JULY 22, 2020

By Dr G Gokul Kishore

IN the backdrop of completion of three years of implementation of GST, in Part-84, some of the major points in the unfinished agenda were highlighted. Retaining our optimism on resolution of such issues, two more issues are briefly discussed in this Part-85.

Delay in constitution of Tribunal and taxpayers' woes

One of the traits of bureaucracy is creation and proliferation of bodies and institutions. But the temptation to place itself in all such bodies sometimes halts such process. In the normal course, such bodies coming at taxpayers' money, if halted, brings some happiness. However, when the body is meant to resolve disputes between the taxpayers and the tax administration, inordinate delay in creation of such institution places taxpayers in considerable distress. The delay in constitution of GST Appellate Tribunal was highlighted in Part-14 (3 rd December, 2018) but at that time, challenge to the related provisions in CGST Act was pending. Subsequently, Madras High Court in Revenue Bar Association v. UOI - 2019-TIOL-2188-HC-MAD-GST had held the same as unconstitutional. This judgment was delivered on 20-9-2019. The reason for delay in bringing suitable amendments is not understandable.

The officers who drafted the law are presumed to have knowledge of settled law on this issue i.e. such quasi-judicial bodies like the GST Appellate Tribunal should have equal number of judicial members as technical members. Despite such knowledge, they went ahead and drafted the provisions with predominance of technical members and, therefore, the provisions were bound to be struck down. The reason for ignoring settled law could be the insatiable appetite for posts. Tax administration is a sub-set of bureaucracy and the urge to man all the posts even ignoring the law of the land as held by the Supreme Court could not be hidden and the provisions were drafted defectively. The claim of taxpayer friendly administration gets exposed when ad hoc measures like Removal of Difficulty Orders are used to bestow itself more time for establishing the Tribunal instead of suggesting to the GST Council Secretariat on the need to amend the law.

This issue is again discussed here only to highlight the woes of taxpayers who are compelled to file writ petitions in High Court to get directions on sanction of refund even when they have favourable orders. For more than one year, the department did not grant refund because it was of the view that the order of Commissioner (Appeals) in favour of the claimant on refund was to be appealed against and such appeal could not be filed due to non-availability of Tribunal. The High Court had to direct refund in such case Zones Corporate Solutions v. Commissioner - 2020-TIOL-1168-HC-DEL-GST. It is not the taxpayer's fault that creation of Tribunal got delayed. It is the department's intransigence that led to such impasse. The department cannot hold on to the refund amount for years before the Tribunal comes into existence and such refusal to grant when appellate order is in favour of the claimant and higher forum has not stayed such order, is patently illegal.

Not every taxpayer can afford to seek remedy from High Court for every claim of refund stuck with the department owing to such unsustainable reasons. Press releases speak high of sanction of refunds but on the ground, these remain hollow claims in most cases. May be, there is a big gulf between sanction of refund and ultimate grant and crediting of refund to taxpayer's account. In these times of extreme economic distress, every rupee counts and it needs no rocket science to find out that the industry is very badly in need of finance. Refund of tax can provide significant relief even if the amount involved is not high. Those who decide to deny refund on the ground of proposal to file appeal before non-existent Tribunal and compel the taxpayer to run to High Court for remedy, should be held accountable. CBIC should take the lead, include curative amendments to provisions on Appellate Tribunal in the agenda of GST Council meeting and convey the message that it understands the pain of industry.

Bifurcating quasi-judicial machinery to eliminate bias

A related issue is to avoid creating administrative mechanism to audit refund claims, whether pre-audit or post-audit, as was the practice in Central Excise and Service Tax. This issue was discussed in Part-40 in this series when the Delhi High Court order in GSI Products v. UOI - 2019-TIOL-1139-HC-DEL-GST was highlighted and, therefore, the same is not repeated here. In this case, the department had informed the High Court that committee of officers formed to consider refund claims of high value has been disbanded. However, subjecting refund claim to scrutiny by an officer higher in the rank, before the proper officer sanctions the same should neither be institutionalized nor practised in any form. At present, there is no pre-audit of refund claims (RFD-01 filed online) but "proper officers" being departmental officers who are tightly bound to the hierarchy can hardly afford to incur the wrath of seniors by passing orders granting refund in majority of the cases.

The incentive to opt for safer option of rejecting the refund and push the claimant to fight out in appeal is far more as compared to sanctioning of refund through judicious orders. The time cannot be more appropriate than now for the GST Council to consider creation of separate hierarchy of officers only for adjudication and appeals in the department to effectively eliminate bias and hierarchy-induced dysfunctions. This is a larger reform but eminently doable. It only requires identification of officers with drive for legal work and to assign them only adjudication and appeal related responsibilities. This dedicated hierarchy of quasi-judicial officers should start at the level of Assistant / Deputy Commissioner (Adjudication) and should comprise Joint / Additional Commissioner (Adjudication) on original side and Joint / Additional Commissioner (Appeals) on the appellate side, Commissioners vested with adjudication powers and those vested with appellate jurisdiction and Member (Technical) of GST Appellate Tribunal. Being a separate vertical, such officers should not be assigned executive functions and for understanding field level issues, they may be posted for a few months, say once in five years or so, in executive Commissionerates. Considering the vast experience gained in interpretation of law, there should be scope for elevation of such officers to Board also as Member. Besides eliminating revenue bias, such measure will also provide much-needed independence to the officers performing quasi-judicial work. This author had discussed in detail such measure in a research paper published in 2006 ["Independence and Prismatic Factors in Quasi-Judicial Sphere of Union Revenue Administration "- Indian Journal of Political Science - Vol. LXVII, No. 3, July-Sept., 2006]. It is presumed that portal related glitches are now subsiding and, therefore, the next set of reforms can be contemplated.

[The author is an Advocate practising independently. Views expressed are personal. ]