Non-adversarial tax administration - Fair mechanism for dispute resolution?
WHEN I took over in August 2012, I made a statement that “clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance”. That statement is the underlying theme of my tax proposals, both on the direct taxes side and on the indirect taxes side .
This is what the Hon'ble Finance Minister said in para 120 of his budget speech just before pronouncing his tax proposals.
After hearing these words, taxpayers would have expected the FM to announce assessee friendly reforms in taxation laws that would aid better tax environment and begin a new era in tax administration, but the shocking reality was far from the rhetoric. In fact, this budget has seen the introduction of many draconian provisions in the indirect tax laws - all in the name of clarity in tax laws and non- adversarial tax administration!
Arrest in Service Tax: Section 91 is proposed to be inserted in the Finance Act, 1994 to give powers to Superintendent to arrest a service tax offender where amount involved is rupees fifty lakhs. Fear and threat of arrest are more dangerous than arrest itself. This will breed unbridled corruption and in the long run more officers than assessees will be arrested. Now, a Superintendent can arrest an alleged offender and an Assistant Commissioner can release him on bail. At every stage, before arrest, during arrest, after arrest and during bail proceedings, there is tremendous scope for corruption and generally, such opportunities are not wasted. When you are planning to take Service Tax to the States with GST, such demonic law will certainly scare the States away – after all they are running their VAT administration for more than 70 years without arrest provisions. Why should you arrest an accused assessee – can't you wait till he is convicted? YOU CALL THIS NON- adversarial!
Repressive Recovery Provisions introduced in Customs and Excise: Section 142 of Customs Act & Section 11 of Central Excise Act are amended to insert recovery provision a la Section 87 of Finance Act 1994, which provides for recovery from a third person or by making banks or post office where the assessee holding deposits to pay the dues. The Department can recover the dues from your bank deposits, just by addressing a simple letter to bank manager. And such a letter to the Bank will virtually cripple the industry as the Bank would treat the industry as a bad customer and withhold overdrafts and other facilities. NON- ADVERSARIAL INDEED.
Customs Broker to replace Customs House Agent. The age-old institution of Custom House Agent (CHA) is to die giving place to the Customs Broker. The Bombay CHA association was started in 1937. Custom House Agent found a place even in the Old Customs Act, 1878. It is not known whether all the existing CHAs would be licenced as Customs Brokers or they have to go all the way to the Supreme Court. Section 146 of the Customs Act is substituted. A STABLE TAX REGIME!
Appellate Apathy: Section 35C of Central Excise Act and Section 129B of Customs Act are amended – to curtail the power of Tribunals to grant stay till the case is decided. The stay given by tribunals gets automatically vacated after one year even though the case is not decided. At present, the minimum time for a case to come up for final hearing after granting stay is four years and what would happen to all the cases where stay has been granted by tribunals till disposal of the case? This is the most unjust appeal provision which may not be practised even in the most authoritarian regimes. The Tribunal is a creature of the State. The Government appoints (or do not appoint) the Members of the Tribunal. The assessee appellant is no way concerned with the working of the Tribunal. How can the assessees be punished if the Tribunal is not able to pass orders within one year? Instead of punishing the innocent appellant, why can't you open a hundred benches of the Tribunal and ask them to clear all the arrears? Your Commissioners pass atrocious orders demanding mind boggling sums; you don't fill vacancies in the Tribunal and you punish the assessee for your incompetence. Will any Government anywhere be more unfair? THIS IS FAIR MECHANISM FOR DISPUTE RESOLUTION!
Works Contract or Construction? Flats with more than 2000 sft or costing more than Rs one crore get an abatement of 70% and the rest will get an abatement of 75%. Almost all the constructions are undertaken as “Works Contracts” and there is no change in the rate of service tax for works contracts in respect of Flats with more than 2000 sft or costing more than Rs 1 crore. So, should you assess construction service under ‘Works Contract' which makes no distinction between two classes of flats or pay tax by availing abatements? When there is tax on Works Contract service, why to have a Notification prescribing abatement for material used? CLARITY IN TAX LAWS!