TIOL-DDT 2713
28 10 2015
Wednesday

THE least that you expect from an adjudicating authority is that he knows that he cannot adjudicate a case without putting his assessee on notice and if he does not know elementary principles of law, the mandatory requirement of a Show Cause Notice is incorporated in the various laws pertaining to taxes.

See the interesting details of this case.

A firm applied for a Service Tax registration as a scientific or technical consultancy. The Superintendent of Central Excise issued a letter stating that the firm could not be given registration under scientific or technical consultancy services and suggested that their services would fall under the category of Consulting Engineer. The superintendent also advised the firm to obtain registration as a consulting engineer for the services under the category of Consulting Engineer. The firm tried to justify with the authorities how their services cannot be termed as Consulting Engineer. The Deputy Commissioner of Customs and Central Excise issued an order to the firm demanding service tax for the period from 07.07.1997 to 30.06.2001.

Okay, the Deputy Commissioner was blissfully unaware that he could not adjudicate without notice. The Commissioner (Appeals) was no better. He confirmed the order of the Deputy and dismissed the appeal of the firm.

The CESTAT found that the firm was never issued a show cause notice as required under Section 73 of the Finance Act, 1994 . On that ground alone, the CESTAT set aside the impugned order. The CESTAT's order was dated 08.05.2007 (2007-TIOL-1315-CESTAT-BANG).

Against the order of the CESTAT dated 08.05.2007, Revenue filed an appeal in the High Court in 2012 - after five years!

One of the substantial questions of law raised was:

Whether the Honourable CESTAT is justified in setting aside the order in appeal passed by the Commissioner (A) and the speaking order passed by the original adjudicating authority on the short question that there was no show cause notice on record even though there was a lot of detailed correspondence between the department and the respondent relating to category of service and also tax liability, penal provisions and interest under various sections of Finance Act followed by a speaking order observing all principles of natural justice?

The Counsel for the Department while admitting that no show cause notice was issued as required under Section 73 of the Finance Act, submitted that the respondent had submitted a detailed explanation and it was considered and rejected quantifying the amount payable by the respondent, as such, there is a substantial compliance on the part of the department and the non-issuance of show cause notice is only a technical breach on their part.

The High Court observed that it is an undisputed fact that the Tribunal had categorically recorded that no show cause notice was issued at any point of time and the order of the Commissioner was set aside on that ground. The procedural requirement of issuance of notice and calling for explanation cannot be dispensed with as otherwise the demand of money in the name of tax is in violation of the very procedure prescribed under the Act, thus violating the safeguard provided under Article 265 of the Constitution of India.

The High Court found no merit in the Revenue appeal and dismissed it.

If this was a matter of classification, shouldn't the appeal have been filed in the Supreme Court? How does this kind of appeal get filed in the High Court?

When a Commissioner forgets to file an appeal in the Supreme Court, the easy way is to file an appeal in the High Court. Moreover, filing an appeal in the Supreme Court involves consultation with the Board - as far as High Court is concerned, Commissioner is king. Even when they know that it is wrong to file an appeal in the High Court, they resort to this, because when the appeal is dismissed by the High Court on jurisdiction or on merits, they can go to the Supreme Court against the High Court order. And thus keep the great Litigation Machinery well-oiled.

And in this case, it took them five years to file an appeal in the High Court. The tax involved is all of seven lakhs of rupees. Just imagine how much money they must have wasted in trying to get the seven lakh rupees!

The Deputy Commissioner who passed the order in original, the Commissioner (Appeals) who sustained that order, the Commissioner who decided to appeal to the High Court against the Tribunal's order - all, they all knew pretty well that an adjudication order without notice is not valid and yet all of them tried to make a virtue out of the blatant blunder of the Deputy Commissioner and played a cruel joke on the administration of justice. These are the people responsible for clogging our courts and they call themselves Revenue Officers!

Isn't it strange that for filing an appeal in the CESTAT against an order of a Commissioner, you need the approval of two Chief Commissioners, while you don't need anybody's approval for filing an appeal in the High Court against an order of the Tribunal? And the order of the Tribunal could have been written by a former High Court judge!

