Second Anniversary of Modi Sarkar - Taxation turns Less Litigious Turf

Indeed much work has been done to reduce litigation by the Modi Sarkar in last two years. But there is always more scope to do. First of it is to change the litigant mindset of the bureaucracy which is a hard nut to crack. In indirect tax i.e. Central Excise and Service Tax there are many decisions from the higher judicial forums which should be accepted by the CBEC as the revenue implication is not much. Further this will give certainty to the rules/provisions. There are few examples on this front. Disallowing cenvat credit on whole list of services where the CESTAT is consistently allowing the same. Most of the cases manufactured out of EA 2000 audit and almost all of them are related to procedural lapses and dis-allowances of cenvat credit of certain services each year for each assessee. What the Govt. should do is to accept few of the CESTAT and Higher Courts decisions and issue a comprehensive circular to withdraw all such pending cases either at SCN level or at appeal level.

Second is to overhaul the EA 2000 scheme as such. This has turned into a big scam in itself. Mechanical audit of each unit each year without any risk review (which was the prime objective of the EA 2000 scheme. There lots of instances of quid-pro-qua in this audit. Audit must be based on specific criteria and with a definite risk analysis. EA 2000 can be said to be the major cause of litigation and dis-ease of doing business because of attitude of the officers. This entire audit machinery is not adding even 1% to the excise revenue.

Third is the FIAT judgement of the Honourable SC which has unsettled the "transaction value" concept and has given a tool to harass the assesses on this.

Fourth is the SKF case(though it has been sent to LB in SC in Steel Authority matter). Interest should be paid from the date of issue of supplementary invoices.

Fifth is the tax demands on the "capital investment subsidy" given by the States. This subsidy is now given as a "certificate" which can be used to pay VAT. There is no retention of tax as the tax payable is deposited fully and the scheme certificate is also used as an instrument to pay the VAT.

Sixth is the "tool and die amortisation" cost addition to the assessable value by the "intermediate manufacturers". Auto-mobile parts manufacturers supply the parts to the OEM's and duty on the final product is always payable by the OEM's. Adding DAC is revenue neutral. OEM's could give a "declaration just like jobwork under 214/86 to pay duty and intermediate manufacturers should be allowed to pay duty on transaction value sane DAC.

These are few of the litigation prone and litigated areas and need clarification from CBEC to create non-adversarial tax regime.

Arbind Aggarwal

Schneider1 Schneider1 27/05/2016