Don't take Show cause Notices lightly – Draconian provisional attachment of property - procedure in place
For the last two years, Section 28BA was happily sleeping in the Customs Act. Under this Section, the Proper officer can attach the property after issue of Show cause Notice, even before the adjudication order is passed. Though it was provided for in the Act to attach property, for the last two years, it seems to have been not put into action. Now the Board has issued guidelines for implementation of the unholy scheme.
1. Proceedings can be initiated only after a Show cause Notice has been issued to demand duty(thankfully it is not applicable immediately after an Audit Objection)
2. The Proper Officer proposing to attach property should make a written proposal in the prescribed format to the Commissioner. If Commissioner himself is the proposer, he can straight away go ahead.
3. Commissioner of Customs will serve a notice of attachment and then duly pass an order of attachment which the Proper Officer will implement.
4. The provisional attachment of property shall be resorted to only when the duty involved is more than Rs. 25 Lakhs. ( Now this is not in the statute and so a High Court may say that this is not binding on the courts, as we recently reported in a case)
5. Movable property should be attached only if the immovable property available for attachment is not sufficient to protect the interests of revenue.
When these provisions were at the legislation stage, TIOL submitted to the Parliamentary Committee on Finance,
These clauses are draconian, outrageous and arbitrary. It will lead to gross miscarriage of justice and will become a tool in the hands of quasi-judicial officers for harassing the assessees. Mere service of notices does not make the persons guilty of committing /breaching the provisions of the Act. This provision has no place in a progressive society aiming to provide transparent tax laws and an efficient tax administration.
The Parliamentary Committee asked the Government as to the means by which the Government proposes to address the concerns on preventing harassment, ensuring that manufacturing activities were not hampered. The Committee also recommended that apart from ensuring proper usage of the provision, appropriate disciplinary action should be initiated against such tax officials who may be found to exercise the proposed powers frivolously and without sound reasons.
The Government had assured the Committee that it would take appropriate steps in that direction.
In tune with this assurance, the Guidelines issued by the Board, stipulate that
It is important to note that there should be sufficient justification to hold a view that the provisional attachment of property is necessary to protect the interests of revenue. The remedy of attachment being, by its very nature, extraordinary, has to be resorted to with utmost circumspection and with maximum care and caution. The grounds on which the proper officer entertains the reasonable belief that the noticee would dispose of, or remove, the property and the source of his information, if any, should be clearly stated while seeking the previous approval of the Commissioner of Customs. Normally, the proposal to be made to the Commissioner of Customs should be forwarded within one month's period of the issue of SCN. It may also be noted that appropriate disciplinary action shall be initiated against the officers who may be found to exercise the powers of provisional attachment of property frivolously and without sound reasons. [Recommendation of the Standing Committee on Finance (Fourteenth Lok Sabha) in its 27th Report.]
It should also be ensured that such attachment does not hamper normal business of manufacturer importer/ exporter or assessee. This would mean that raw materials and inputs required for production or finished goods, in case of manufacturer importer/ exporter should not be attached by the department.
Similar provisions exist on the Service Tax and Central Excise side too, and similar guidelines are bound to follow.
Lawyers are going to have a good time ahead. With Classification and Valuation disputes gone, CENVAT issues almost settled, there is a feeling that scope for litigation is limited. Every time the lawyer faces prospective unemployment, the good Government drops opportunities on him like manna from heaven.
CBEC Circular NO , Dated: June 30, 2008