We bring you this High Court order today. Please see Breaking News

Smuggling of Gold - What is "ingenious concealment"? - ADC instructs Adjudicating Authorities

WHAT is "ingenious concealment"? In a recent instruction to his colleague ADC and all the Deputy Commissioners/Assistant Commissioners in the Mumbai Airport Customs, the Additional Commissioner of Customs, CSI Airport, Mumbai, states,

The term "ingenious concealment" has not been defined anywhere. However, keeping in mind the recent trend of smuggling, the interpretation ingenious concealment has been narrowed down. Now not only in cases where gold was found concealed in emergency lights, DVD players, TV, Shoes, etc. but also in cases like concealed in undergarment, specially stitched Pocket etc. are also viewed as ingenious concealment by the department. Except the cases where gold is found in pant pocket, baggage etc., all other clever concealments are treated as ingenious concealment while reviewing order.

This fact now may be kept in mind by all adjudicating authorities while issuing/Passing the adjudication order in cases involving gold smuggling .

He actually wants absolute confiscation of gold in case of ingenious concealment and that such gold should not be released on redemption fine.

Is gold kept in the underwear of a lungi clad man concealment - ingenious or otherwise? Imagine a lungi clad passenger arriving at the airport with gold in his underwear? Is he ingeniously concealing gold? His lungi has no pockets and that is the only place where he can safely keep the gold. Is he guilty?

Can you give instructions to Adjudicating Authorities? Is the Additional Commissioner competent to give instructions to the Adjudicating Authorities on how they should pass adjudication orders? He says he has the approval of the Principal Commissioner to issue these instructions. For that matter is the Principal Commissioner competent to give instructions on adjudication? The Adjudicating Authority is supposed to be an independent authority who should decide the case based on facts and law and not on the basis of instructions from his colleague or boss. Is this not an interference on the quasi judicial function of the adjudicating authority?

CSI Airport Customs, Mumbai F.No.SD/Adjn/Misc.-23/2013-14 Adjn., Dated: October 13, 2015

I-T - Ease of Doing Business and Reducing Litigation - Govt Appoints Committee

THE Government has appointed yet another Committee with lofty goals. This Committee headed by Justice RV Easwar, former President of ITAT is to:

i) to study and identify the provisions/phrases in the Act which are leading to litigation due to different interpretations;

ii) to study and identify the provisions which are impacting the ease of doing business;

iii) to study and identify the areas and provisions of the Act for simplification in the light of the existing jurisprudence;

iv) to suggest alternatives and modifications to the existing provisions and areas so identified to bring about predictability and certainty in tax laws without substantial impact on the tax base and revenue collection.

Justice Easwarbrings with him unparalleled experience as a lawyer, Member and President of ITAT, judge of a High Court and a qualified chartered accountant. For about ten years in ITAT, he must have heard every litigated provision in the Income Tax Act and is undoubtedly the most eminently qualified person to head this committee.

But what do they do with the reports of the Committees? Usually they gather dust in the insignificant corridors of Delhi's powerful buildings.

This Committee is supposed to submit its first batch of recommendations by 31st January 2016. Maybe the FM has enough time to include some of them in the Finance Bill 2016.

In the ease of paying taxes, we have remained almost where we were.

Ease of Doing Business - India's rank improves

INDIA now ranks 130 out of 189 countries in the Ease of Doing Business according to a World Bank Group Report. Our rank was 142 last year. According to World Bank Chief Economist and Senior Vice President Kaushik Basu, "A forward movement of 12 spots in the ease of doing business by an economy of the size of India is a 'remarkable achievement."

China is ranked 84 and Pakistan is at 138th place. Pakistan slipped 10 spots from 128 in 2014 while China has moved six spots in a year from 90 since the last report. Singapore remains at the top.

India shows the potential gains many countries could make by pushing through economic overhauls. The government has enacted a number of policies that have bolstered investor and business confidence. For example, eliminating the minimal capital requirement needed to start a company and cutting the bureaucratic red tape needed to get electricity helped propel the country up four spots in the rankings. The government's economic restructuring efforts have helped avert financial turmoil and make the country the fastest-growing major emerging market in the world.

Make Life Easy for Assessees and Difficult for Evaders

LAUNCHING two projects of the Income Tax Department - "e-Sahyog", a project aimed at reducing compliance cost, especially for small taxpayers and "special PAN camps in remote areas", the Finance Minister Arun Jaitley said that the objective of the Income Tax Department is to make life as easy as possible for the assessees and difficult only for those who consciously evade taxes. These digital initiatives will help in creating a positive environment.

The FM launching the projects from the office chamber of the Chairperson of CBDT, in North Block, Delhi yesterday.

Until Tomorrow with more DDT

Have a nice day.

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