News Update

Forced Voluntary Payments

FEBRUARY 17, 2021

By Vijay Kumar

IN 2016-TIOL-1958-HC-DEL-ST, the Delhi High Court observed,

When the MD of a company is in judicial custody, the offer made to pay the alleged arrears of service tax dues of such company even without an SCN can hardly be characterised as 'voluntary'. The loss of liberty, and more disconcertingly, the loss of reputation, is bound to compel even the most rational person to succumb to the extreme pressure that such circumstance subjects him to. The Court is satisfied that in the present case the payment of Rs. 17 crores was not 'voluntary' but under coercion and duress and is required to be returned by the DGCEI forthwith.

In an order dated 09/02/2021 - 2021-TIOL-396-HC-AHM-GST, the Gujarat High Court observed,

This is one more matter wherein serious allegations of harassment, coercion, threats, etc. have been alleged against the respondents Nos.4 and 5 respectively herein. It appears that the search was undertaken under Section 67 of the Act at the premises of the writ applicant, and in the course of the search, the respondents Nos.4 and 5 are alleged to have caused undue harassment to the writ applicant. It is alleged that the writ applicant was forced and threatened to transfer an amount of Rs.2.68 Crore by way of the DRC - 03.

Consequent to this, yesterday the High Court observed, - 2021-TIOL-397-HC-AHM -GST

The officers of the concerned department who were asked to join the video conference did join, but at a very later stage. They were unable to witness the discussion that took place between the Court and Mr. Vyas. We propose to pass an interim order issuing the following directions.

The Central Board of Indirect Taxes and Customs as well as the Chief Commissioner of Central/ State Tax of the State of Gujarat are hereby directed to issue the following guidelines by way of suitable circular/instructions:

(1) No recovery in any mode by cheque, cash, e-payment or adjustment of input tax credit should be made at the time of search/inspection proceedings under Section 67 of the Central/Gujarat Goods and Services Tax Act, 2017 under any circumstances.

(2) Even if the assessee comes forward to make voluntary payment by filing Form DRC-03, the assessee should be asked/ advised to file such Form DRC-03 on the next day after the end of search proceedings and after the officers of the visiting team have left the premises of the assessee.

(3) Facility of filing complaint/ grievance after the end of search proceedings should be made available to the assessee if the assessee was forced to make payment in any mode during the pendency of the search proceedings.

(4) If complaint/ grievance is filed by assessee and officer is found to have acted in defiance of the aforestated directions, then strict disciplinary action should be initiated against the concerned officer.

Please see 2021-TIOL-397-HC-AHM-GST.

Will the Revenue accept and follow this?

Appeal/COD - wrong tree

In an order last week, the Supreme Court observed.

There is a delay of 536 days in filing the appeal against the order of the Customs Excise and Service Tax Appellate Tribunal. Repeatedly, it has come to the notice of this Court that appeals in revenue matters involving indirect taxation are being filed with a gross delay.

In the present case, the submission which has been urged before the Court by learned counsel, is that there was some mis-apprehension on the part of the Commissionerate as a result of which the appeal was filed before the Gujarat High Court and after the appeal was dismissed, this Court was moved.

The legal position that the appeal would lie before this Court cannot be a matter of doubt. Certainly, it would not be open to the Department to contend that they were unaware of the legal position. Such appeals are being filed with a gross delay. In the event this Court does not allow the application for condonation of delay, the officers may seek to justify their inaction by contending that they had moved this Court with an application for condonation of delay which was not entertained. The Union government, in the Department of Revenue must find an answer to this state of affairs by ensuring that matters which are required to be litigated are litigated with all necessary dispatch and matters not worthy of being pursued are set to rest.

Also see - 2021-TIOL-88-SC-CX-LB

When the Department Does not Know Where to File Appeal

"Ignorance of the Law is no Excuse" is an oft repeated cliché. Certainly there is no excuse for the unfortunate citizen, but does the principle apply to the Government? Almost with boring regularity, we come across cases, where the Revenue Department files an appeal in the wrong forum.

Ten years ago, we reported a case - 2011-TIOL-174-CESTAT-MAD where the Customs Commissioner filed an appeal in the CESTAT in a case related to Drawback. The Tribunal observed,

The issue in this appeal against the order of the Commissioner (Appeals) relates to payment of drawback. Hence the jurisdiction of the Tribunal to hear this case is ousted in terms of proviso to Section 129A of the Customs Act, 1962. The appeal is therefore dismissed as not maintainable along with COD application and stay application and the papers are returned to the Revenue for presentation before the appropriate authority, namely, Joint Secretary (Revision).

The appeal to the Tribunal must have been prepared by a team of officers consisting of examiners, appraisers, superintendents, Assistant Commissioners, Deputy Commissioners, Additional Commissioners and two Commissioners and none of them realized that they were approaching the wrong forum. Law makers and Law enforcers are allowed the luxury of being ignorant of the laws.

