AUGUST 29, 2018

By Vijay Kumar

But will they?

THE Indian citizen knows very well how to face the fury of nature and the calamities it brings, without foreign assistance (assumed or real) or an additional Cess on GST (which is being strongly contemplated.) Look at the happy faces in Mumbai enjoying an annual urban flood or the ones swimming against the powers of nature in that God's own land. The Indian taxpayer is no different. He knows how to withstand the fury and might of the Government and its army of officers meant to serve. It is really one of those Indian mystical secrets that quite well-educated, rather rich businessmen suffer silently the hurricane of government fury, just for the fun of running their businesses. In a recent GST case before the Supreme Court, one of the judges is reported to have stated, "if you (government) poke industries like this, they will run away". No! your lordship. They will not run away, they will stand and face all the humiliation, all the difficulties, all the tax terrorism, just to stay in business.

And what is tax terrorism ? It is what the opposition leaders think is the government's tax policy - until they come to power. The present rulers were shouting about tax terrorism when they were in the opposition and the other day, former Finance Minister Chidambaram said, "The way the GST is implemented is an example of tax terrorism... you ask someone to file 37 returns in a year in a single state. If he has all-India business, he has to file over 1,000 returns. What else is tax terrorism?" So, what tax terrorism is, depends on whether you are in government or opposition, but for the victims of terrorism, it makes absolutely no difference whether it happens under A's regime or B's.

GST is supposed to be a technology driven tax and it was campaigned that everything will be online and contact with officers will be almost nil. But what happens if technology fails? Even the Courts, which will have to go by the laws made, is helpless when the taxpayer has to be punished for the incompetence of the machines and the great men who handle them. There used to be a time when merchants used to follow certain conventions to carry out business smoothly and settle disputes. Once societies developed and the need to manufacture GDP statistics became an unavoidable governmental function, the "Law Merchant" had to give way to hastily and faultily legislated statutes, which had to be interpreted strictly against the wily merchant and in favour of the holy State, even when the mechanism created by the State fails. As Justice Wilson remarked, "in almost every nation, which has been denominated free, the state has assumed a supercilious pre-eminence above the people who have formed it. Hence, the haughty notions of state independence, state sovereignty, and state supremacy."

GST is one year old, going strong and litigation is steadily reaching the High Courts as the highways are blocked by enthusiastic taxmen. Just look at some of the High Court cases reported by us in the last couple of months.

1.  2018-TIOL-2846-HC-DEL-GST: The issue was that the assessees were not able to upload data regarding input credit. The Government informed the Court that out of the 17000 such cases, 13000 have been resolved and the rest would be resolved soon. The Court advised the petitioner assessee to approach the grievance redressal mechanism.

2.  2018-TIOL-2845-HC-KERALA-GST: The petitioner, a firm, purchased some tiles in Gujarat and was transporting them. The respondent authority seized the vehicle and demanded payment of tax/penalty. The Court directed the Government to release the petitioner's goods on its providing the Bank guarantee for the value of the goods. Thereafter, the authorities may proceed further, in accordance with law.

3.  2018-TIOL-2844-HC-KERALA-GST: In the above case, the party went in appeal to a Division Bench pleading that Bank Guarantee should be on the tax amount and not value of goods. The High Court agreed.

4.  2018-TIOL-2843-HC-KERALA-GST: A trader, an assessee under the new tax regime (GST), wants to carry goods (timber) inter-state. The vehicle intercepted on the route, it faces detention - and a possible confiscation - proceedings. It has not uploaded or carried with it a completed e-way bill: Part B is incomplete. After receiving a notice, the trader replied, and then received an order: the detaining officer demanded tax and penalty under the law. Aggrieved, the trader questioned the detention and the concomitant proceedings. The High Court noted:

On 4th August 2018, the Assistant State Tax Officer (Intelligence) [the ASO] intercepted the vehicle. The ASO obtained the driver's statements and issued Ext. P4, P4 (a) and P4 (B) besides passing the Ext.P5 detention order, alleging that the e-way bill accompanying the consignment was not fully filled in. On the same day, the ASO also issued the Ext. P6 notice under section 129 (3) of the combined Acts (CGST and KSGST).

After repeatedly failing to upload part B of the e-way bill, petitioner claims to have approached the Deputy Commissioner, SGST. Again, on advice, he tried once more and, at last, uploaded part B. Then it filed the Ext. P8 reply along with the Ext.P7 copy of the e-way bill, incorporating Part B as well. Still, on 6th August 2018, the ASO issued the Ext. P9 demand notice, demanding tax and penalty, both amounting to Rs. 187,916/-.

