JULY 15, 2014

By Abhijit Saha, Director (Indirect Tax), BDO India

AFTER glancing through the budget proposition on indirect tax, prima facie two provisions have attracted my attention.

i) Deletion of Stay Proceedings

ii) Interest on delayed payment of service tax

The deletion of stay proceedings is replaced by Ad-hoc payment of 7.5% or 10% of the duty / penalty for admission of the appeal for hearing.

As far as the deletion of the stay proceedings mechanism, there are two school of thoughts. One is that it is welcome relief to the huge burden on the judiciary and litigation expenses of the appellant. On the other hand unjust imposition on the appellant in case of frivolous demand followed by mechanical adjudication order.

It is almost a settled position of fact that the adjudication order is passed mechanically without application of mind and it is very rare and exceptional to expect justice at the adjudication stage. Hence there is a huge probability that frivolous demand get confirmed against the appellant at the adjudication stage exposing the appellant to the vagaries of the financial hardship without any redressal.

It may be stated that justice weeps in silence because there is inadequate judicial machinery and there is no accountability of the adjudicating authority for passing an order confirming demand amount without application of mind. Hence the balance of convenience which is the doctrine followed by the judicial forum and legislative authority has no place to stand when such ad-hoc payment is imposed on the appellant for no fault of them.

As regards the interest for delayed payment of service tax it is proposed that interest would be 18% for first six months, 24% for the next six months and 30% for the period after one year. Hence the assessee has to cough up such an enormous amount of interest which has been introduced to encourage prompt payment of service tax. In this respect it is humbly submitted that such encouragement is also legitimately expected from the department when they sit on a confirmed refund amount. However the rate of interest for delayed payment of refund amount is dismal 6%. Is it balance of convenience or to put it in other legal lexicon, is it for public interest? If so, then for whose interest?