Tax Vista Your weekly tax recap Edn. 26 - 14 December, 2020 By Dr. G. Gokul Kishore

Callousness, harassment & arbitrariness - High Court imposes costs to be recovered from salary of officer

Absence of proper training in law for officers performing quasi-judicial functions has been repeatedly highlighted in this column. On this point, in a recent order, Allahabad High Court has observed that quasi-judicial functions have been assigned to persons who are not legally trained affecting huge revenues. It said - "A perusal of the said show cause notice clearly highlights the fact that serious quasi-adjudicatory functionaries (sic) are being discharged by persons who do not have a legally trained mind and are entrusted in discharging functions affecting huge revenues. The order dated 30.1.2020 passed by the Assistant Commissioner rejecting the application of the petitioner is wholly arbitrary and demonstrates the lack of legally trained mind as there appears to be no effort to verify the correctness of the assertions made by the petitioner at the end of the Department."

The petitioner did not file GST returns for six months and the department issued show cause notice proposing cancellation of registration. The SCN, as in most such cases, was "completely vague" without mentioning the ground on which reply is sought. The petitioner filed the returns which means paid tax with interest, replied accordingly and sought revocation of cancellation of registration. The Assistant Commissioner passed order rejecting the request for revocation on the ground that challan details for tax / interest / late fee payment were not provided. The petitioner was compelled to file appeal and the appellate authority rejected the appeal holding that evidence for payment was not produced and internally department could not verify such details.

The High Court was rather furious at the manner in which the taxpayer was treated by the department. It came down heavily as can be seen from this observation - "This case highlights the callous manner in which the assessee has been harassed by the respondents." Taking note of Rule 23 of UPGST Rules, the High Court noted that except payment of the amounts due with interest and late fee and filing of returns, no further burden was cast on the taxpayer seeking revocation of cancellation of registration. The department was required to verify the same but did not do so. The High Court was equally displeased with the appellate authority - "the appellate authority has also committed the same manifest arbitrariness in deciding the appeal, the recording of the reason that facts cannot be verified at the appellate level is wholly arbitrary and militates against the whole purpose of statutory appeal under an enactment."

The department, before the High Court, submitted that no dues were pending, and the Court expressed dismay as to why such action could not be taken at the earlier stages pushing the taxpayer from one forum to another "wasting his considerable financial resources as well as time". The petition was allowed and costs of Rs. 10,000 was imposed on the officer to be paid from his salary [Ansari Construction v. Additional Commissioner - 2020-VIL-609-ALH].

The High Court order is eloquent enough for the CBIC to consider drastic reforms to contain the rot in the quasi-judicial system where notices are issued callously, taxpayers' replies are not considered, orders are perfunctorily passed, and taxpayers are harassed by compelling them to go to High Courts seeking remedy through writ petitions. But such orders are quite common these days and the tax administration seldom prefers action to slumber.

E-way bill - Should it be valid till the time department verifies the consignment'

Strange are the ways of operation of the tax authorities when it comes to e-way bills. Goods reached the destination with proper e-way bill and before expiry of the period of validity of such e-way bill but could not be unloaded immediately and they were unloaded the next day. The department visited the premises of the taxpayer a week later and took the stand that the e-way bills had to be valid at the time of inspection when the goods were being unloaded from the vehicle. The taxpayer had to approach High Court and the Court drew attention of the department to Rule 138(10) of CGST Rules providing for extension of validity of e-way bill in certain cases. The order passed by the department was quashed [Hemanth Motors v. State of Karnataka - 2020-VIL-618-KAR].

The issue and order are brief, but it does highlight the fact that e-way bill related harassment is widespread. Many at the cutting-edge level are neither equipped with the training to understand the intention of such provisions nor is the tax administration serious in addressing such issues. While optimistic taxpayers can pursue legal remedies, those who cannot, have to rue their fate.

Enhancement of declared value - Order not required when importer waives right of notice and hearing

If a person voluntarily waives his statutorily granted right and consents to an action by a statutory authority, then he cannot resile from such position later and claim the same. This is the ratio of an order of CESTAT allowing 36 appeals filed by the Customs department relating to customs valuation. The two importers had declared particular values and the Customs authorities enhanced the same based on value of contemporaneous imports. Both of them accepted such enhancement and informed the same in writing and expressly declared that they did not require show cause notice, hearing or speaking order. Relinquishing such rights was also mentioned in such letters. Based on such submissions, the department did not offer any hearing or pass order but enhanced the value. Then, appeals were filed by the importers against such enhancement and the Commissioner (Appeals) allowed the same on the grounds that speaking order was required for rejecting declared value and acceptance of enhancement did not preclude an assessee from challenging assessment.

The department was before CESTAT. The Tribunal took note of Section 17(5) of Customs Act, 1962 which provides for speaking order except in cases where the importer confirms the re-assessment by Customs, in writing and held that in this case, the importers had accepted re-assessment and therefore, speaking order was not required. Further, scope of Rule 12 of Customs Valuation Rules providing for manner of rejection of declared value as transaction value when the officer has reason to doubt the truth and accuracy was also taken into account. The Tribunal expressed the view that once the importers had accepted the enhanced value, it was not necessary for the assessing authority to undertake the exercise of determining the value of the declared goods under the provisions of Rules 4 to 9 of the Customs Valuation Rules. It relied on precedent rulings to the effect that when consent was given by the importer to the value proposed by Customs authorities and SCN and order were stated as not required, then consented value became the declared value requiring no further investigation. The Tribunal observed that the ground advanced by the importer that enhancement was accepted initially to save on demurrage, etc., was taken only in the appeal before it and not earlier [Commissioner of Customs, Delhi v. Hanuman Prasad & Sons - 2020-VIL-520-CESTAT-DEL-CU].

Jurisprudence on acceptance or rejection of transaction value, enhancement of declared value, application of Customs Valuation Rules, scope of Rule 12, etc., is plenty and yet, disputes on valuation continue to be agitated. The dispute resolution machinery is tasked with distinguishing the body of case law not relevant or where it disagrees and applying those on which it seeks to place reliance. This exercise has been a delicate balance as can be seen from this order also.

(The author is an Advocate, Gokul & Subha Advocates, Chennai. The views expressed are personal)