In his order, the Judge made some interesting observations:

In a federal constitutional set up, coordination rather than subordination at its heart, the States and the Central as the constituents have demarcated spheres of legislation and governance. With clearly demarcated legislative fields, neither legislation can trespass upon the other - the residuary powers lying with the Centre, though. The division of powers is zealously guarded in no other sphere than fiscal. Taxation as the backbone of a welfare nation, which India is, the legislative fields are as distinct, yet interconnected, as the spinal segments.

That said, 101st Constitutional Amendment is the epoch-making federal feat unparalleled in constitutional democracies - almost. It is, I may say, a constitutional coup de grâce delivered against the fiscal confusion compounded by conflicting taxation regimes. This amendment, perhaps, marks the crest of cooperative federalism. It has given rise to even a constitutional institution - GST Council.

As the times pass by, utopian vision of justice has given way to a utilitarian view. Material comfort or upliftment has become the hallmark of good governance. So economic analysis of law substitutes the notion of justice with the notion of economic efficiency and wealth maximisation. True, nations like France successfully embraced GST regimes in the 1950s. Even federal polities like Canada replaced MST (Manufacturer's Sales Tax) with GST (Goods and Services Tax) in the 1980s. India joined the fiscal reform bandwagon a little late. Tentative it was to begin with, but determined it is in this new federal fiscal path.

A nascent enactment in a nebulous field of taxation will have many teething troubles. GST is no exception. In its path to perfection, GST has much dust to settle - legislatively and judicially. These are the days of confusion and cacophony: many views, many interpretations, and many jurisprudential mumblings.

Indeed, before passing the Ext.P9, the Assistant State Tax Officer ought to have heard Garuda (petitioner). That is what Section 129 (4) mandates: No tax, interest, or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard. But the fact remains that an order was passed, and it needs to be challenged.

So, the Court ordered that, once the petitioner provides the bank guarantee for the tax and penalty and bond for the value of goods, under Rule 140 of the Rules, it will have the goods provisionally released - and then pursue the appellate remedies - all because the Department's system malfunctioned!

5.  2018-TIOL-2841-HC-KERALA-GST: The petitioner has now migrated to the Goods and Services Tax regime. To use the input tax available to its credit at the time of migration, the petitioner had to upload FORM GST TRAN-1 within the stipulated time. The petitioner asserts that though it attempted to upload the form within the time, it failed because of some system error. The petitioner, therefore, seeks directions for taking credit of the available input tax. The Court observed, "Not only the petitioner but also many other people faced this technical glitch and approached this Court. If the petitioner applies within two weeks after receiving this judgment, the Nodal Officer will consider it and take steps within a week thereafter. If the uploading of FORM GST TRAN-1 is not possible for reasons not attributable to the petitioner, the authority will also enable it to take credit of the input tax available at the time of its migration.

6.  2018-TIOL-2838-HC-MAD-GST: In several cases including this one, s um and substance of the prayer of the petitioners is that they are unable to upload Form GST TRAN-1 to take credit of the Input Tax /Service Tax/Central Excise Duty availed by them at the time of migration within the time stipulated. Similar prayers were made before the High Court of Chhattisgarh, High Court of Delhi and High Court of Kerala. The Court directed, "The Nodal Officer nominated will, in consultation with the GSTN shall take note of the grievances expressed by the petitioners/assessees and forward the same to the grievance committee, who in turn would take an appropriate decision in the matter within a period of three weeks from the date on which the applications are received in proper form."

And this is the ultimate - No Account, only Cash?

7.  2018-TIOL-2804-HC-KERALA-GST: The petitioner, dealing in Marble and Granite, was a dealer under the Kerala Value Added Tax Act. Later it migrated to General Sales Tax Act (GST Act). When he supplied a consignment of goods to another dealer, the GST Officer intercepted the goods and issued detention proceedings. Later, he issued show cause notice under Section 129(3) of the GST Act. Eventually, he demanded tax and penalty of Rs.22,880/-.The petitioner paid the penalty in the portal of GST under Section 49 of the Act. When it wanted the release of the goods, the GST Officer insisted that the petitioner ought to have paid the amount either in cash or through demand draft. Aggrieved, the petitioner has filed this writ petition. The Court declared that the insistence that the petitioner should pay the amount either in cash or through demand draft cannot be sustained. As is further evident, the petitioner is a dealer registered under the CGST. Cumulatively viewed, the petitioner's paying the penalty under receipt to the portal of GST is eminently sustainable. Therefore, the Court directed that the GST authority, release the goods, after receiving receipt. 

You think any of these petitioners will run away and stop doing business?