FEBRUARY 23, 2022

By Vijay Kumar

THE Economic Times and several newspapers on 21.02.2022 reported a PTI story to the effect that the Union Finance Minister Nirmala Sitharaman stated:

1. The criticism of the Goods and Services Tax (GST) as 'Gabbar Singh Tax' is a knee-jerk reaction which is a disservice to the country's institutions.

2. The GST council consists of all the states and the Centre, and the latter has only a one-third influence on the decisions which are arrived at.

3. For whatever reason, knowingly or unknowingly, when we try to tarnish the GST for whatever agenda, we are undermining the institution which has been created with all the states on board.

Okay, GST is not the Gabbar Singh Tax and the GST Council has all the States with equal powers, but if some one criticises the faulty implementation of GST, is he undermining the GST Council? Nobody undermines the GST Council or the Parliament. After all the GST Council is a constitutional institution and everybody has respect for the constitution, the parliament, the laws passed by parliament and the institutions created by legislation permitted by constitution.

But the problem comes when the laws are badly drafted and faultily implemented; the essential organisations are full of glitches right from the beginning and the fences are busy eating the crops.

I am reminded of these famous words received with thunderous applause at a FICCI meeting eight years ago.

This tax terrorism in the country is terrifying. One can't run the government by thinking that everybody is a thief.

The alternatives being reported in the media need to be given a serious thought. FICCI's experts and tax payers should be asked about the problems they face. All stakeholders should sit and brainstorm about tax reforms.

You know who said these? Mr. Narendra Modi in January 2014 when he was just a few months away from becoming the Prime Minister of India.

How can such a man herald a Gabbar Singh Tax? No way! But then as he so wisely said, you can't run the government by thinking that everybody is a thief. See the number of cases booked, people arrested, registrations cancelled, input credit denied and the maze of confusing mountain of laws creating perennial rivers of litigation.

If your system does not work;

If your laws are not clear;

If your officers wildly interpret those laws;

If you are not able to match invoices;

If you are not able to create a Tribunal;……….

The one who suffers is the poor taxpayer, not for his faults but for the government's.

Bail or Jail?

Just a few days ago, the Orissa High Court delivered an important judgement worth noting by the concerned authorities. The details: 2022-TIOL-268-HC-ORISSA-GST

The prosecution's case: the Petitioners along with other accused, were involved in the creation and operation of 12 fictitious/ bogus firms in the name of unconnected persons by misutilizing their identity proof. The same was done behind their back, in order to avail and utilize bogus input tax credit of an amount of Rs. 20.45 crores on the strength of fraudulent purchase invoices without any physical receipt or actual purchase of goods. As such both of them are alleged to be part of a collusion to evade taxes to the tune of approximately Rs. 42.00 crores and therefore are liable for the payment of the same under Section 132 of the OGST Act, 2017.

The Other Side: Petitioners earnestly submitted that the allegations made against them are bald allegations which are completely false and baseless. It was contended that the Petitioner No. 1 was a mere employee who has dutifully followed the directions and orders of his superiors. Similarly, Petitioner No. 2 was in no way connected to the case as he is a mere paan shop owner and has no nexus to the alleged fraud in any way whatsoever and has been embroiled in the matter merely because he is the brother of Petitioner No. 1. It has been submitted that the alleged fraud has been perpetrated by someone else and the present Petitioners who are mere pawns, have unduly been made scapegoats despite having no involvement in the alleged fraudulent activities. It is further submitted that the Petitioners have been duly cooperating with the authorities and have on multiple occasions appeared in the GST offices to assist the authorities with the investigation, but despite their bona fide actions, they were forwarded into custody on 21.12.2020 and have remained in custody ever since. The Petitioners have wives, young children and a widowed mother who are completely dependent on the Petitioners and are on the brink of starvation due to the absence of the only two earning members in the family especially given the pandemic situation.

The High Court observed:

- The courts owe more than verbal respect to the principle that punishment begins after conviction and that every man is deemed to be innocent until duly tried and found guilty.

- The object of bail is jurisprudentially neither punitive nor preventive, although the Supreme Court sounded a caveat that any imprisonment before conviction does have a substantial punitive content.

- The seriousness of the charge, is no doubt one of the relevant considerations while examining the application of bail but it was not only the test or the factor and that grant or denial of such privilege is regulated to a large extent by the facts and circumstances of each particular case.

- Detention in custody of under-trial prisoners for an indefinite period would amount to violation of Article 21 of the Constitution.

- Bail, as it has been held in a catena of decisions, is not to be withheld as a punishment. Bail cannot be refused as an indirect method of punishing the accused person before he is convicted.

- Furthermore, it has to be borne in mind that there is as such no justification for classifying offences into different categories such as economic offences and for refusing bail on the ground that the offence involved belongs to a particular category. It cannot, therefore, be said that bail should invariably be refused in cases involving serious economic offences.

- It is not in the interest of justice that the Petitioners should be in jail for an indefinite period. No doubt, the offence alleged against the Petitioners is a serious one in terms of alleged huge loss to the State exchequer, that, by itself, however, should not deter this Court from enlarging the Petitioners on bail when there is no serious contention of the Respondent that the Petitioners, if released on bail, would interfere with the trial or tamper with evidence.

Having regard to the entire facts and circumstances of the case, especially the fact that both the bread earning sons of a family have been in custody for over a year now, the Court did not find any justification for detaining the Petitioners in custody any longer.

As a side note, the Court observed "more and more such cases are brought to the fore where the mere pawns who have been used as a part of larger conspiracy of tax fraud have been brought under the dragnet by the prosecution. It is perhaps time that the prosecution will do well to follow the trail upstream and bring the "upstream" parties who are the ultimate beneficiaries who are the gainers in these evil machinations."

Until Next Week