A forward-looking approach in conflict management

Budget proposals need not be a limitation on resolving litigation

Conflict is rife between taxpayers and tax collectors. The issue of too many litigations has attracted the attention of the public, analysts and also the government. In Budget 2016-17, the finance minister has specifically said the thrust of his tax proposals falls in nine categories one of which is "reducing litigation and providing certainty in taxation". The FM has further said that "Litigation is a scourge for a tax-friendly regime and creates an environment of distrust in addition to increasing the compliance cost of the tax payers and administrative cost for revenue".

Extent of the problem

There are about 300,000 tax cases pending with the 1st Appellate Authority with disputed amount being Rs 5.5 lakh crore, the Budget says. It is also too well-known that the percentage of cases where the department wins is far too little in tribunal, courts and the Supreme Court. Figures pending at the courts are not ascertainable.

Measures to counter it

The Budget has proposed the creation of a new Dispute Resolution Scheme under which a taxpayer who has an appeal pending as of today before the Commissioner (Appeal) can settle his case by paying the disputed tax and interest up to the date of assessment. He will only get favourable consideration for penalty. However, this will not solve the problem much because in 90 per cent cases, the merit is against Revenue and, therefore, only 10 per cent people will themselves avail of the scheme. It will be of limited utility.

The Budget has also proposed creation of 11 more CESTAT (Customs, Excise and Service Tax Appellate Tribunal) benches for increasing disposal.

A more effective move was taken by the CBEC (Central board of Excise and Customs), which issued a circular (F No 390/Misc/67/2014-JC) on December 18, 2015. It states cases pending in tribunal, high courts and the Supreme Court shall be withdrawn if the Supreme Court - on the same issue - decides in favour of the taxpayer and the department accepts it. For implementing the decision, a machinery has been set up by the board. The pending files will be examined by the Principal Chief Commissioner and commissioners and senior departmental representatives, among others, who will decide to withdraw such cases. This is a very useful move but what is important is the implementation of this fruitful idea.

What I am now writing about is that this is not the only move, which will solve the problem. There are many other ways to get rid of the litigations. These are:

A) The same committee of Principal Chief Commis-sioners can also examine those cases where there is already an order under Section 37B of the Central Excise Act, 1944, and similar provisions under Customs and Service Tax laws in favour of the taxpayers. There have been cases such as in the case of CCE, Indore vs Virdi Brothers - 2007(207)ELT 321(SC) where the officers simply ignored the existing order under Section 37B, (circular no. 58/1/2002-Cx, dated January 15, 2002) even though it was pointed out by the tribunal that there was one such order. This blatant attitude of the officers in going to the Supreme Court should have brought disciplinary action against them. Unless the attitude of the officers for over reaching to the Supreme Court is punished, the same tragic situation will continue.

B) The committee of Principal Chief Commi-ssioners should also point out all the issues on which several appeals are being filed before the tribunals, high courts and the Supreme Court. Once these issues are identified, they should request the CBEC to issue a tariff circular under Section 37B of the Central Excise Act and other Acts.

C) The board should issue more tariff circulars under the provisions for binding circulars like 37B. The fact is that the board has hardly issued any circulars for several years. That means the board is doing only the day-to-day work. Circulars under this section are meant to solve continuing problems.

D) The board should give the power to senior departmental representatives and chief departmental representatives to concede the points raised by the taxpayers during the litigation or even at the time of hearing in the tribunal or courts.
smukher2000@yahoo.com