MAY 01, 2019

By Vijay Kumar

Zindagi ke Saath bhi, zindagi ke baad bhi.

WE all know the oft-repeated boring cliché that nothing is certain except death and taxes, but do we know that taxes can follow even after death? It is like life insurance - Zindagi ke Saath bhi, zindagi ke baad bhi.

"Death" occurs seven times in the CGST Act. Have a look - at the Act, not death.

29. (1) The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where,-

(a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or

xxxxxxx

93. (1) Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016, where a person, liable to pay tax, interest or penalty under this Act, dies, then-

(a) if a business carried on by the person is continued after his death by his legal representative or any other person, such legal representative or other person, shall be liable to pay tax, interest or penalty due from such person under this Act; and

(b) if the business carried on by the person is discontinued, whether before or after his death, his legal representative shall be liable to pay, out of the estate of the deceased, to the extent to which the estate is capable of meeting the charge, the tax, interest or penalty due from such person under this Act,

whether such tax, interest or penalty has been determined before his death but has remained unpaid or is determined after his death.

xxxxxx

110(2) Proviso:

Provided that in the event of the occurrence of any vacancy in the office of the President by reason of his death, resignation or otherwise, the senior most Member of the National Bench shall act as the President until the date on which a new President, appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office:

One really cannot escape tax just by dying.

Recently we reported a case where the determined revenue pursued a case right up to the High Court against an assessee who was not there to defend himself, for the simple act - he died.

The details:

The appellant is (actually was) a proprietorship concern manufacturing flush door, plywood and block boards etc. Based on the information that the assessee was evading payment of duty by resorting to under-invoicing and clandestine removal of excisable goods manufactured and sold by them, the officers of the DGCEI, Bangalore conducted searches at their factory cum office and premises of their dealers on 19th September 2004 resulting in seizure of incriminating records/documents/CPUs etc. The learned Commissioner confirmed the demand of central excise duty and imposed penalty, amounting to more than a crore of rupees. The appellant died while his appeal was pending in the Tribunal.

This Tribunal vide its order dated 30.06.2016 - 2016-TIOL-2022-CESTAT-BANG held that the appeal abates on the death of sole proprietor who died on 27.12.2011 when the appeal was still pending; that recovery proceedings cannot be initiated against a dead person and set aside the impugned order by allowing the appeal of the appellant.

Aggrieved by the order of the Tribunal, Revenue filed appeal before the High Court and the High Court allowed the appeal of the Revenue and set aside the CESTAT order dated 30.06.2016 and remanded the case to the Tribunal for deciding the appeal afresh on merits in accordance with law - 2018-TIOL-1871-HC-KAR-CX.

On remand, the Tribunal held, - 2019-TIOL-971-CESTAT-BANG

"we find that the appellant was a sole proprietorship concern and Sh. Harilal M. Patel was the sole proprietor of the appellant firm who died on 27.12.2011 when the appeal was pending before this Tribunal. Further, we find that Mr. Ashok Kumar S/o Sh. Harilal M. Patel, has not come forward to defend the case of the appellant rather he has filed an affidavit saying that he has no concern with the proprietorship concern and he has not succeeded to the said business and has distanced himself from the appellant. Further, we find that in view of the Apex Court decision in the case of Shabina Abraham v. Collector of Central Excise (supra) no recovery proceedings can be initiated against the dead person. In view of all these facts and circumstances and the decisions cited above, we hold that the present appeal abates after the death of the sole proprietor, Sh. Harilal M. Patel. The appeal is accordingly disposed of."

However, in this case, while agreeing with his brother Judicial Member, the Technical Member gave a separate order, which is worth reading by every revenue official. The Member(T) observed,

- While entirely agreeing with Hon'ble Member (J) in the decision above, there are certain aspects of the proceedings, as pursued by the respondent herein, on the former occasion of its consideration by the Tribunal that, if left unremarked upon, could well set a precedent for future misadventures.

- It is common ground that the appellant is a sole proprietorship, that the mortal existence of the proprietor was extinguished during the pendency of the appeal, that none came forward to carry forward the litigation initiated by the deceased and that Revenue is not in appeal against the order impugned. Yet the statutory consequence of that dread finality on the dispute raised by the deceased sole proprietor sufficed to cause such grievance to the respondent-Commissioner as to take recourse to section 35G of Central Excise Act, 1944 with the present outcome of re-consideration now dealt with.

- It would appear that the implication of 'abating of appeal' in accord with the Customs Excise Service Tax Appellate Tribunal (Procedure) Rules, 1982 has not been properly comprehended by the respondent-Commissioner.

