JULY 19, 2022

By M G Kodandaram

TODAY, TIOL has reported the Bombay High Court decision in Jaspal Singh Chandok Versus Union of India - 2022-TIOL-977-HC-MUM-CUS castigating the Principal Chief Commissioners of Customs for not appointing a representative to defend the department in Customs cases. The honourable Court vide its order dated 16.06.2022, while considering the prayer of the respondent representative for granting time to obtain instructions and to file Vakalatnama for the revenue, observed - 'Para 2 - We have to express our anguish that there are so many matters in which Customs department, either Sea Customs or Air Customs is involved and nobody appears for them. Therefore, this Court is not able to proceed further in the matter, particularly old matters. There are matters where substantial revenue is involved and the Government will be the loser.'

From the above remarks, it is evident that one of the reasons for the pendency of large number of indirect tax cases in Courts and tribunals is that the departmental chiefs concerned are not attending to these matters earnestly. These types of lapses are recurring due to administrative failures to manage and monitor court cases, that needs to be attended to on top priority, failing which the public exchequer is going to suffer immensely.

In the cited case, the court goes further to record that - 'all the Principal Chief Commissioners, who are posted within the jurisdiction of this Court are put to notice that whenever any matter is listed pertaining to their Commissionerate, either they shall personally remain present in Court and go on with the matter or ensure that a duly authorised advocate is instructed to appear in the matter . If due to absence of any representative the matter is adjourned, it is made clear that the Court will impose costs to be recovered from the Principal Chief Commissioner from his salary under whose jurisdiction the subject matter is covered'. The above remarks clearly indicate the negligent approach of the Revenue department to defend its cases before the Honourable Courts.

The approach of department is no way better in respect of cases pending with the Supreme Court of India also. The Hon'ble Supreme Court, in Union of India &Ors. v. M/s Vishnu Aroma Pouching Pvt. Ltd. &Anr. - 2021-TIOL-192-SC-GST ] imposed a penalty of Rs.25,000/- on the Revenue Department for delay in filing the Special Leave Petition and for wastage of judicial time. Further,the court directed that the penalty be recovered from the officers responsible for the delay in filing the SLP.However, the CBIC has been prompt in issuing instructions and calling for reports. As there is no proper and continuous monitoring mechanism in place to measure the performance of the legal sections of the department, there is serious deficiency in the show of the department before legal forums.

In the latter case, CBIC faithfully followed it up with the issue of a Circular No. 1077/01/2021-CX [F.No.275/65/2013-CX.8A (Pt.)] 19/01/2021 calling for Strict compliance to limitation while filing Appeals/Petitions before Courts/ Tribunal. In the opening part of the circular, the Board observes that Instructions have been issued from time to time regarding strict adherence to the timelines while filing appeals/petitions before High Courts and Supreme Court, the latest being the Instruction dated 23.12.2020 vide file of even no. Despite the same, appeals/ petitions are being filed before High Courts and Supreme Court belatedly, highlighting no extra-ordinary circumstances while filing Condonation of Delay Applications.

Further, the Board has stated that important petitions/appeals filed before Hon'ble High Courts, which would have all-India ramifications and would require policy inputs from the Board should be immediately brought to the notice of policy section concerned of the Board along with Commissioner (Legal). The same should also be mentioned separately in the monthly report being submitted to the Board.

Now, the larger issue is what is happening to all these reports? Any useful policy decision and suitable administrative mechanism created to handle such legal matters is a matter that needs serious contemplation.

Similarly, now in the former issue,CBIC has issued another instruction vide F.No. 275/ 14 /2022 - CX.8 A dated 08th July,2022 in which it plans to Conduct a High Court Litigation Monitoring Fortnight from 14.07.2022 to 27.07.2022. In this,they resort to calling for a report again on issues like whether the Counsel is appointed, the Date of filing of last affidavit by Revenue and the Status of the case. Is it not possible for the Board to circulate the details of cases pending in various courts and seek specific developments in respect of each of such case from the jurisdictional wings? Or Does the Board not have such comprehensive information despite the availability of periodical reports? Are such reports not monitored on regular basis to serve required purpose? These aspects need an introspection to improve upon the management of litigation in respect of such pending cases.

The above instruction records the Court's anguish on non-appearance of counsels in many matters of Customs. The Hon'ble Court has further noted that if any matter is adjourned due to the absence of any representative, the Court shall impose costs, which is to be recovered from the salary of the Principal Chief Commissioner concerned.

This sentence - "In this regard, it has been ascertained that in many old matters pertaining to indirect taxation before Hon'ble Bombay High Court, even the counter-affidavit has not been filed as yet. Further, in many cases the counsels have ceased to be on panel, as most of these cases are prior to year 2007-08, when the indirect tax matters were represented by counsels appointed by the M/o Law & Justice, as the present scheme of empanelment of Sr/Jr Standing Counsel was introduced inthe year 2007-08" appearing in the instructions indicates the state of management of litigation by the legal wings of CBIC.

The data about the pendency of Customs and Central Excise Court cases in various High Courts and Supreme Court furnished along with the reply dated 25th March 2022 in Lok Sabhain pursuance to Unstarred Question No.3810 on National Litigation Policy by Minister of Law and Justice shows the alarming state of pendency and revenue implications in respect of pending cases.

The reasons for the poor show by the department in respect of these legal matters with tribunal and court is mostly due to the apparently negligent attitude exhibited by the officers in charge of handling such cases at the jurisdictional levelas they are not having ready information, motivation, and direction to act upon. The officers are eager to register new cases and are not much interested in the later activities that are essential to protect the interests of the revenue. The later activities like timely investigation to issue of appropriate demand, conduct of speedy adjudication, and paying necessary attention in further legal journey to be undertaken to realise the tax evaded are the key factors that needs to be properly managed. This is lacking in the administrative set up, at present, as there is no appropriate system in place to tabulate and regularly update these activities in a comprehensive manner for effective monitoring.

For this purpose, there is need of creating a facility in the administration to gather such data in real time with timelines duly built in, made available to recognise and perform the required action in an able manner. This is not being done and,therefore, the failure of the department in defending the cases in court of law are recurring. Mere getting reports only to tide over the crisis, will not solve the issue at hand. As time lapses, the files also are either misplaced or not available for timely action, which result in huge loss of revenue. There is need of a systematic aggressive and long-term approach to overcome this weak performance at least in the future.

There is need of having an effective digital backend system wherein the real time information is made available from show cause notice stage for timely action, the author feels. The cases from the stage of issue of show cause notice till the final disposal or recovery of revenue, covering all legal appellate stages and activities need to be built into a digital facility for enabling timely monitoring of cases on real time basis. Unless this kind of back-end system is developed and the officers are not suitably equipped, the performance by them cannot be improved. The Board should consider this on top-priority so that pending cases can be properly managed on time which will help in timely clearance of pending cases. Otherwise, the loss of revenue to the exchequer will continue unabated.

The officers posted in anti-evasion, anti-smuggling and legal wings of the department, in addition to providing suitable data base and backend facility,as stated above,to access all demands related information and files, are to be trained in essential legal and procedural matters relating to functioning of judiciary and tribunals. Such a measure alone will help the department in managing tax related litigation in a progressive way.

[The author is IRS, Assistant Director (Retd), Advocate and Consultant and the views expressed are strictly personal.]