Appeals in Wrong Forum - Board Concerned

In CBEC F.No. 390/Misc./100/2010-JC, Dated: September 22, 2011, the Board informed the field, "It has come to the notice of the Board that field formations have filed appeals in the jurisdictional High Courts in matters relating either to determination of rate of duty or value of the goods which ought to have been filed in the Supreme Court. Such appeals get dismissed by the High Courts on the ground of jurisdiction alone, invariably after pending for a long time. Civil Appeals filed in the Supreme Court in such cases have frequently been dismissed on the ground of limitation. It may also be noted that the time period for filing Civil Appeal is 60 days from the date of receipt of the Tribunal order in the Commissionerate."

Board directed the Commissioners to examine the issue involved in the dispute very carefully for deciding the appellate forum. The jurisdictional Chief Commissioners, while giving concurrence to the proposal for filing appeal, are expected to ensure that appeal is being filed in the correct forum in order to avoid needless litigation being pursued in the wrong forum and consequent loss of revenue.

I wrote ten years ago,

It is not that many of the Commissioners do not know where to file appeal. Normally after receipt of the Tribunal order, the decision to file appeal is not taken immediately. They take their own sweet time and by the time they decide to file appeal, the deadlines for sending proposal to the Board for filing appeal in SC will be over. (10 days from the date of receipt of CESTAT order). Instead of offering explanation to the Board for delay, the safest way to get over the situation is to file appeal in High Court. (Plenty of time available - 180 days u/s 35G). Normally the disposal in High Court takes not less than four to five years and by that time, the Commissioner becomes the Board Member (possibly with charge of L&J) and the Standing Counsel becomes the Judge of the High Court!

Nothing seems to have changed as the Supreme Court case referred to in the beginning was an appeal filed by Revenue in 2020 against a CESTAT order of 2013.

What will they do now, under the GST appeal against an order by the National Bench is to the Supreme Court. Please see these sections of the GST Act.

117. Appeal to High Court. Any person aggrieved by any order passed by the State Bench or Area Benches of the Appellate Tribunal may file an appeal to the High Court and the High Court may admit such appeal, if it is satisfied that the case involves a substantial question of law.

118. Appeal to Supreme Court. An appeal shall lie to the Supreme Court-

(a) from any order passed by the National Bench or Regional Benches of the Appellate Tribunal; or

(b) from any judgment or order passed by the High Court in an appeal made under section 117

Is there any possibility for confusion? First of all, let the Tribunal be constituted, then we can think of confusion.

Fight against fake invoices

The CBIC Chairman, Mr. Ajit Kumar in his weekly letter says,

It's now three months since the drive against the fraudulent use of fake GST invoices was launched in the second week of November, 2020. As on 13th February, 2021, the department has made 3046 cases and unearthed about 9294 fake GSTINs in just these 3 months. This is evidence that certain unscrupulous elements have tried to take undue benefit of the laws, procedures and reduced compliance measures designed for honest taxpayers under the GST regime to further their own profit at the cost of the nation. This, apart from having a huge impact on revenue, also puts the honest tax payer at a tremendous disadvantage in a highly competitive market place.

I must appreciate the efforts put in by officers of DGGI and the CGST Zones. While a lot has been done by them, some mop-up still remains. I am sure that they would continue to be vigilant against such fraudulent activity in the months ahead.


From 10th February 2021, officers of and above the rank of Assistant Commissioner belong to a service called Indian Revenue Service (Customs and Indirect Taxes) IRS (C&IT). Earlier they were called Indian Revenue Service (Customs and Central Excise); IRS (C&CE). This was in 2004. Before that they were called Indian Customs and Central Excise Service [IC&CES]. That was in 1959. Before that there was an Indian Customs Service and an Indian Central Excise Service. What's in a name?; that which you call rose, by any other name would smell as sweet.

Mr. IJ Rao, a former Vice-President of CEGAT writing in our columns 15 years ago remarked,

I joined the Central Excise Department in October 1955. It was a historic occasion because I was the first to join as a direct recruit in the Department. For the first time, such recruitment was made.

That was not a help to me. There was no training scheme and the then Collector, Mr. Neale, chalked out an ad-hoc training schedule with the intention of finishing my training in six months. None knew what my position was as I joined as a  Probationary Superintendent (class I)  and the  Assistant Collectors and the Deputy Collectors were all class II officers.  Mainly to get rid of the embarrassment, the Collector sent me to various divisions and ranges. None knew what to do with me. Some superintendents and Inspectors did help me to get an idea of what the Department was all about but on the whole it was not at all an ideal situation. This continued for more than two years during which I worked as Superintendent at Gobi, Tellicherry and the like. Departmental examination was held only for the first part and my probation was extended because  I did not pass the second part which was not held at all.  My protest about this extension received no response.

Until next week

Sub: In the same class as Voluntary Statements

The voluntary payment of tax falls in the same class as "voluntary" statements recorded under Section 14 of the CE Act. I cannot understand, how a statement given pursuant to a summons can be construed as voluntary. It is not as though the deponant walked into the CE office and offered to give a statement.

Posted by Gururaj B N