written letters demanding payment forthwith, even in respect of paltry demands of around Rs.50,000.

The Industry as a whole has, with its typical efficiency, rushed to the jurisdictional High Courts invoking writ jurisdiction for staying the hands of the Revenue. Everyone has been granted relief for asking. All that one had to say in the High Court was just one word “Circular” and relief would be handed down! No statistics are available in the public domain to tell us how much money has indeed been recovered pursuant to “The Circular” and Section 35C(2A). But, the assessees at the receiving end have spent a tidy fortune to engage counsels to get some breather.

The pertinent observations of the Bangalore Bench of the Hon'ble Tribunal, made a couple of days back is justified. But for this circular, the Revenue would have perhaps realised more money by way of pre-deposits and higher disposals of stay applications. The circular has added tremendously to the burden of the Tribunal and its Registry, with no benefit whatsoever to anyone, except perhaps to the counsels.

Tax journals and websites have been flooded with articles written by the tax professionals, expressing pained astonishment at the zealous but illegal attempt at recovery of dues. This is but natural as the tax professionals are hired as taxpayers' mouth pieces – they let out their eloquence, anger, anguish on behalf of their clients. But, the ones who are actually affected by the sudden recovery zeal have maintained deafening silence – none of us have heard the Industry Leaders speak of or against this recovery drive!

Giving press statements is not something new to the Industry Captains. But, in this particular instance, the Industry honchos and leaders of Industry and Commerce Associations and Federations seem to have decided that silence is golden. Even such rare companies of corporate India who pride themselves of carrying on their business in completely above board manner and in a socially responsible manner haven't considered it necessary to speak out against the illegal revenue recovery drive.

Finance Bill 2013 has proposed introduction of more ugly provisions: (1) recovery of dues from the third parties who money to the assessee – garnishee orders with no protection to the payer; (2) making some of the Central Excise, customs and service tax related offences non-bailable and conferring the power to grant bail on ACs and DCs; (3) clipping the wings of the CESTAT by curbing the inherent power to grant extension of stay orders. Even such provisions with potential for causing huge mischief in future haven't prompted the Industry heads and the Leader to speak up against such provisions.

The reasons can be manifold. Some can be guessed and listed below:

++ Industry leaders don't understand the legal issues behind the recovery drive and oppressive penal provisions. Hence, they do not want to speak about these matters.

++ Heads of industry are too busy to be concerned about Central Excise or customs or Service Tax matters. They don't mind paying up couple of crores of rupees to the Government, even of the money is not legally owed to the Government.

++ Facing and warding off such demands is the job of the obscure clerk or manager who sits in Stores, or Accounts or Purchase departments. Give him a good firing now and then, he will shape up and do the needful.

++ Arrest, attachment etc happen to others and not to us.

++ Too busy with the sales and despatch to catch up with the targets in the month of March.

++ Heads of Industry Associations and Federations are busy rubbing shoulders with high ranking bureaucrats and ministers, and cannot be bothered to represent the problems of their constituents.

++ The job of industrial bodies is merely to submit pre-budget and post-budget memoranda to the mandarins of the Department of Revenue, is luckier, to the Finance Minister himself, and avail the Photo Op.

++ At individual level the business entities, and heads of business association have self-interest as upper most concern, and do not want to run the risk of taking up cudgels on behalf of others.

++ All the industries and their heads are afraid of retaliatory and vindictive action by the Revenue, if they come to the ‘adverse notice' of the Revenue officers. Retaliation may be in the form of search, seizure, audits, inspection visits – each one sufficient to ruin several days of an industry, in the busy month of March.

One may keep adding up more motives for supporting this deafening silence of the Industry leaders. Read any business magazine or business daily to read about successful businessmen who are known to be go-getters, demanding bosses, captains, magnates and moguls of industries. But, none of them have bothered to protest against the oppressive statutory provisions and illegal recovery drive. They are observing silence, where there is a duty to speak.