By Vijay Kumar

TWO High Court Judgements compel the attention of this column this week.

Drastic powers of the Act should not be exercised as a matter of course, but only after due application of mind to the relevant factors:

On 11.10.2018, the Assistant Commissioner of State Tax visited the factory premises of the petitioner company. During the course of such visit, he found that there was a stock difference, inasmuch as physical goods valued at Rs.51,73,633/- were found in excess in the factory premises when compared to the recorded quantity. It is the case of the petitioner that under pressure, threat and duress, the Assistant Commissioner obtained a statement of the proprietor and further pressurized the petitioner to deposit Rs.17,00,000/-. The Department also claimed that a total of Rs.55,37,237/- was payable by the petitioner and obtained post-dated cheques of the differential amount from the petitioner under pressure, threat and duress. Subsequently, by an affidavit dated 26.10.2018, the proprietor of the petitioner firm retracted the statement recorded by the Assistant Commissioner.

By an order of seizure dated 12.10.2018 the Assistant Commissioner attached the goods which according to him were found in excess in the factory premises of the petitioner. It is the case of the petitioner that the respondent worked out the amount payable by the petitioner at Rs.55,37,237/- and thereafter, on 22.10.2018, eight bank accounts of the petitioner were attached by the Assistant Commissioner. The petitioner requested the respondent authorities to release its bank accounts; however, to no avail. It is the case of the petitioner that on account of seizure of its goods as well as attachment of the bank accounts, the petitioner is not in a position to carry on its day to day business and make payment of statutory dues like GST, income tax, local taxes, etc. The dealer is before the High Court.

The High Court noted,

A perusal of the computation of tax as made by the first respondent reveals that while assessing the tax liability as well as penalty, he has added 100% to the stock found during the course of search. Evidently therefore, the amount of 37,25,016/- sought to be recovered on the tax and penalty payable on the dues of stock is twice the amount of goods actually found. An amount of Rs.18,00,000/- has been computed on the basis of statement of the transporter by adding 100% of the quantity stated by him. Thus, an inflated amount of Rs.55,37,237/- has been computed towards the tax liability.

From the facts as emerging on record, it appears that the tax liability of the petitioner in terms of the goods seized as well as the transporter's statement, the same would not exceed Rs.13,00,000/-. The petitioner has already deposited a sum of Rs.17,00,000/- with the respondent. Insofar as the amount assessed towards the penalty is concerned, in the absence of any proceedings having been undertaken under the provisions of the GGST Act as well as any penalty having been imposed, in the opinion of this court, the respondent authorities were not justified in resorting to such a drastic coercive measure of attachment of the bank accounts and seizure of goods, which results in bringing the business of the petitioner to a grinding halt.

The High Court quashed the attachment of bank accounts and seizure of goods with the observation, "It is clarified that the fact that the petitioner has deposited a sum of Rs.17,00,000/- during the course of the search proceedings shall not be construed as an admission of such dues on the part of the petitioner."

Before parting, the court deemed it fit to caution the authorities: -

that while exercising powers under section 83 of The GGST Act, the authorities should try to balance the interest of the Government revenue as well as a dealer to ensure that while the interest of the revenue is safeguarded, the dealer is also in a position to continue with his business, because it is only if the dealer continues with the business that he would generate more revenue.

The authorities should keep in mind that bringing the business of a dealer to a halt does not in any manner serve the interest of the revenue. Therefore, while taking action under section 83 or 67(2) of the GGST Act, the concerned authorities should take care to ensure that equities are maintained and while securing the interest of the revenue, they should attempt to see that the dealer is in a position to continue with the business.

Such drastic powers under section 83 of the Act should not be exercised as a matter of course, but only after due application of mind to the relevant factors.

Please see - 2018-TIOL-2937-HC-AHM-GST

There are several cases where bank accounts are indiscriminately attached, virtually paralyzing the business and these unfortunate victims have to approach the High Courts for justice and relief. And it is not as if the High Courts are sitting free without work to decide this kind of writ petitions. Government should realise that killing the goose was never a wise proposition, and more so now, especially when we have just started a new geese farm.

