CBIC- A bottleneck in Justice delivery system

Introduction

We would like to communicate that this article is not to criticize but to bring out lot of thorny issues in GST administration which requires immediate redressal. The Constitution Bench of the Supreme Court has held that access to Justice is a Fundamental Right guaranteed to citizens by Article 14 and Article 21 of the Constitution of India.

The 3 independent pillars of Indian Democracy along with the GST Council were to safeguard the tax payer as well as the revenue: 1^st - The independence parliament which makes laws; 2^nd - the effectiveness of Supreme Court which interprets the laws; are being systematically diluted & usurped by the 3rd pillar – the executive calling most of the shots today. GST Council toeing the line of the executive.

The tax administrators are on the ground, in their understanding and slowly in the understanding of the practical tax payer becoming the law maker, the law interpreter and the implementation agency. Democracy and Justice is under threat as far as GST is concerned in India. It was drafted by the executive, implemented by the executive and appealed to SC in all case adverse to them or amended retrospectively. GST Council is toeing the line of the executive. It maybe noted that absolute power corrupts absolutely.

In order to build the trust among the taxpayers on the fairness, certainty of law as well as the executive including the enforcement, REFORMS are imperative. If the Government of India focuses on redressing these issues, Tax department can better serve the taxpayers and taxpayer’s society at large who incidentally pay for the expenditure of the Government as well as the salaries of the executive! Tax collections in long run certainly would increase with more FDI, more compliance due to reforms being put in place.

The following are some of authoritative judgments in the context of GST regime on substantial questions of law held in favour of Taxpayers by the Courts:

1. Mohith Minerals Pvt Ltd Vs UOI 2020 (33) G.S.T.L. 321 (Guj.) in the context of levy of the GST on Ocean Freight it was held that “Notification No. 8/2017-I.T. (Rate) and Entry 10 of Notification No. 10/2017-I.T. (Rate) were unconstitutional and ultra vires Integrated Goods and Services Tax Act, 2017 as they made importer liable for tax on service of transportation of goods upto Indian Customs Station provided by and received by persons in non-taxable territory outside India”
2. In the case of Torrent Power Ltd Vs UOI 2020 (34) G.S.T.L. 385 (Guj.) With respect to levy of the GST on application fee for releasing connection; rental charges against metering; testing fee for meters/transformers, capacitors, etc.; labour charges for shifting meters or shifting of service lines; charges for duplicate bill held that C.B.E. & C. Circular No. 34/8/2018-GST, dated 1-3-2018 clarifying these charges are liable for GST, struck down as ultra vires the Notification No. 12/2017-C.T. (Rate) Serial No. 25 and Section 8 of Central Goods and Services Tax Act, 2017.
3. In the case of Commercial Steel Engineering Corporation vs State of Bihar 2019 (28) G.S.T.L. 579 (Pat.) interest liability would not attract in case the ITC is availed and reversed before utilizing the same for the payment of Taxes.
4. In the case of Ankit Lokesh Gupta vs State Of Gujarat 2019 (31) G.S.T.L. 577 (Guj.) & Pranit Hem Desai Vs DGGI 2019 (30) G.S.T.L. 396 (Guj.) provisional attachment of the Bank Account is very drastic and far-reaching power, should not be invoked to harass the taxpayer, invoke only as a last resort or measure.
5. In the case of Safari Retreats Private Limited vs C-CGST [2019 25 GSTL 341 (Ori.)] Restriction of Section 17 (5) (d) of the GST Act, 2017 is not applicable where the construction services are used for construction of shopping mall which would be subsequently used for rendering output taxable supplies.
6. In the case of Amit Cotton Industries Vs UOI 2019 (29) G.S.T.L. 200 (Guj.) & Saraf Natural Stone Vs UOI 2019 (28) G.S.T.L. 385 (Guj.) held that in the context of delay in sanctioning the IGST Refunds, Court held that Refund directed to be sanctioned immediately along with 7% simple interest from date of filing of shipping bill till date of actual refund.
7. Siddharth Enterprises Vs NODAL Officer (Gujarat High Court) 2019 (29) G.S.T.L. 664 (Guj.) The right to carry forward credit is a right or privilege, acquired and accrued under the repealed act therefore, it cannot be allowed to lapse under Rule 117 of the CGST, 2017, for failure to file declaration form GST Tran-1 within the due date, i. e. 27. 12. 2017
8. In the case of Filco Trade Centre Vs UOI 2018 (17) G.S.T.L. 3 (Guj.) held that condition limiting eligibility of first stage dealer to claim credit of eligible duties in respect of goods which were purchased from manufacturers prior to twelve months of appointed day- the condition having retrospective operation taking away existing right and without any basis limiting scope of dealer to enjoy existing tax credits accordingly Court has struck down such condition.
1. Maxim Tubes Company Pvt Ltd vs UOI 2019 (368) E.L.T. 337 (Guj.) "pre-import condition" contained in paragraph 4.14 of FTP 2015-2020 inserted vide Notification No.33/2015-2020 dated 13.10.2017 and inserted vide clause (xii) in Notification No.18/2015-Cus vide Notification No.79/2017-Cus dated 13.10.2017, as being ultra vires the Advance Authorisation Scheme of FTP, 2015-2020.

