07/02/2017
Budget 2017-18
A brief Note on few issues
I. Tax Administration:
A. Honouring the Honest:
The Hon’ble Finance Minister in his Budget Speech has said (vide para 19 and 180 of his speech)- Honouring the Honest and Honest Tax payers with would be treated with dignity and courtesy
“19….. (x) Tax Administration: honouring the honest”
“180….. I would like to assure everyone that honest, tax-compliant person would be treated with dignity and courtesy”
This is a loudable announcement but nothing found in the Budget - how it would be done, this not clear at all. whereas the Indian Taxpayers are demanding it for years.
Everybody will guess what is scope of this promise and how the Government want to fulfill this promise.
a) Does it mean Tax –officials will not issue summons to such taxpayers?
b) Does it mean Tax – officials will not give threat of arrest or will not arrest such tax payers?
c) Does it mean tax officers will attend and reply to letters addressed to the Commissioner or the Chief Commissioner?
d) Does it mean such tax payers will not be slapped with bogus show cause notices?
B. Accountability of officers:
The Hon’ble Finance Minister in his Budget Speech has said (vide para 180 of his speech) - Greater accountability of officers of tax Department for Specific Act of commission or omissions -
“180….We plan to enforce greater accountability of officers of Tax Department for specific act of commission and omission….”
This is need of hours as there are numerous instances of taxpayers harassment by tax officials by abusing their powers and tax officials get escaped, which does not deter them not to repeat it. In fact, it has become rule of the day that tax officials will not be punished despite their patently acts of unbecoming towards taxpayer and deliberately harassing.
This is certainly meetings the aspiration and long standing demand of large taxpayers and a loudable announcement but nothing found in the Budget - how it would be done, this not clear at all. Whereas the Indian Taxpayers are demanding it for years.
a) Does it mean those officials who refused to follow Board Circulars and Instructions will be punished?
b) Does it mean those officials who deliberately defy Board Circulars and Instructions will be punished?
c) Does it mean those officials who deliberately refuse to follow the precedents and law laid down by the superior authority?
d) Does it mean those officers who do not pass orders for months together even after conclusion of hearing will be punished?
Some interesting facts: Governments instructions showing good intentions but not adhered to –what to do?
(I) The Board issued Instruction F. No. 275/17/2015-CX.8A, dated 11-03-2015 it was stated that adjudicating authority should pass order within a specified time. Earlier, Board issued Circular No. 732/48/2003-CX., dated 05-08-2003 wherein it has been stated that the Board has taken serious view on the matter of delay in issuance of adjudication/appellate order referring to earlier Circular No. 32/80-CX.6, dated 26-07-1980 where it was directed that after the conclusion of personal hearing it is necessary to communicate the decision immediately or within a reasonable time of five days. Where for certain reasons, the above time-limit cannot be adhered to in a particular case, the orders should be issued within 15 days or at most one month from the date of conclusion of the personal hearing. The Board has directed that above instruction should be complied with in true letter and spirit, and any failure to adhere the prescribed time limit should be viewed seriously. Instruction F. No. 275/17/2015-CX.8A, dated 11-03-2015 it was stated that adjudicating authority should pass order within a specified time.
How many officers has followed it – None. Whether any action has been taken against any one in last 3 decades against any one for defying these Board Circulars.
(II) The Government has issued Instruction F. No. 275/17/2015-CX. 8A, dated 11-3-2015 to improve the indirect tax administration by taking note that sometimes Show Cause Notices have been issued, which become unsustainable in the legal process. Creating such avoidable SCNs not only does become burden on the Government revenue, it also impacts the precious time of Trade & Industry as well as Appellate Authorities/Courts. The Government issued following guidelines to reduced litigations:
(i)SCNs should be issued after thorough examination and keeping in mind that grounds given in the SCNs are cogent, sustainable and backed by legal provisions and pronouncements.
