MARCH 12, 2018

By S Murugappan, Advocate

COME March. Pendency disposal fever catches officers working under CBEC. But its pain is felt far and wide by the assessees.

It is no secret that there is a huge pendency of show cause notices to be adjudicated and appeals to be decided under the Central Excise and Service Tax laws . Introduction of GST from July last year has mounted pressure on CBEC to liquidate the huge pendency of cases under the erstwhile provisions.

Inspite of repeated instructions over the years by CBEC to field formations to clear pending cases, there is a huge pendency of cases. Broadly the reasons for such pendency are - (1) At the slightest pretext show cause notices / demand notices are issued indiscriminately. (2) No categorical time frame is fixed for closure of such notices. (3) No accountability is fixed on the authorities for disposing of such notices. (4) Notices are issued with sketchy details for fancy amounts without strong grounds which make it difficult for the officers to decide.

But when March arrives, in a state of frenzy, pending issues are disposed of, mostly in favour of revenue and then all these travel to the appellate stage as appeals, clog the appellate mechanisms and stay there as their pendency.

To come out of the self-created pendency problem, CBEC has issued several circulars. (1) Circular No. 1049/37/2016-CX dated 29.9.2016 specifically stating that in view of huge pendency of adjudication of service tax cases, the service tax cases are to be earmarked to Commissioners of Central Excise and Commissioners (Audit) of Central Excise also. (2) Master Circular No. 1053/2/2017-CX. dated 10.3.2017, superseding 89 circulars issued earlier on the same subject with regard to issue of notices, adjudication process and recovery of arrears. To be fair to CBEC, safeguards to be undertaken by the adjudicating officers are specified in detail in this circular but the circular goes on to hold that show cause notices issued by DGCEI after investigation can be adjudicated by Additional Director General of DGCEI as well as his subordinate officers. (3) Circular No. 208/6/2017-S.T. dated 17.10.2017 containing proposals to re-allocate 50% of appeals pending with Commissioner (Appeals) to other officers such as Principal Additional Director General or Additional Director General posted in Directorates, Principal Commissioners / Commissioners of Central Excise and Service Tax and Commissioners of Central Excise and Service Tax (Audit) with a view to "eliminate" pendency of appeals by 31.03.2018. The circular goes on to add that the reduction in pendency is to be addressed on a "war footing" and appropriate administrative arrangements with support staff should be made.

From the above instructions, it is clear that the purpose is to "eliminate" pendency on "war footing". When accumulated pendency is to be liquidated on a war footing, the essential principles governing the adjudication process can go awry. Basically, administrative adjudication or quasi-judicial adjudication is always looked upon with suspicion. Though such suspicion may be unwarranted, the reason is administrative adjudication can result in arbitrary exercise of powers by the authorities in disregard of established principles of transparency, natural justice and laws of evidence. Secondly, in respect of tax matters, the tendency is always to err on the revenue side. Thus, coupled with opacity and lack of publicity, unbiased approach can be a rarity. It is common to hear adjudicating officers state that they have to take care of their position whereas an assessee has multiple levels of appellate remedies. Thus, protecting one's seat takes priority over providing justice to an assessee.

The instructions contained in the Circulars referred to above can bring in uncertainty and unpredictability because of huge number of pending cases spread across the country and hundreds of officers (with different perspectives) nominated to deal with them.

Consequently, the issues that arise will be manifold.

One, officers will dust the files untouched for years and grant hearing on consecutive dates without any break to take care of the provisions relating to grant of three opportunities, in letter, but not in spirit. The result will be a fast churning out of orders confirming demands and imposing penalty etc. that are frivolous, one sided, non-speaking and un sustainable against law.

Two - they will run through the hearings as ceremonial necessities. There are instances where orders are typed and kept ready even before the conclusion of hearings.

Three - DGCEI officers who investigate cases, can also adjudicate those cases. While there is apparently no unconstitutionality in such arrangements one cannot overlook the legal maxim "nemo judex in causa sua" i.e. one person cannot be a judge in his own cause. An officer who, and an office which, has investigated a case cannot afford to drop that case. To do otherwise, will be to invite department's wrath and establish their in competency.

Four - The fate of 50% of the pending appeals to be decided by other than Commissioner (appeals), hangs on other officers who may not have a proper exposure to appeal processes and the minimum requirement of laws they have to keep in mind with regard to those processes.

Five - when pending cases are converted into orders demanding taxes or imposing penalties, for the assessees to file appeals there is a mandatory requirement of pre-deposit of the duties / taxes or penalties demanded. Previously, atleast, if the assessee has a prima facie case then total waiver from pre-deposit could be claimed from the appellate forum. But that has become a thing of the past since now pre-deposit is mandated by law irrespective of the merits of the case. Therefore, arbitrary exercise of power to protect one's position can become a costly affair for an assessee who has to cough up pre-deposit to fight an unjust demand.

We cannot forget the saying "justice hurried is justice buried".

The root cause for the situation is CBEC's adoption of "get rid of" approach than "solve the problem" approach. There can be several simple ways to prevent accumulation of pendency of notices or appeals but the only difficulty is the implementation of such measures. First, indiscriminate issue of notices on frivolous issues is to be stopped. There should be a monitoring mechanism for this and when notices are not sustained that should get reflected in the issuing officer's performance report. A Commissioner used to say that it will be very easy for a Superintendent to issue a demand for Rs.50 crores with a stroke of his pen, but extremely tough for a Commissioner to drop it.

Second, once a hearing is over, a time frame to issue of order should be scrupulously followed. In fact, in Circular No. 732/48/2003-CX. dated 05.8.2003, CBEC has instructed that an officer should pass orders within five days of conducting the hearing and where this limit cannot be adhered to in a particular case, order should be issued within fifteen days or at the most one month from the date of conclusion of the hearing. Such circulars are observed more in breach than in compliance. The officers should not grant hearing and should not waste their time and the assessee's time, if they cannot pass orders after hearing, within a reasonable period. There are numerous instances where hearing is granted but officers fail to pass orders for months or even years together. When longer periods are taken for decision making, fair play steps aside and corruption sets in and extraneous issues take the field.

Third, there are also instances where officers go on transfer after hearing the assessee in a case but without passing any orders. Result is, holding of repetitive hearings for the same matter. Officers who heard the assessees should be made to pass orders before they are allowed to go on transfer.

Finally, the officers should be made accountable for the orders they pass and the fact that such orders are sustained or thrown out in subsequent proceedings should get reflected in their performance reports. This will make the officers pass reasonable orders and make them think twice before confirming frivolous demands and passing non-speaking orders.

All these may be asking for too much.

For the time being the Advocate fraternity can expect to be kept busy in March and the coming months, preparing appeals overtime and keep counting their fees.