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Budget 2014-15: The stamp of Babudom is evident

JULY 21, 2014

By S Sivakumar, LL.B, FCA, FCS, ACSI, MBA, Advocate

THERE were a lot of expectations from the public, vis-à-vis the first budget of the new Government, especially, considering the manifest and other public utterances of the leaders of the current ruling party on the tax administration. One of the promises that I remember clearly, is that of ushering in a ‘non-adversarial' tax administration. While some of the proposals contained in the Budget, with regard to direct taxes do seem to be in the right direction, I am concerned about indirect tax proposals as regards the role to be played by the Tax Bureaucracy (read the Babudom),

In terms the Finance Bill, the Customs Act, 1962 and the Central Excise Act, 1944 is to be amended to provide that a reference to a Chief Commissioner of Customs or a Commissioner of Customs may also include a reference to the Principal Chief Commissioner of Customs or the Principal Commissioner of Customs, as the case may be. The effect of this amendment would be that, in respect of customs and central excise departments, wherever we have Chief Commissioners currently, there would now be Principal Chief Commissioners bossing over them and wherever we currently Commissioners, we will now have Principal and/or Chief Commissioners.I do understand that the creation of the post of the Principal Commissioner is arising out of cadre restructuring, which has been in the pipeline for quite some time. But, will not this move go against the stated promise of the Government to have ‘minimum government and maximum governance'. The taxpayer would have no issues if more jobs for the Babus are created at the level of Superintendents, who are actually running the tax administration. Writing earlier for TIOL, I had commented that, the finality of law arises either at the level of the Superintendent or the Supreme Court. I am not able to see merit in the move to create additional officers at levels of above the Commissioners, who are the officers that are required to hear assessees and pass adjudication order, which can delay the decision making process which is already running at a snail's pace.

Be that as it may…. one would have expected the Government (read, the Legislature) to assure the taxpayer that adjudication and appellate proceedings up to the level of the Appellate Commissioners would be expeditiously completed, in the light of the proposal to drastically increase the interest rates, in respect of service tax payments. In fact, a faster, reliable and transparent adjudication and appellate system, is a sine qua non for the levy of high interest rates by the Government. The proposed insertion of Sub-Section 4B to Section 73, wherein, where it is possible to do so, the time frame of 6 months and 12 months, for completion of adjudication proceedings, when the demand falls within 18 months and during the extended period, respectively, would be adhered to, comes as a big dampener. It is known to the Government (read, the Legislature) that the Executive takes years to adjudicate matters including, in respect of refund claims. It is my experience that the average time taken by an Assistant Commissioner for passing an adjudication order concerning a refund claim filed by an exporter is anywhere between 2 to 4 years, from the date of filing of the claim. What is sad to note is that, despite repeated Board Circulars, the Tax Babus have just refused to adjudicate matters. Under the new dispensation involving very high interest rates, there would be higher motivation for the babus, of garnering more revenue by way of interest, by delaying adjudication proceedings. The taxpayer would have been happy if the words' where it is possible to do so' were not forming part of the proposed Sub-Section 4B, as this Sub-Section is very unlikely to change the ground realities.

I am also amused to see the proposed amendment, vide Clause 97 of the Bill, to empower the Board to extend by 30 days, under Section 35E of the Central Excise Act, if the Committee of Chief Commissioners does not take decision within 3 months of the receipt of the adjudication order. Here again, one can see a conscious attempt to condone the delays related to taking of executive actions by the Babus.

Yet another amendment concerns the proposed amendment to Section 82 of the Finance Act, 1994. Currently, the Joint Commissioners have powers to search and seize or authorize the Superintendent to search and seize. In terms of the amendment, such powers of search and seize can be exercised by the Joint Commissioner or the Additional Commissioner or such other central excise officer as may be notified by the Board, or any other central excise officer authorized by the above officers. The very purpose of giving such powers to the higher officers was to ensure that these powers are not exercised in a frivolous manner. With junior officers now being given such powers, one does hopes that, this provision does not go the way, the powers to issue summons, are exercised by the Departmental officers.

