JULY 26, 2016

By B S V Murthy

THERE is a general impression that most of the problems are created by the officers at the cutting edge level and senior officers are knowledgeable and understand the policies of the government and the rationale behind such policies and principles and also are considerate to the tax payers. I will give a few examples to show that the problem of a mindset which affects not only the taxpayers but also administration within the department is not limited to the junior officers at cutting edge level. These examples are the incidents that took place between 1983 and 2010.

An assessee requested for repacking of goods packed for export since the description on the packing had to be changed. This was permitted by the Assistant Commissioner as required under the law and ordered to be done under the supervision of the officers. His supervisory officer told him to withdraw the permission on the next day before the order could be implemented. The Assistant Commissioner did not refuse but requested to pass an order on the file which would be sent. But this offer was not accepted and the order was implemented. The Assistant Commissioner came to know that this happened because the assessee had refused to let out his building on rent to set up the office of the senior officer. It has to be put on record that nothing happened to the Assistant Commissioner and in fact he was rated excellent by the same superior in the confidential report.

Initially modvat credit rules provided for issue of certificate by the Superintendent in charge of the jurisdictional range office to avail credit in case the gate pass (presently invoice) which was supposed to move with the goods was lost. Because some officers issued wrong certificates, this facility was withdrawn. In the result, if the transporter does not hand over the transport copy of the gate pass, no credit could be taken. One of the assessees who was manufacturing items which were small in volume but high in value and hence booked as small consignments, approached a Commissioner of Central Excise for relief since in one year their customers had lost more than Rs.5 lakhs because the document was not handed over. He was advised to start their own lorry transport service to avoid this problem.

One of the Commissionerates had large quantity of confiscated goods which could not be sold as such but had to be powdered and disposed of. One of the converters agreed to convert the product. He offered to lift the item from the office, take it to his factory and powder the same under the supervision of the departmental officers deputed for the purpose. He offered to purchase the powder emerging from the operation at Rs. 6 per Kilogram. He was informed that his offer to convert the goods into powder is accepted but the resultant powder will be auctioned and he can also participate in the auction. This was done as per the directions of a senior officer.

Finding that the assessee had not paid service tax as a recipient of services from abroad, he was advised by the officers of the department to pay the tax. The assessee agreed and paid the service tax and interest of about Rs.35 lakhs and took credit of service tax but not the interest (naturally). This incident happened prior to 2006. Later Bombay High Court decided that no service tax is payable for the services received from abroad prior to 2006. An offence case was registered against the assessee for availing credit of service tax which was not payable resulting in confirmation of the demand for credit availed with interest and imposition of penalty equal to service tax credit availed.

We are yet to formulate systems and procedures and processes which can identify such instances, take remedial actions which would prevent such incidents from happening in future.

(The author is former Member, Customs, Excise and Service Tax Appellate Tribunal and the views expressed are strictly personal.)