We have quoted only few judgments here to illustrate. However, there are many other judgments held in favor of taxpayers on substantial question of law. Moot question in this article: GST is a Central Law having unform application across the Country. Whether the GST Officers implementing the above judgments in true sense and spirit?

CBIC is simply filing the Appeal/SLP against the above judgments before Apex Court and the GST Officers are not following the above rationale of judgments saying that subject judgment has been challenged before higher Forum. Sometime GST Officers say the judgment has given in some other’s case not in your case therefore not required to be followed. Sorry to say this, unfortunately even IRS Officers also have become rubber stamps & following this approach & passing the Orders ignoring the authoritative judgments by giving the ‘rubber-stamp reasons’. Why IRS Officers, who are academically meritorious, studied hard in highly competitive environment to get rank in civils become rubber stamp in this whole system? 

Recently a GST Audit Officer is demanding the GST on deemed Ocean Freight in the case of CIF imports from one Taxpayer which was already struck down. Many cases of SCN issued even after quoting the settled position!! In how many cases the GST department is sanctioning the interest refund in case the Refund sanctioned by the proper Officer beyond the period of two months from the date of application. Is it not the duty of the Officers to sanction the interest also in case of delay (Ranbaxy’s Supreme Court Judgment).

Authorities are least bothered about these judgments. Their approach sometimes shows the judgment is for the Court to follow & implement not for the authorities. It will take at least 10 years for all these issues to be settled at hon’ble Supreme Court. Till then the revenue Officers left and right collect the unauthorized taxes. In the case of State of West Bengal Vs Calcutta Club Ltd 2019 (29) G.S.T.L. 545 (S.C.) hon’ble Supreme Court after imposition of Service Tax on Clubs for a period 14 years, held that Service Tax on Clubs is invalid. By that time it is 15 years!!. The revenue officers ignored the Tribunal & High Court Judgments collected service tax from Clubs through unauthorizedly.

When the aggrieved party either the taxpayer or department can file the appeal before higher forum against the Order impugned, what is the problem for the Officers to take the independent decision on such issues. Judicial discipline commands the adherence to higher Court decisions by the lower authorities. If his independent, unbiased decision is not correct & against to revenue interest, the revenue department can very much file the appeal/petition. Then what is problem for the department. Therefore, CBIC should allow the freedom for the authorities to take independent, unbiased decision considering the judicial pronouncements which they are supposed to do as per the Legislature & constitutional mandate. CBIC should not become bottleneck or come in a way in justice delivery system by giving the instructions to adjudicating authorities for short circuiting the whole process.

