THIS year’s financial bill is sprinkled with provisions for retrospective
application of numerous amendments. As could be seen from the notes on clauses,
there are at least 17 instances of retrospective application of the proposed
changes. These relate to extending powers of condonation of delay in filing of
appeals/objections before High Courts, area of jurisdiction of certain officers
of customs, rebate of duty in terms of Rule 18 of Central Excise Rules, Sections
8B, 8C, 9 and 9A of Customs Tariff Act (relating to imposition of safeguard duty,
duty on subsidized articles and anti-dumping duty) and issue of warrants under
Income Tax Act provisions.It is settled position that legislature has powers to enact laws with retrospective effect. But it has to be equally appreciated that such powers for making laws that are retrospectively applicable have to be exercised with extreme caution. Normally, retrospective application of law is resorted to for rectifying omissions in the Acts and rules pointed out by the judiciary. In the Ujagar Prints case, the Supreme Court held that parliament can always validate a law which has been declared by courts as invalid to cure or remove the deficiencies pointed out in the judgments. But such legislation with retrospective effect is not to be used, simpliciter to set at naught, the judgments of courts.
In a majority of the proposals, the notes on clauses in the finance bill very clearly state that they are made to validate certain actions affected by certain judicial pronouncements. What are these pronouncements, what are the actions taken and what is the justification for overturning those judgments have not been thrown open for public debate. The whole exercise appears to be to nullify and not rectify.
The hallmark for any efficient tax administration is its transperancy, clarity and certainty. However, a majority of the retrospective amendments proposed in the bill do not appear to advance these characteristics. Provisions relating to safeguard duty, duty on subsidised articles and anti-dumping duty are sought to be amended with retrospective effect to recover duties, interest, fines as well as penalties. Further, several of these proposals contain clauses to oust the jurisdiction of the courts under all circumstances. In one broad sweep, rules and of notifications are sought to be amended by providing substantive powers to the government to collect tax retrospectively by razing to the ground, judicial pronouncements obtained, often, after long drawn litigation.
Such exercise of power by legislature has inherent dangers. With the parliamentary democracies as they exist today, our representatives hardly debate such technical and tax issues at length, rarely succeed in bringing safety measures and quickly acquiesce with the proposals given by the executive arm. In the result what is passed as law by the parliament is what is written by bureaucrats. Thus while, before courts, issues are hotly debated by both sides and reasoned decisions are handed out after examination of all issues, in the legislature, exparte proposals decided by officials sitting in their rooms, sipping coffee happen to be passed into law. Consequently, legislative wisdom rarely shines in such instances and the official word is clothed as an Act of parliament.
Several of the provisions sought to be retrospectively applied in this Finance bill are not confined to procedural aspects but affect substantive rights of assesses, importers and exporters. Therefore, there is a need that such proposals for retrospective application of law, especially laws which are supposed to set at naught judicial pronouncements are put forth before the public and allowed to be debated upon. In fairness of things, persons who will be affected should know about the nature of the amendments proposed, purpose of the amendments and if they are to be retrospectively applied, the justification for such retrospective application. They are not to be merely told that these are for validating “certain” actions affected by “certain” judicial pronouncements. If retrospective application is only to overturn a judicial pronouncement, then that will make a mockery of the judicial institutions.
By retrospective application, uncertainty is introduced into past transactions, disputes raised by the department are re-opened and mechanisms are put in place to recover revenue arrears with the authority to validate laws declared invalid. In such a system of tax administration competence and consistency become victims and tax payers are left to wonder as to whether there is any finality for any case. (Remember ITC Ltd.’s Rs.2,000 crore case in Supreme Court and government’s subsequent ordinance to dilute the judgment.
One example is the proposal to give powers to High Court to condone delays with retrospective application from July 1999. It appears that the officers inefficiency in filing appeals in time is being rewarded with retrospective regularization of such inefficiency at the cost of tax payers. As a policy, High Courts can definitely be given powers to condone delays but there is no justification for retrospectively applying this amendment to infuse life into department’s dying cases.
To sum up, amending laws retrospectively to overturn courts rulings without proper consultation and without discussion will be grossly unfair and will amount to abuse of “government’s” legislative power (rather than legislature’s legislative power). A fine balance exists between judiciary, executive and parliament and that fine balance needs to be maintained. The tendency in the recent budgets is to bring in more retrospective legislation, which should cause concern to everyone. With a spate of retrospective amendments every year, much uncertainity and fluidity is brought into settled and closed issues. With so much retrospective legislation, one can only tell the tax payers “Plan not only for future. Plan for past also”.