CBEC plans critical reforms to tackle mounting litigation

Speedy out-of court settlements, work quality-based appraisals in the offing.

Mounting number of customs, excise and service tax litigation cases and the amount involved in them has forced the Central Board of Excise and Customs (CBEC) to look for major changes in their handling and disposal.

The number of appeals at various levels, beginning from the commissioner (appeals) to the Supreme Court, has shot up from 49,015 at the end of March 2007 to 87,862 on March 31, 2011. The amount involved in these appeals has more than doubled during this period from Rs 28,595 crore to Rs 62,543 crore.
 

CUSTOMS, EXCISE & SERVICE TAX LITIGATION

Date

Details of total (departmental and party’s) appeals*

No. of appealsAmount involved
(in Rs cr) Mar-0749,01528,595 Mar-0858,57635,124 Mar-0967,09144,298 Mar-1077,44751,974 Mar-1187,86262,543 *At commissioner (appeals), CESTAT, high courts and Supreme Court
Source: Central Board of Excise and Customs

The CBEC, already under pressure to collect revenue, is planning to reform the indirect tax administration to tackle the problem and unlock revenue caught up in these cases.

The steps include, bringing in suitable provisions for out- of-court settle-ments, improvement in quality of investigation, liberal refund and penalty imposition mechanisms, strengthening of Settlement Commission and Authority on Advance Ruling and annual performance appraisal based on quality of work done by officials.

The CBEC is considering suitable provisions for out of court settlement as a step forward in de-congesting the tribunals and courts. Where the disputed amount is low, a committee of two chief commissioners for a zone could meet and dispose the cases on a regular basis.

A complete change in attitude towards pre-adjudication preparatory work and judicial analysis of the issues is in the offing. The board has planned monitoring of progress in investigation by senior officers of the rank of additional commissioner and commissioner for expediting investigation work.

The board has also asked officials to emphasis on areas like refund, payment of interest on delayed refunds, unjust enrichment, invocation of extended period and imposition of mandatory penalty, which are recurrent themes in litigation.

The CBEC also proposes to strengthen the Settlement Commission and Authority on Advance Ruling by expanding their ambit of the subjects. The scheme of advance ruling is likely to be extended to include foreign investors’ liability of indirect tax.

Further, the board is initiating a system of annual performance appraisal whereby the quality of work done and not the quantity is set to be taken into consideration for growth and advancements.

The idea is to bring in a system of assessment and rating of the officers on the basis of quality of orders passed and not the numeric disposal of cases.

The Central Board of Excise and Customs is also banking on the proposal for creation of national tax tribunals with powers similar to that of a high courts.

It is expected that all matters concerning taxes could be quickly resolved in the national tax tribunals and law could be framed for final disposal of cases within a specified time-frame in this set up.