In May 2021 I had written an article 'Indian Customs – Gate Keeper or facilitator1', doing realty check on compliance to Citizen Charter (www.cbic.gov.in) of the Central Board of Indirect Taxes and Customs2 (CBIC) by the officers of the CBIC while discharging their duties.
In the last one year much water has flown under the bridge. We have learned to live along with Corona, economy is bouncing back, Mr. Narender Modi, the Indian Prime Minister is firmly in saddle subtly pushing his agenda, including of ease of doing business, make in India, self-reliant India, and Sabka Saath, Sabka Vikas, Sabka Vishwas and Sabka Priyaas (carry everyone, growth for all, earn trust of everyone and efforts of everyone).; and Ms. Nirmala Sitharaman, the Finance Minster of India is working towards delivering 'non-adversarial tax administration'. And we have a new team of seasoned administrators in the CBIC which is known for honesty, integrity, uprightness and delivering results.
In this backdrop, let us look at whether any change has happened at ground level in the last one year – whether still Citizen Charter is being followed now or a poster on the wall?.
During my last outing I had mentioned that first standard laid down in Citizen Charter is acknowledgement by authorities of all written and electronic communications within 3 days, which is not happening. And it is the same, even today. Assessees keep on sending emails, letters and follow on phone calls which all go into a black-hole. Most of the time no response.
The next issue is regarding second standard laid down in Citizen Charter is to convey decision on matters including declarations and assessments within 15 days, which is again not happening. Even statutory deadlines are not being followed by field officers - passing of appealable orders within 15 days under Section 17(5) of the Customs Act, where importer does not agree to change of classification or valuation done by Group Assistant Commissioner at the port of import in Bill of Entry (BOE). Leave aside meeting statutory deadline of passing appealable orders within 15 days, even after years of follow up either orders or not passed or simply letter responses are given to importers to file appeals, which serve no purpose.
The last issue I covered was adjudication by departmental officers as quasi-judicial authorities. Most of the times sketchy orders are passed by departmental officers with a clear motive of confirming demand made in show cause notice in violation of judicial discipline and principles of natural justice. It is an accepted fait accompli by the industry when any demand show cause notice is issued that demand of duty or tax is going to be confirmed for longer period of limitation along with interest and penalty will also be imposed, irrespective of merit of the case. What is judicial discipline and rule of law? Who cares!
Before going further, let me narrate two recent real examples, which will confirm above issues.
Against order of confirmation of demand of tax and imposing of penalty, assessee filed appeal before the Tribunal along with stay application. The Tribunal ordered the appellant to make pre-deposit, which was complied with by the appellant. Later the Tribunal decided appeal and confirmed demand of tax for a normal period holding that neither extended period of limitation is invokable nor penalty can imposed. When the assess approached the Assistant Commissioner for refund of balance amount of pre-deposit after deducting tax payable, he not only deducted interest but penalty also and refunded the balance amount without interest. On appeal the Commissioner (Appeals) remanded the matter to the Assistant Commissioner for deciding the issue of penalty and interest on confirmed demand by issue of show cause notice and pass a reasoned speaking order. After a follow up of about 2 years and escalating matter right upto the Chief Commissioner, the Assistant Commissioner first asked the assessee to file refund claim to which he was informed that the same was not required; then he fixed hearing in the matter during which the assessee filed written submissions and remined him that since in compliance to direction of the Commissioner (Appeals) to issue show cause notice has not been issued and thus right refund of assessee is crystalised; and thereafter the Assistant Commissioner issued show cause notice proposing to impose penalty and demand interest now and deny interest on refund on pre-deposit under Section 35FF of the Central Excise Act and heard the matter again.
The above instant raises some serious questions about conduct of the Assistant Commissioner of utter disregard - for rule of law; compliance with instructions of the CBIC, decisions of the higher Appellate Authorities and judicial discipline. Can the Assistant Commissioner sit on adjudication of matter after 8 years of adjudication by the Commissioner, where on appeal the Tribunal did not order for recovery of interest and held that neither extended period of limitation invokable nor penalty imposable, and does he has jurisdiction to demand interest and impose penalty now where no demand of tax is pending before him and matter has attained finality with the decision of the Tribunal. Unfortunately, this is real and happening with impunity.
The second incident pertains to change of classification by the Group Assistant Commissioner declared by importer in BOE, which was not accepted by importer who paid duty under protest and requested for passing of appealable order under Section 17(5) of the Customs Act. After about 20 months of follow-up and escalating matter to the Commissioner, finally the Group Assistant Commissioner informed that in view of decision of the Supreme Court in the ITC Case3 importer can file appeal before the Commissioner (Appeals), if case he was aggrieved by the reassessment of BOE.
