AUGUST 26, 2020

By Vijay Kumar

A rather routine notification by the Government yesterday caused widespread fear, anxiety and confusion among the tax consultants, reporters and advisers.

A brief history:

As per Section 50 of the CGST Act, replicated in all the SGST Acts also, the interest on delayed payment of tax had to be paid on the gross amount and not on the cash portion. This was Frankenstein in all his might. It resulted in an absurd conclusion that if you had to pay a tax of 100 rupees and you had a credit of 99 rupees and you could not pay that cash liability of one rupee, you had to pay interest at 18% on the whole of 100 rupees. For that one rupee, you may be required to end up paying 36 rupees or more. Just multiply these figures with crores and you will know how intimidating it is. As usual, taxpayers had to ring the bell in agony before the High Courts. Fortunately, the CBIC, the author of the complicated and confusing legislation saw reason and suggested to the GST Council to amend the law to provide for interest only on the net amount and not gross.

As it often happens with fiscal legislation, the amendment to Section 50 did not solve the problem. It was not notified till yesterday. Then there is a big doubt as to whether the amendment has retrospective effect or not. The Madras High Court - 2020-TIOL-382-HC-MAD-GST has already held that it has retrospective effect, even though it was not notified when the Court held so.

Then all of a sudden, a Member of the CBIC entered the scene and riled up the Hornet's Nest with his instructions to the field to collect the astonishing amount of Rs.45,000 crores of illegitimate interest. Fortunately, again the CBIC itself and the GST Council saw reason and the Council in its meeting in March decided to put an end to this fiasco.

Did it?

The Press Release issued by the PIB immediately after the Council Meeting states:

Interest for delay in payment of GST to be charged on the net cash tax liability w.e.f. 01.07.2017 ( Law to be amended retrospectively ).

It was finally notified yesterday 63/2020-CT as to be effective from 01.09.2020, and all hell broke loose. What about retrospective effect? What about the decision taken by the GST Council? Professionals are worried (or happy?)

Actually, there is nothing to worry. The amendment to Section 50 took place much before the GST Council took the decision to make it retrospective. Now they have only notified the effect from a prospective date. They couldn't have made it retrospective by a notification. Parliament has to do that. Wait till the next budget and they will hopefully remember to do it. In the meantime, don't create panic - already we have a pandemic virus far more active than all our tax problems put together. That's how laws are made.

Actually, there is no need of any retrospective amendment. In fact, there was no need of an amendment, let alone a retrospective one at that. If the system did not allow, what the law did, the remedy was to correct the system and not the law. Just because you could not put the portal in order, do you ask the Parliament to change the law? Shouldn't you show a little more respect to Parliament? Since the law is already amended, there is no need to amend it further to make it retrospectively effective. The Madras High Court - 2020-TIOL-382-HC-MAD-GST has already held so. The Government can give a clarification that the amendment would have effect from 1.7.2017. They can also think of giving a 'Removal of difficulties' Order under Section 172. This could be a simple solution to the problem, but are we ready for simple solutions?

In an order last Friday, the Orissa High Court - 2020-TIOL-1424-HC-ORISSA-GST] took notice of the GST Council decision and directed the Superintendent, Central GST and Central Excise, Berhampur to dispose of the representation filed by the petitioner on 06.05.2020 keeping in view the decision taken in the 39th meeting of GST Council, as expeditiously as possible.

So, the amendment is, practically retrospective - only the lawyers should make some money. Maybe some lawyers group can circulate a model affidavit to be filed in High Courts. The lawyers should thank the government for opening new doors, when many seem to be closing on them.

Mandatory Virtual Hearing in GST?

CBIC has decided to make it mandatory for various authorities, such as Commissioner (Appeals), original adjudicating authorities and Compounding Authority to conduct personal hearing, in respect of any proceeding under the Customs, Central Excise, Service Tax and GST through video conferencing facility. Board has issued instructions in F.No. 390/Misc/3/2019-JC, dated 21st August 2020, superseding the Instruction dated 27.04.2020 on the same subject.