(ii)Need to pass quality adjudicating orders, which can stand legal scrutiny of the Appellate Authority/Courts.
(iii)Urgent requirement of passing the adjudication orders within the specified time.
(iv)Judicial discipline should be followed while deciding pending show cause notices/appeals.
(v)Instructions issued with regard to the threshold limits for filing appeals before various fora must be applied scrupulously.
(vi)There should be proper system of monitoring and handling the litigation at the field level to prevent delays.
Would there be any data and details, what steps taken to implement this instruction. Whether any action has been taken against any one for not complying this Board Instruction.
(III) The Board has issued Instruction F. No. 280/45/2015-CX.8A, dated 17-9-2015 emphasised that all the adjudicating authorities are directed to pass adjudicating taking note that the Show Cause Notice was not adjudicated for 17 long years, taking into account the Bombay High Court decision. It is painful to note that in spite of various monitoring mechanisms in existence, such occurrence could not be avoided. The matter has been viewed seriously and all the adjudicating authorities are directed to pass adjudication orders within time limits as prescribed, so that the above said instance is not repeated in future.
Would there be any data and details, what steps taken to find out how many show cause notice are pending to fix accountability? How many cases are pending for re-adjudication as ordered by Tribunal and Courts? Why officers are not hearing cases on aging system how cases of their choice are heard and not others.
(IIII) The Board has issued Instruction F. No. 390/CESTAT/69/2014-JC, dated 22-12-2015, in view of the fact that the CESTAT has imposed cases in number of cases on the Department or on the Adjudicating Authority on the ground of poor quality of adjudication order.
Whether action has been taken against any officers under service Rules for passing such poor quality orders, which lead to huge harassment to taxpayers.
(V) The Board has issued Instruction F. No. 390/CESTAT/69/2014-JC, dated 22-12-2015, clarifying that there is a need to examine critically the orders passed in favour of the Department.
Whether any officer has examined so far any orders, how many of order passed in favour of Department found poor quality order, and what steps and action taken against those officers responsible for the same.
(VI) The Board has issued Circular No. 275/32/2016-CX.,8A, dated 01-11-2016 taking note that blatantly pro –revenue orders passed by the Commissioner (Appeals), which leads to unnecessary and frivolous litigation before higher fora and refer the earlier Board Circular No. 885/5/2009-CX., dated 30-4-2009, directing that Commissioner (Appeals) should desist from passing frivolous orders.
Whether action has been taken against any officers under service Rules for passing such frivolous orders, which lead to huge harassment to taxpayers.
(VII) The Board has issued instruction F. No. 390/CESTAT/24/2016-JC, dated 13-04-2016 taking note CESTAT final order dated 29.02.2016 , which clearly records empty formaility was followed by Commissioner (Appeals) for disposal of Appeal and his action is contrary to law. The Board has recoded that fixing/ re-fixing of personal hearing is a vital step towards the disposal of cases by the quash judicial/ Appellant authority, and file notings should clearly indicate the same under the signature of said authority.
Whether action has been taken against such officer under service Rules for passing order contrary to law. Whether any monitoring is done.
(VIII) The Minisry of Finance, Govt. of India issued Press Release F. No. 296/07/2016-CX.9, dated 25-04-2016 that Pre Show Cause notice consultation with the assessee at the level of Pr. Commissioner/Commissioner has been made mandatory in all the cases where duty involved is above Rs. 50 Lakhs.
At ground level, this instruction is openly flouted.
Would there be any data and details, what steps taken to implement this instruction. Whether any action has been taken against any one for not complying this Board Instruction?
(IX) The Minisry of Finance, Govt. of India issued Press Release F. No. 296/07/2016-CX.9, dated 25-04-2016 that Detailed instructions have been issued to all field formations regarding the manner, in which a SCN is to be issued, personal hearings are to be granted and speaking adjudication orders to be issued. The Chief Commissioners have been directed to do sample verification of records of such proceedings from time to time.