Now, as we are aware, central excise assesses are required to file monthly returns while service tax assessees are required to file half yearly returns. As against the original promise of a simple one page return, the current ST-3 return format runs into several pages and for many corporate officials, the task of filing up the columns in the current format of the ST-3 return could be onerous and daunting. Apart from this, assessees are regularly flooded with requests for information from the various wings of the Department. Viewed in this context, the proposed introduction of Section 15A in the CE Act, requiring for the furnishing of periodic information return or document containing details such as, bank transactions, tax payments, sale or exchange of goods or interest in property, etc. by specified persons comes as a big dampener. As such, under the current adjudication system, we are witness to the Department taking the stand, in 99 out of 100 cases that, but for the visit of the audit or the anti-evasion team, the Department would not have come to know of the alleged duty/tax evasion by the assessee, pointing out to the simple fact that, the Departmental officers, in most cases, do not care to see the periodical returns filed by assessees and the information contained therein. This being the case, one wonders as to how the Department's case would be served, by the filing of additional information, on a periodical basis. At this rate, it would seem that, the assessees would have to spend more time in filing returns and providing information to the Department, rather than run their factories and businesses.

I have no issues vis-à-vis the Babus, on the tax provisions aimed at garnering more revenue, especially, those concerning service tax. For the first time, service tax is projected to overtake central excise and customs, as the largest component in the indirect taxes basket. While the assessee is being subjected to all kinds of controls and restrictions, where is the accountability in so far as the Executive (read, the Indirect Tax Babus) is concerned? While the Government would be collecting 30% interest from assessees for delays in payment of service tax of more than one year, the Government would still pay only 6% interest for the delay, in granting refunds. With this kind of a disparity, where is the incentive for the Executive to close adjudication proceedings on an expeditious basis and where is the justification for penalizing the hapless assessee due to delays in the adjudication and appellate redressal system over which the assessee has no control?

Before concluding...

It would seem that the proposal to introduce a compulsory pre-deposit for appeals to be filed is another instance of the Executive usurping the powers fixed for the Judiciary, under the Constitution. The inherent power of the Tribunal to grant a waiver of the pre-deposit has now been taken away.

Yet another proposal where the hand of the Babus can clearly be seen is the one, related to the proposed amendment to Section 94 of the Finance Act, 1994. In terms of this proposal, the Government (read, the Babus) can issue circulars to make provisions for withdrawal of facilities or imposition of restrictions (including restrictions on utilization of cenvat credit) on service providers or exporters for dealing with evasion of tax or misuse of cenvat credit. While one has to wait for the circulars to be issued under the Section, the very fact that the power is being given to the Babus to decide on how cenvat credit (which has been lawfully availed) can be utilized is a very sad reflection on the political establishment (read, the Legislature). Having lost several cases before the CESTAT and the Courts, especially in terms of the refunds to be granted to the exporters, wherein the legal view that once cenvat credit is allowed, there can be no restrictions on its utilization has been reinforced, the Department would now seem to have managed to get this proposal in the Budget which could result in refunds to be denied to the exporters on the ground of the restrictions on utilization of the credit.

I do not want to go on and on. I would still want to give the benefit of doubt to the new Government given the fact that the Finance Ministry has had very little time to work on the Budget. The Government would need to understand the difference between good policy and its implementation by the Bureaucracy. Unless and until the Bureaucracy is made accountable and transparent in its working, the promise of a 'non-adversarial' tax administration, at least insofar as it concerns indirect taxes, would remain a distant dream.


 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: LEAD TO AUTOCRAT

The article by Adv.S.Sivakumar is showing how the power is accorded to the FF and higher-ups.

In the finance bill, the changes brought in Sections 73(4B), Section 80, Section 82, 83, 86,87,94 are very alarming.

Under section 94 the authorities can even stop utilisation of cenvat credit. The word 'exporter' is added, which means they stop the refund and give notice as erroneous credit and can immediately get 7.5% predeposit while going for appeal.

The trade and industry will be put in to harassment, I doubt about opportunity of getting FDI investment.

The indirect taxation is contributing CENVAT, Excise duty or service tax around 45% of turnover. If the industry or trade has to suffer in these areas they will be closed down.

Does the Government want this?

R. Vaidyanathan

Posted by Ramadoss Vaidyanathan
 

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