So, now your hearing is online and it would solve many problems faced in live hearings. See this story, I wrote ten years ago.

Personal Hearing - A Big Farce

The other day, a client wanted me to attend a personal hearing before an adjudication authority of the Central Excise Department. I told him, "it's a waste of time; you can send your clerk or peon and ask him to reiterate the submissions made in the reply to the Show Cause Notice."

The Client was not impressed and he along with another lawyer appeared for the personal hearing. After a harrowing experience, he cursed himself for not following my advice.

He explained his experience to me:

"[At the appointed time, we went to the office of the adjudicating authority and we were told that Sir has gone for lunch and not yet returned. We waited patiently - there was no place for us to sit outside his office, the few chairs on the verandah were occupied by important looking sepoys, one of whom was awfully drunk and asked us for money. He was rude to us when we refused to pay him.

After more than an hour, we are ushered into the chambers of the adjudicating authority. He is surrounded by half a dozen officers all with urgent files and he is giving directions to all of them. He gets a few telephone calls and answers all of them leisurely. During all this, he asked us a few times, "yes, tell me", but unfortunately had no time or mood to listen to us. Twice he was called by his boss and he went out and came in after about thirty minutes. Not even once he mentioned to his boss or the telephone callers that he had a personal hearing and the party was before him. After more than two hours, he tells us, "okay you have anything new to submit other than what you have already mentioned in the reply?". Then he calls his steno and tells us, "you dictate to her whatever you want to say; I will just come back; okay?]"

Even Supreme Court Judges do not enjoy this kind of privilege; once they come to the court, they have to sit there!

Why can't Departmental officers ensure that a particular time is slotted for personal hearing and during that time they are not disturbed by subordinates or superiors? Adjudication should not only be done but seem to be done!

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Reading is not a favourite pastime with many adjudicators and most of their orders are written by Inspectors and Superintendents who are not present during the hearings and so they simply do not know what happened during the hearing. And when the order is put up for signature, the adjudicator does not remember what happened during the personal hearing. So even in the rare cases when the adjudicating officer is convinced about the case during the hearing, this conviction is not found in the ultimate order, because of the gap. If one person hears and another decides, then personal hearing becomes an empty formality.

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While almost all the Commissioners sit in opulent offices, they have not ensured that their visitors have minimum comforts and their visitors are not ordinary people; they are either top assessees or top consultants. The other day I saw a retired Member of the Board sitting on a rickety chair, beside a Sepoy outside an Additional Commissioner's room waiting for a personal hearing with the Big Boss. The Sepoy was sitting in grand style while the former member was squirming in his seat unable to beat the heat and humiliation, while the Additional Commissioner was busy inside, probably with protocol arrangements for his Commissioner. I asked the former Member whether it was necessary for him to go through this humiliation and heat just to get an order which is bound to be against his client. The HUMBLE former Member (maybe humbled after retirement) told me, "let the officer enjoy his ego!" How nice it would have been if the Additional Commissioner had come out of his room and escorted the former Member into his room!

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Personal Hearing at 12.53 hrs - Shubh Muhurt ?

HERE is a Commissioner who knows the value of time - every minute is precious. He has fixed a personal hearing at 12.53 hrs! And his Superintendent who sent the PH Intimation states that no adjournment will be granted and if the assessee fails to appear at the time fixed (mind you 12.53 by the minute - not a second before not a second later), the matter will be decided ex parte.

Normally we find such precise time being fixed for occasions like wedding, but it is perhaps a good omen that the Revenue officers also follow these auspicious timings. Maybe the assessee should be given an option to choose the time so as to exclude durmuhurat and rahu kalam!

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Will the 'Record of Personal Hearing' be Given to assessee?

In an RAC Meeting, the Department clarified,

Though statutorily, no provision is available for giving copy of record of Personal Hearing, taking into consideration the Principles of natural justice, there is no bar in making available the Copy of Personal Hearing Record. However, it is for the individual adjudicating authority to follow this principle.

Many of these issues will be solved in the hearing by video and perhaps that is going to be the new norm. Maybe in the next few years, we will have artificial intelligence for adjudication!

Until next week