In the case the Group Assistant Commissioner was to advise importer to file appeal against reassessment of BOE why he waited for 20 months and what is the purpose Section 17(5) of the Customs Act mandating the Group Assistant Commissioner to pass appealable orders in case importer does not accept reassessment done by him. Further, the Mumbai High Court in decision in the case of the Dimensions Data Case4 has that in the ITC Case "the issue considered by the Supreme Court was whether in the absence of any challenge to an order of assessment in appeal, any refund application against the assessed duty could be entertained'. The recourse to the ITC Case even after upholding of the Dimension Data Case by the Supreme Court, by the Group Assistant Commissioner not only bad in law but also shows utter disregard for rule of law and compliance with the instructions of the CBIC.
The above two instances are not exception but normal response from Customs and GST authorities. The CBIC may ask for information from public and in response may receive thousands of such instances.
The CBIC has issued many instructions in the past mandating field officers to follow judicial discipline and pass speaking orders. Vide Circular 1053/2/2017 dated March 10, 2017 - Master Circular on Show Cause Notice, Adjudication and Recovery the CBIC has issued detailed guidelines for departmental officers, which are rarely complied with. The field officers are also reluctant to drop demands or pass favorable orders on account of fear of allegations of favoritism and possible vigilance enquiry against them.
In this view of the matter it is for the present leadership of the CBIC to ensure proper training of both IRS and junior officers, instill confidence of working fearlessly while following judicial discipline and ensuring compliance with principles of natural justice and governing legal provisions. Simultaneously, the CBIC must also take administrative action against officers who follow the policy 'I will only confirm demand and not give any relief to tax payer' or do not follow judicial discipline and principles of natural justice; and compliance to the law with reasonable interpretation and not with a view to somehow deny legitimate benefit to tax payer.
Before moving further it is good to refer to tow decisions of the Supreme Court.
The Supreme Court in the Kamlakshi Finance Case5 has upheld passing strictures against 2 Assistant Commissioner by the Mumbai High Court with the observation - 'The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities; The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws.'
The Supreme Court in the Bhag Singh Case6 has held 'Even in respect of administrative orders Lord Denning M.R. in Breen v. Amalgamated Engineering Union [1971 (1) All E.R. 1148] observed "The giving of reasons is one of the fundamentals of good administration". In Alexander Machinery (Dudley) Ltd. v. Crabtree [1974 LCR 120] it was observed: "Failure to give reasons amounts to denial of justice". Reasons are live links between the mind of the decision taker to the controversy in question and the decision or conclusion arrived at". Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the "inscrutable face of the sphinx", it can, by its silence, render it virtually impossible for the Courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system, reasons at least sufficient to indicate an application of mind to the matter before Court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made, in other words, a speaking out. The "inscrutable face of a sphinx" is ordinarily incongruous with a judicial or quasi-judicial performance.'
The above two examples of displeasure expressed by the Indian Highest Court speaks volumes about importance of following the law in letter and spirit in quasi-judicial proceedings. There may be thousands of more such decision of the various High Courts and Supreme Court.
Now it is upto the leadership of the CBIC how they take this narrative – positive feed requiring laying down guiding principles for field officers or to just ignore it. I am sure with service to the Nation at heart and making a difference to leave a lasting legacy, the current leadership of the CBIC may take prompt action to ensure that the attitude of revenue bias and somehow confirm demand against an assessee and impose penalty changes. Rolling out policy of taking administrative action against erring officers, who are not willing to learn inspite of being retrained, in cases of violation of judicial and administrative discipline may establish a 'non-adversarial tax administration'.
In addition, the CBIC should also ensure that commitment made in Citizen Charter is met and any non-compliance is viewed seriously. These efforts if taken by the CBIC, will go a long way in instilling faith of assessees in quasi-judicial proceedings, cut down cost of compliance and ease burden of Appellate Authorities, the High Courts and the Supreme Court.
Footnotes
1. https://www.mondaq.com/india/government-measures/1072226/indian-customs-gatekeeper-or-facilitator-
2. The administrative body in the Ministry of Finance (Department of Revenue) for administration of Customs and GST Laws of the Federal Government
3. [2019 (368) ELT 216 (SC)]
4. 2021 (376) E.L.T. 192 (Bom.), upheld by the Supreme Court vide order dated November 8, 2021
5. [1991 (55) ELT 433 (SC)]
6. 2004 (164) E.L.T. 137 (S.C.)
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