Government vs Government: Though not directly connected to GST, this judgement reveals another dangerous face of the system.

In a global tender, a Company from foreign shores secures a contract to run a complex of duty-free shops in an International airport. The Customs Department receives complaints and acts on them. It inspects the warehouse and duty-free shop, summons records, checks records, suspects malpractice, complains to several investigating agencies, hands down press briefings and, then, suspends the Company's license. The Company complains of harassment, of injury, and of infamy. It accuses the Customs officials of violating the law and procedure. So it approaches a departmental superior. That authority orders the business restoration; yet the officers on the file refuse. As a result, the Company comes to Court.

The Airport Authority laments wanton waste. It claims to have been caught in the cross fire between the Customs and the Company. It shows huge loss to the exchequer.

The questions that the High Court had to answer were:

(1)  Balanced between the departmental necessity and public interest, is the business banishment the only just measure available pending the investigation?

(2)  Have the officials been biased - acting in bad faith?

(3)  In an administrative set up, can an official in the lower rung ignore a directive from the higher rung, on any assumed notion - say, that he acted quasi-judicially but the directive is administrative?

The High Court noted,

The Company alleges that Madhan (its employee) was pressurised to give a false statement, but he did not yield. So the Superintendent and two other officials "brutally manhandled" him. Of this incident, after examining the CCTV footage, the Central Industrial Security Force (CISF) seems to have submitted "an incident report" on the same day. On Madhan's complaint, Police Station has registered a case too.

Then, on 19.04.2018, the Commissioner passed the order, purportedly under Sec. 58B (2) of the Customs Act, 1962. That order has suspended the Company's special warehouse license with immediate effect, pending enquiry. The order also restrains the Company from depositing any more goods in the special warehouse during the suspension. Soon thereafter, on 20.04.2018, followed the order, passed by the Superintendent. That follow-up notice stops all operations in the Duty-Free Shops in the International Airport.

Aggrieved, the Company complained to the Chief Commissioner of Customs. He ordered the Customs officials concerned to let the Company carry on its business. But the Commissioner and other officials remained unmoved. As part of the inquiry, it seems, the authorities arrested the Company's CEO on 02.06.2018. Besides that, the Commissioner has held several press conferences, vilifying the Company and its personnel. He lodged complaints with many Central Investigating Agencies: the Director, Serious Fraud Investigation Office, New Delhi, CBI, ED., to name a few.

The Airport Authority seems to support the petitioner's version of the incident. On its part, it too accuses these two officials of harassment. It has, being a governmental agency, even filed a detailed affidavit through its official, setting out the instances of harassment its officials have been meted out.

The High Court observed, "In fact, the Airport Authority's allegations are disturbing, casting a shadow on the investigative impartiality and the departmental detachment. Neither seems to be present. It has tellingly placed on record a few more allegations of harassment."

The Standing Counsel for Airport Authority of India has complained that because of the rigid unjustified attitude the Customs authorities have adopted, the public interest has immensely suffered. For many months, the duty-free shop complex stands closed. According to him, besides Airport Authority losing substantial revenue, many passengers have chosen to land, say, at Cochin International Airport, used the service of a duty-free shop there and then proceed to Thiruvananthapuram. In other words, as he puts it, the Airport Authority has been caught in cross fire of egos between egos of the departmental authorities.

The Counsel for AAI clarifies that Airport Authority as Union Government's establishment does not desire to take stand. Yet it wants to fairly place on record, as it has already done, about what he terms the highhanded approach the Customs authorities have adopted. According to him, on 21.12.2017, the Customs officials inspected the duty-free shop complex in the airport. In that context, the security agency found the activities of the Customs authorities recorded in the CC cameras. Thus, he presses that evidently the sixth respondent's subordinate officials used physical force against the Company's employees.

He further submits that the officials of the Airport Authority have all along co-operated with the Customs Department every time they were summoned. The officials of the Airport Authority appeared before the authorities, produced the records and faced the enquiry. Despite all these, the Customs authorities, especially, the sixth respondent has been acting highhandedly and harassing the airport authority's employees with no justification.