At ground level, this instruction is openly flouted.
Would there be any data and details, what steps taken to implement this instruction. Whether any action has been taken against any one for not complying this Board Instruction?
(X) The Minisry of Finance, Govt. of India issued Press Release F. No. 296/07/2016-CX.9, dated 25-04-2016 that Training/Workshops are being organized in zones to train officers to issue quality Show Cause Notices, judicious adjudication orders, advocacy, in order to minimise disputes and further litigation. This will assist ease of doing business.
Can any data and details be shared how many officers trained and what is the result of it as neither quality of show cause notices have improved and nor the quality of adjudicating authority. Who are the trainers?
(XI) The Board has issued instruction F. No. 207/07/2014-CX-6, dated 20-01-2015 referring and reiterated to earlier instruction F. No. 137/39/2007-CX-4, dated 26-2-2007 that instances as came to the knowledge that the summons are being issued in a routine manner to call documents. Senior management officials such as CEO, CFO, General Managers of a large company or a PSU should not generally be issued summons at the first instance. They should be summoned only when there are indications in the investigation of their involvement in the decision making process which led to loss of revenue.”
At the ground level summons are still being issued in routine manner, by flouting these instructions.
Whether action has been taken against any officers under service Rules issuing summons in routine manner by flouting instructions issued by Board, which lead to huge harassment to taxpayers.
II. GST Goal Post:
The Hon’ble Finance Minister has said (vide 179 of his speech) - Goal of GST Implementation as per Schedule.
However, The Hon’ble Finance Minister has not given date when it would be implemented as what Industry body knows the date is 1st April 2017. Whether the Government will strict to it or it is deliberately not given new date to keep guessing every one?
III. Retrospective amendment for works contract involve transfer to land or undivided share in land:
The present Government had promised no retrospective amendment will be done. However in this budget, in service tax retrospective amendment has been done for valuation w.e.f. 1.7.2010. This amendments is applicable when ex*****on of work contract involve transfer of land or undivided shares of land to clarity it will not include value of such land and undivided share of land.
However no provision is made to determine cost of such land or undivided share of land. And in alternatively tax is demanded on 25% to 30% value of works contract, which makes that as there is no value of such land or undivided share of land, as almost on similar amount tax was to be lived had there was not such provisions was introduced.
This provision is introduced to overcome the judgment of Delhi High court delivered on 3.6.2016 in Suresh Bansal case. As per said judgement, it was held no tax is payable unless there are provisions to segregate the value of land or undivided share of land in any works contract.
As the amendment is applicable with retrospective effect (1.7.2010) it is against the Government promise not to make retrospective amendment.
It will open up past cases also, which will cause further litigation and harassment.
In any case, such an amendment is ambiguous unless the mechanism is evolve to determine the value of land or undivided share of land in any works contract, it only continue with litigation.
IIII. Retrospective amendment for exemption of service tax on Premium paid for long terms lease:
The Government has made provisions to give retrospective effect (w.e.f. 01.06.2007) to exemption granted by Notification 41/2016-ST, dated 22.09.2016 to exempt from levy of service tax on premium paid for transfer of plot on long term lease basis for 30 years or more, which appears to exemption but in fact, it levies tax on premium paid on transfer of property on long term lease over 30 years. As the exemption is limited to State Govt undertaking or corporations giving plot to industrial units that means all other persons transfer land or building on long term lease or sub lease, they have to pay service tax on entire value. This is against the judgment of Tribunal in Greater NOIDA Authority that premium on long term lease does not attract service tax and said judgment was accepted by Govt but yet this amendment.
This amendment is not only put huge burden of tax on everyone but it also not acceptable as it levy stamp duty and service tax both on such long term lease transaction on entire value. It would same be for in future in GST also.
Such provisions must be re-looked by committee and no such tax be imposed on transfer of land or building on long term lease basis, which virtually a transfer and attract stamp duty.
