FEBRUARY 16, 2015

By E Ramesh

DISPUTES arise because parties to the dispute strongly believe that the merit lies on their side, despite the fact that mainly it can lie on any one's side only. In the event of not finding any solution at the level where it has arisen, such disputes are taken for dispute resolution through the process of adjudication. In the matters of taxation about which this article revolves the adjudication is done by quasi-judicial authorities. Adjudication is the legal process of resolving disputes. The principle of equity demands fair decisions in any adjudication, which makes judiciary a most reliable entity among all the organs of governance.

The hierarchy for dispute resolution starts with lower authority or Original authority, who adjudicates the matter by issuing original order. Unavoidably, tax adjudicators in majority of the cases, happen to be the applicant of the dispute. In other words, they represent the side they belong and form opinion about the issue due to which the dispute arose. Few exceptions to this sort include Notices issued by the investigating agencies like, DGECI, DRI, SIIB or Notices issued on account of audit objections etc. The adjudication process that starts with the issuance of Notice ends with the passing of Order by the Original Authority upon hearing the respondent concerned. The logical expectation on the outcome of such orders would be that at-least fifty percentage of such orders should be giving relief to the respondent, if not more. Because, neither the tax authorities nor the Noticee (assessee or importer) can be expected to be totally correct in what they argue.

Given this background, a cursory look at the state of affairs in the area of adjudication by the lower authorities makes any sensible person disturbed as almost all cases are confirmed in a casual manner. Unlike other litigations, tax adjudications rely more on facts and interpretation than on evidence or witness. As it involves lot of interpretation with reference to the parent Act and other allied Acts, all such Orders passed by the Original Authorities are aptly called as Speaking Order, leaving little scope for ambiguity. Unfortunately, a vast majority of the Orders speak for the side the adjudicator owes allegiance to and hardly the points raised by the respondent are being discussed. More than not, the non-speaking nature of the Original Orders, the reasons ascribed for such confirmation are the cause of worry.

It is the fact that the Lower Adjudicating Authorities are entrusted with adjudication powers with the limited mandate to pass Orders. The quasi-judicial nature of this power deprives them of the independence other judicial officers are perceived to be enjoying. Though, they seem independent as far as passing Orders based on the facts presented, their inherent limitations with regard to listening to the instructions of their superior officers cannot be ignored. There is a fear of the sword hanging above their head, the probability of the same getting dropped increases with every relief the lower authority offers to the Noticee. The increasing instances of lower authorities facing departmental proceedings for passing orders against the will of the bosses and against the Notices issued by the investigating agencies such as DRI and DGCEI further endanger the situation. All this has resulted in ‘play safe' attitude of the authorities by confirming what is said in the Notices and severely under mining the process of adjudication by the lower adjudicating authorities. In the entire episode, the severely affected are the one who have merit on their side and most importantly those who are struggling to establish their business with the initial start-ups.

The effect of the confirm syndrome are multifold and its unabated growth would damage the very foundation of taxpaying secondary and tertiary sectors by crippling their financial ability without any reason. The appellant department has got nothing to lose as they are not investors but collectors of tax in strict sense. Armed with the Acts and Rules, they have an upper hand and the initiation of any process, which includes a dubious one, disturbs the other party to the dispute who has to endure the long process of litigation. Demand of tax liabilities, fine and penalties constituting major part of the Orders and the present period of litigation at the Appellate forums like Tribunal and Higher Courts extending up to five years or more make the existence of the appellant more vulnerable once the litigation comes to an end. This is with particular reference to appellants who are made to deposit the demands till they get the relief in higher judiciary. With the amendments making certain percentage of pre-deposit of duty demand and penalty mandatory, the situation of beleaguered appellants is made more worse.

Good governance requires proper functioning of all organs of government. Executive assisted by bureaucracy is essential in efficient functioning of government. Tax administration plays a major role in not only collecting the revenue but in facilitating the taxpayers by way of instilling confidence with regard to fair discharge of their duties. The notion that tax collection at any cost is definitely not supported by law as it says there shall no levy and collection of taxes without the authority of law. Blatant misinterpretation of certain provisions of law and confirming the same with the obvious disadvantage to the taxpayer just for the purpose of grabbing the money for the exchequer is nothing short of misuse of authority. More so is the illogical argument, ‘let me confirm it and you can get relief at the appellate level'. Both the adjudicator and the people responsible for such coercion should understand that by making the lower adjudicating authority defunct, they are not only putting the well-established system in jeopardy but also inflicting severe damage to the innocent taxpayers. Added to the above is the piling of cases at appellate level causing inordinate delay in disposal and pressure on adjudicators to hear the issue in detail.

Before I conclude, it won't be improper to share what I overheard recently - that a Central Excise Chief Commissioner has instructed his Commissioners to confirm all the pending cases so that they can get sizable revenue in the form of mandatory pre-deposit on appeal by the parties.

This makes one wonder about the attitude of tax administrators who display scant regard to the judicial process and the plight of innocent taxpayers who are the victims of mal-administration.

(The views expressed are strictly personal.)