The following erudite observations of the Court deserve to be taught to every officer:

Adjudication is not an inert intellectual exercise, undertaken in emotionally sterile atmosphere. Indeed, such an adjudication is an ideal, mostly-if not impossibly-unattainable, for the courts, too, deal with the lives and their miseries, with the laws and their complexities, with the powers and their perversities.

Duty-Free Shop is one of the chief attractions of the International Airport. In any public-law dispensation, public interest is paramount.

"In a country governed by rule of law, if an official of the State is given the liberty to judge for himself the validity or the legality of the orders of his superiors and remain impervious to them until the issue comes before a Court of law, where he can always collaterally challenge the order or directive and justify his disobedience, it is a sure prescription for administrative chaos, if not collapse."

Indeed, the Airport Authority, the real affected party, presents a different picture. Not to be forgotten, the Airport Authority is as much a Governmental agency as the Customs is a Governmental Department.

These days technology is the Orwellian Big Brother. Facts remain intact; only their interpretation yields to variation.

In fact, the Airport Authority's allegations are disturbing, casting a shadow on the investigative impartiality and the departmental detachment. Neither seems to be present.

"Confirmation bias" occurs when a person believes in or searches for evidence to support his or her favoured theory while ignoring or excusing dis-confirmatory evidence and is disinclined to change his or her belief once he or she arrives at a conclusion.

Indeed, investigation is a matter of integrity and it must inspire confidence even in the one subjected to that investigation. Here that is lacking. I entirely leave aside the Company's version. Even going by the Airport Authority's version, the allegations of bias, predetermination, and prejudice are writ large.

Bias is a preconceived opinion, or a predisposition, or predetermination to decide a case or an issue in a particular manner. It is, in fact, a condition of mind, which sways judgments and renders the judge unable to exercise impartiality in a particular case.

Prejudice applies to a conclusion made before evidence is available and typically to an unfavourable preconception marked by suspicion and antipathy. Bias, on the other hand, implies a lack of balance or distortion in one's judgment owing to a predictable pull in one direction. That pull results out of partiality or prejudice. Predetermination results in a decision before the event actually happens. Mala fides or bad faith is a much stronger expression. It is dishonesty of belief or purpose.

But the question is, could the Department have done without suspending the licence? Possessing power does not justify using it-always. Possessing is a matter of statute, but its use is a matter of discretion. And that discretion must be animated by reason and justification.

Besides that, the Airport Authority of India laments the loss of revenue; it asserts that the license suspension, interim though, is entirely avoidable, could have been done without. It cites numerous complaints from the international passengers about the airport's inability to provide a basic amenity for them.

Please read the full judgement reported as - 2019-TIOL-60-HC-KERALA-CUS

GST on Two-wheelers: Pawan Munjal, Chairman, Hero MotoCorp says, "Given that two-wheelers provide basic mobility to the masses, there is an urgent need to reduce the GST rate on two-wheelers from the 28% bracket of 'luxury goods' to that of 18% for mass usage items. This will provide the much-needed relief to millions of two-wheeler customers across the country, as well as the entire value chain dependent on the sector. It is absolutely imperative to ensure growth in the auto sector to create and sustain inclusive economic growth."

Bajaj Auto MD Rajiv Bajaj is reported to have supported a reduction but suggested that it should be tied to the introduction of new models. He said that rationalising GST rates is not the only means of keeping consumer demand steady amidst an overall increase in prices due to the implementation of safety and emission norms. He suggested that manufacturers should also look at technological solutions to address the cost-value equation.

TVS Chairman Venu Srinivasan says, "Given the importance of the two-wheeler segment as an item for mass mobility, the GST rates for two-wheelers undoubtedly needs to be reconsidered. It certainly cannot be benchmarked against the prevalent GST rates for luxury goods at 28%, especially given the current state of inconsistencies with the integrated multi-modal public transport systems across India.

Intoxicated GST : Drink and demand a GST Bill and get thrown out. It is reported that a bar in Kolkata threw out three inebriated customers who demanded a GST Bill and created a ruckus when informed that like petrol, there was no GST on liquor. Both need to be under GST urgently.