FEBRUARY 26, 2020

By Vijay Kumar

THE title of my last week's column was, "Not a penny more". Now I find the Central Tax Department very pennywise. Since the Board Member exhorted the field officers to collect that 46,000 crores as interest on the Input Credit already with the government, thousands of polite notices have been issued exhorting (bordering on threat) the taxpayers to pay up that interest. The government is not ready to leave a penny, no not even a minute fraction of a penny/paisa. It seems that a taxpayer got a notice to pay an amount of Rs. 5.9858630140000004. You can pay Rs.5/-, but how do you pay 0.9858630140000004 rupee. This is nobody's joke, but obviously a system generated farce. Even in an Excel sheet, you can stipulate that a number can be limited to two decimal places or zero. But the system used by the CBIC is not aware that the rupee has only hundred paise and there can be only two decimal places. It is not for GST alone. A declarant under the Sabka Vishwas scheme got an order to pay an amount of Rs.96,109.20. I told him that he can pay Rs. 96,109 as the 20 paise can be ignored. He refused to follow my advice and paid that 20 paise too. He didn't get his SVLDRS-4 easily, is another story.

Section 170 of the CGST Act reads as:

Rounding off of tax, etc.

The amount of tax, interest, penalty, fine or any other sum payable, and the amount of refund or any other sum due, under the provisions of this Act shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of a rupee consisting of paise, then, if such part is fifty paise or more, it shall be increased to one rupee and if such part is less than fifty paise it shall be ignored.

But how do you make your computer aware of a law which provides for rounding off to the nearest rupee? Why should the CBIC work with such incompetent systems? Don't they have enough money to buy decent systems and hire some competent persons to manage them? Is it really that difficult? The IRCTC handles more business than the GST Systems and buying a Railway ticket from anywhere to anywhere sitting anywhere is far more easy than paying GST. Amazon handles crores of transactions with little difficulty and they wouldn't ask you for interest on the amounts deposited by you with them. Input Tax Credit is actually tax deposited with the Government even before you get the inputs, but the government wants interest on the money which is already with them. Fine! At least they should know how to collect and how much.

Government coercing citizens

In Neelkamal Realtors Tower Vs Union Of India - 2019-TIOL-1728-HC-MUM-ST, the Bomaby High Court quoted the Supreme Court:

We would not like to hear from a litigant in this country that the Government is coercing citizens of this Country to make payment of duties which the litigant is contending not to be leviable. Government, of course, is entitled to enforce payment and for that purpose to take all legal steps but the Government, Central or State, cannot be permitted to play dirty games with the citizens of this country to coerce them in making payments which the citizens were not legally obliged to make. If any money is due to the Government, the Government should take steps but not take extra-legal steps or manoeuvre. .......

The High Court further observed,

Therefore, the Supreme Court as well as our High Court has repeatedly held that rule of law has to be followed and no officers of the respondent can take law in his own hands or take extra-legal steps or manoeuvre so as to collect amounts which have not yet been held by judicial and/or quasi-judicial order as payable by the petitioners to the respondent. ……

The events as well as the material placed on record by the Petitioners, after considering the affidavits filed by the Respondents, lead us to conclude that the Respondents have acted in a high handed manner and forced the Petitioners under the threat of arrest to reverse the Cenvat Credit of Rs.11.25 crores before the show cause notice was issued or before any adjudication order thereon was passed.

How fair is it for a government to argue in court that it can attach the bank accounts of taxpayers without adjudication or 'show cause notice' for amounts which they are not liable to pay? Heard of tax terrorism?

All Anti-profiteering writs in one High Court.

Yet another classic example of bad drafting and worse execution is the anti-profiteering provisions in the GST law and they are under challenge in various High Courts.

In Jubilant Foodworks case - 2019-TIOL-1017-HC-DEL-GST, the challenge inter alia was not only to an order passed by the National Anti-Profiteering Authority ("NAPA") but also to the statutory provisions under which the said authority is exercising its powers i.e. Section 171 of the Central Goods and Services Tax Act, 2017 and Chapter XV of the CGST Rules and in particular Rules 126, 127 and 133 as being violative of Articles 14 and 19 of the Constitution of India. One of the principal grounds of challenge concerns the constitution of the NAPA itself. Under Rule 122 (a) of the CGST Rules, the NAPA consists of a Chairman who holds or has held a post equivalent in rank to the Secretary of Government of India. Under Rule 122 (b), the 4 technical members are those who are or have been Commissioners of State Tax or Central Tax for at least one year or have held an equivalent post under the existing law. The Chairman and Members of the NAPA are to be nominated by the GST Council. In other words, there is no judicial member in the NAPA. It is further pointed out that under the CGST Rules there is no provision for constitution of an appellate authority to review the orders passed by the NAPA.

Another feature of the functioning of the NAPA is that under Rule 126 it is the NAPA which determines the "methodology and procedure" for determining as to whether the reduction in the rate of tax on the supply of goods and services on benefit of Input Tax Credit ("ITC") has been passed on by the registered person to recipient by way of "commensurate reduction in prices". In other words, it is the NAPA who determines what can amount to profiteering in a given situation. It is further pointed out that it is the NAPA which issues notice to the suspected profiteer and it is the NAPA which adjudicates the said notice without any provisions for an appeal. It is contended that it is contrary to the settled legal position regarding the constitution and functioning of quasi-judicial authorities and tribunals as explained by the Supreme Court in Union of India v. Madras Bar Association. - 2010-TIOL-39-SC-MISC.

Last week, the Supreme Court ordered transfer of such writ petitions to the Delhi High Court - 2020-TIOL-59-SC-GST observing that a batch of writ petitions is pending before the High Courts of Delhi, Bombay and Punjab and Haryana in which the constitutional validity of Section 171 of the Central Goods and Services Tax Act 2017 read with Rule 126 of the Central Goods and Services Tax Rules 2017 and other cognate provisions, is under challenge. Twenty writ petitions are pending before the High Court of Delhi. The Supreme Court considered it appropriate and proper that, in the interests of a uniform and consistent view on the law, all the writ petitions should be transferred to the High Court of Delhi, where earlier writ petitions are already pending.

Mad?

BJP MP Subramanian Swamy describes GST as "the biggest madness of the 21st century." Swamy recently said, "Don't terrorise them with income tax and this GST, which is the biggest madness of the 21st century. This GST is so complicated - nobody understands which form to fill where. And they wanted it to be uploaded to the computer. Somebody came from Rajasthan, he said we don't have electricity, how can we upload? So I said, upload it on your head and go to the Prime Minister and tell him."

Trump on GST

In June 2017, Donald Trump, POTUS referring to GST told the Indian Prime Minister, "In just two weeks, you will begin to implement the largest tax overhaul in your country's history - we're doing that also, by the way - creating great new opportunities for your citizens. You have a big vision for improving infrastructure, and you are fighting government corruption, which is always a grave threat to democracy."

Until next week