- Such abatement does not extinguish the detriment visited upon the appellant by the lower authority but termination of the appeal that was, otherwise, underway and the continuance of the appeal, should such plea be brought forth by the legal successor, is a privilege permitted by the Tribunal.

- Such a privilege was neither sought nor granted by the Tribunal. There can, therefore, be no cause for grievance to the respondent-Commissioner.

- It would, therefore, appear that the respondent-Commissioner, in seeking re-consideration on merit against the deceased appellant, has sought to extend the scope of appellate remedy beyond the appeal itself.

- With the abatement of appeal, the original detriment to the appellant lives on but the erasure on the consequent constraint on recovery is, in all probability, the affirmation that the authority desires our verdict on.

- There is no other conceivable outcome that we can perceive. If that be so, such concurrence is beyond the pale of our appellate jurisdiction and which we must certainly decline to be complicit in.

- In the eagerness to raise the level of grievance, the subterfuge on the part of the respondent-Commissioner appears to have gone unnoticed.

- The appellant is, understandably, not before us in person to prosecute the appeal initiated by him and is, not surprisingly, represented through counsel or any other person.

- In appealing to the jurisdiction of the Hon'ble High Court, it was not brought on record that the respondent-therein was, by mortality, unable to defend himself. And that appeal was, thereby, compelled to be decided without a notice to the named respondent - an ex parte order arising from neither negligence nor unwillingness, neither concurrence nor indulgence. The concealment of this vital fact from the Hon'ble High Court is one that, we do hope, shall not be overlooked by the authorities, particularly the Central Board of Indirect Taxes & Customs to whom the respondent herein is accountable.

- Perhaps it is the absence of cost to Revenue in seeking appellate remedies that prompts such misadventure on the part of officials entrusted with high responsibility.

- It is, indeed, surprising that it was considered necessary to temper impetuosity with deliberation, through the institution of collegiality of Commissioners or Chief Commissioners, for seeking intervention of the Tribunal while leaving untouched the even more sacred task of proceeding against assessees before the constitutional courts.

- We request the Revenue administration to ponder over this gap that, if untouched, leads to consequences such as is before us now.

Let us hope that the Commissioners and the Board understand the anguish of the Member, so that such deadly instances are not repeated. For all that we know, the Revenue is most likely to go the High Court again.

Sometime back, the Karnataka High Court observed in an Income Tax case - 2018-TIOL-1293-HC-KAR-IT

We express our concern and anguish at the tendency of the Revenue Department to file unnecessary appeals u/s. 260-A of the Act even though the issues are ex facie covered by the decision of the jurisdictional High Courts or even the Hon'ble Supreme Court of India. The substantial question of law essentially means that a question of law which is not already settled by the Constitutional Courts can only fall within the ambit of Section 260-A of the Act and therefore repetitive filing of such appeals by the Tax Department who are expected to be serious and bonafide litigants in the Constitutional Courts is a matter of concern. It is expected of the concerned Authorities who approve filing of such appeals u/s. 260-A of the Act, to bonafide apply their mind to such aspects of the matter and only after recording appropriate reasons for need to file such appeals and need to get substantial question of law genuinely arising from the Order of the Tribunal determined by Constitutional Courts, that they should approve the filing of such appeals and the High Court u/s. 260-A of the Act. But, the present Appeal filed by the Revenue is certainly not one of that kind and therefore we record our note of caution for the Revenue Authorities concerned in this regard.

No GST on sale or purchase of DFIA: The Maharashtra Appellate Authority for Advance Ruling for Goods and Services Tax has ruled that No GST is applicable on the sale or purchase of DFIA (Duty Free Import Authorisation), as provided in Sr. 122A of the Notification 02/2017-C.T. (Rate) dated 28.06.2017 as amended by the Notification No. 35/2017-C.T. (Rate) dated 13.10.2017. - 2019-TIOL-36-AAAR-GST

The Advance Ruling Authority, citing that the DCS are issued under chapter 3 of FTP whereas DFIA are issued under Chapter 4 and thus observing other procedural differences between DCS (Duty Credit Scrips) and DFIA opined that DFIA are liable to GST. - 2018-TIOL-269-AAR-GST. This appears to be the sole ground for the Advance Ruling Authority to hold that DFIA are not entitled to the exemption from GST. On appeal, the AAAR set aside the ruling pronounced by the AAR.

They do pass orders in favour of the assessees - sometimes.

On that positive note,

Until next week