In 2014 election, the BJP Government led by Mr. Modi and late Jaitley promised inter-alia they will put end to tax terrorism and retrospective amendments in taxation laws. Unfortunately, ignoring their promises in response to various judgments adverse to revenue retrospective amendments have been made. Some of them are:

1. Activities of the Club is deemed to be a supply.
2. GSTR-3B is deemed to be GSTR-3 Return retrospectively (AAP & Co Judgment)
3. Transition of CESS Credit disallowed retrospectively.
4. Denial of refund of ITC on input services in the case of inverted duty refunds 
5. Giving the power retrospectively for prescription of time limit for filing Trans-1.

No doubt Parliament has great latitude and wide powers to frame laws including taxing statutes with retrospective effect but why they should make such promises which are not being followed. Is it not unfair on legitimate tax payer who arranged his affairs as per the provisions of existing law as on that date. For this we should not blame only the Government, Political Parties but also the public as they also become corrupted to certain extent in certain way.

In response to a n adverse judgment, the CBIC Board either appeal mindlessly upto the Apex Court therefore that cannot be enforced or implemented. Alternatively amending the Law retrospectively. One interesting issue is that the GST department have thrown all the judgments to wind, but GST department intellectually considered one judgment and contemplating the amendments in the GST Law.

The Board vide C.B.I. & C. Circular No. 132/2/2020-GST, dated 18-3-2020 clarified that the appellate tribunal has not been constituted in view of the Judgment by Madras High Court in case of Revenue Bar Assn. v. Union of India 2019 (30) G.S.T.L. 584 (Mad.). Board having not considered all the judgments which are in favour of tax payer, why considered this judgment. How long they will take time for amendment in GST law-Appeal provisions. Whether the Government interested in establishing the GST Tribunal at all or not. In the previous regime recovery provisions initiated only after enquiry, show cause notice, adjudication, adherence to principles of natural justice, completion of appeal remedy.

Now the trend in GST regime, first the department is initiating recovery provisions without following the due process of law. By not establishing the GST Tribunal so far, it may not be possible in near future as the GST Council has to discuss, Law is to be amended, Parliamentary approval, Legislative Council approval for the amendments, the way the recovery proceedings are initiated or enforced it appears Government is not interested in putting the Tribunal in near future for early disposal of the cases & delivering the justice.

Circular No. 79/53/2018 – GST dated 31 December 2018 (para 9(a)) clarifies that refund of Compensation cess would not be admissible in respect of consignments exported on payment of IGST. In my view this clarification is going contrary to law or ultra vires IGST Act in view of no such restriction evident under the said Acts. What a Zero-rated turnover for the purpose of IGST Law, how it will not become the Zero-rated turnover for purpose of Compensation Cess Act.

Like this there are many clarifications given by Board which are contrary to Law Provisions. Example, single Refund application for two FY (Pitambara’s case), charging GST on meter rent (Torrent’s case), amendment of GSTR-3B Return (Bharti Airtel Case) e.t.c. Apex Court in CCE, Bolpur v. Ratan Melting and Wire Industries 2008 (231) E.L.T. 22 (S.C.) it was held that A circular contrary to statutory provisions has no existence in law. Because of the wrong Clarifications by the Board, even genuine officers are also not be able to take the independent and unbiased decisions. Somewhere at the gross route level it is an unofficial law that for the Officer Board Circular is Supreme & Bible and above the Law. This approach requires drastic changes.

Adding to this, sometimes GSTN Portal also behaves or responds contrary to legislative provisions, in this case it will be a nightmare for the taxpayers.

Conclusion

Therefore, we urge with due respect to the Government, CBIC & Officers that every case need not travel up to Supreme Court, as our judiciary is already burdened with too many cases. Officers to take independent decisions ignoring the fact that department filed the appeal before Supreme on the same or similar matter. Similarly adjudicating authorities to take independent views though it may be contrary to the clarification given by Board if Courts view is different. They need to follow judicial discipline, Board should not issue the clarifications contrary to law of the land. We hope & believe our suggestions would improve the certainty, discipline, compliance, ease of doing business, tax payers faith & trust in the Government administration. In the longer term certainly lead to net increased tax collections. 

For any further queries/comments please write to [email protected], Mobile 9989604111, [email protected]