To handle the problem of ever-mounting arrears in the Income-Tax, and Customs & Central Excise, the Budget 2004 seriously needs to come out with a solution.

And this solution could be either the formation of much-debated National Tax Tribunal (NTT) or yet another Kar Vivad Samadhan Scheme (KVSS).

Even if we do not talk about the income tax arrears for a while (as they have long surpassed all levels of discipline), in Central Excise and Customs alone there are millions of cases pending from the level of assistant commissioners right up to the Supreme Court of India.

It takes about a year or two for an assistant commissioner to decide a case, then another year for the first appellate stage, three to six years for the Tribunal and five to ten years for the higher courts.

Sometimes by the time a case is decided by the highest court, the issue is no more relevant.

We also have cases pending with the Committee of Disputes, settlement commission and revision authorities. In Customs and Central Excise matters (for that matter any matter), the interests of the assessee is in postponing the liability as far as possible and that of the department in getting as much as possible as quickly as possible.

In these contradictory goals, it is the lawyers and consultants who ultimately reap the benefits.

While everybody agrees that it is futile to be engaged in a long-drawn legal battle, nobody seems to be prepared to get out of the legal wrangle, especially in fiscal matters. They say, in a war the first casualty is the truth. This is true of many of our legal battles.

A lot of money, time and paper are wasted in thousands of pending cases at various levels. Tons and tons of printed orders are delivered often repeating the same old decided cases, sometimes overruling, sometimes distinguishing, sometimes just referring and almost always surely confusing everybody.

It was once believed that simplification of procedures and simple language of the laws would reduce litigation. The revenue boards have been on a long course of simplification and simple laws.

And surely and steadily every simplification has provided an opportunity to the legal fraternity to reap rich harvests. A quarter century ago there was no CEGAT, there was a Commissioner (Appeals) for three or four states, one fourth the present number of Commissioners, no publications, no web sites and the laws were tough to understand and implement.

All the simplification has only added to litigation and all the adjudicating and appellate authorities are always busy churning out orders.

And nobody is able to clear the arrears of pending cases. The amount of money spent in monitoring these pending cases is also quite huge.

Several reports are called for and compiled about cases pending in various stages and even Parliamentary Committees scrutinise the alarming growth of pending litigation.

Dutifully, periodic reports on the amount of duty locked up in litigation are prepared, analysed and action plans devised to reduce pending litigation and realise arrears of revenue. But the mountain has been growing steadily and all our efforts to reduce pending litigation have not met with any reasonable success.

Why?

• Maybe, we are just a litigation-loving country.
• Legal delays are axiomatic in any country, but we thrive on only the delaying capacity of the judicial institutions. Many of our assessees go in appeal to Tribunal and courts not because they have any hope of winning the case, but the very fact of delaying payment would help them and who knows what will happen tomorrow? May be there will be a Kar Vivad Samadhan or some such scheme which are meant more for the benefit of law-breakers than the ones who obey the laws!
• On the other hand, the departmental officers are trained and tuned to the music of 'err on the right side.'
• The departments are more litigation lovers that the assessees. The Commissioner (Appeals) is just an intermediate product, never an end. If the commissioner's order is against the assessee, he will surely go in appeal. If it is in his favour, the department will promptly appeal. All the strictures against frivolous appeals by department go almost unnoticed (The R K Tiwari report largely deals with this issue).
• So, given an opportunity we will not let go of an opportunity to appeal. No wonder the appellate fora are full to the brink and overflowing.

In spite of an apparently profitable proposition of waiver of penalty, interest and prosecution for a 50 per cent payment of duty demanded, our earlier Kar Vivad Samadhan was not very successful. Revenue only lost cases where the department's cases were very strong and would have certainly won. Other cases remained and these other cases constitute the major chunk. The Settlement Commission only offered yet another forum and litigation continues merrily.

Reports are published that thousands of crores (about Rs 92,000 crore in income tax and Rs 14,000 crore in Customs & Excise) are locked up in court cases. Actually this figure is highly exaggerated. Every rupee locked up in litigation is not revenue.

Actually what the Revenue department may ultimately get is only a fraction of the amount under litigation and that too after years of agonising court room battles and may be a little retrospective legislation!

Is there no way out? There is; if we are prepared to take some drastic realistic measures. There is no point in the blaming game for arrears. TIOL would suggest another Kar Vivad Samadhan Scheme which should kill most of our pending arrears of cases.

The TIOL scheme would work like this:

• Ask the litigants to pay just 10  per cent of the duty demanded and give them total immunity from all liabilities pertaining to that case. Cases pending at all levels should be covered in the scheme.
• After the scheme is closed, if still there are a large number of cases pending, have an Excise and Customs Adalat, again at all levels. The adalat would constitute of members from the trade, department and an independent judge. Once the amount to be paid is determined, give the party one year to pay the amount, if needed in instalments.

There should be a Samadhan within the department also as follows:

• As a one-time measure, close all the provisional assessments ordered before 1st July 2004 with absolutely no liability on either side.
• Treat all the existing Audit paras, both internal and AG's as closed. Simply destroy all the audit files.
• In all cases booked, if Show Cause Notices are not issued within six months from the date of seizure/detection, return all the seized goods and records with no liability to the assessee. Destroy all the case records.
• Do away with the five-year limitation for demands for the past five years. The five-year period should apply prospectively from January 1, 2004. That is for an offence committed in January 1, 2002, no demand can be issued after January 1, 2004. However for offences committed after January 1, 2004, the limitation can be five years.

Our revenue offices and courts will have a better look with all those mountains of paper destroyed and with better-looking officers having no worry about those pending arrears and audit objections. In another 50 years, we are bound to clog the system and all the ills will come back, but for now let there be Samadhan and let's start afresh.
A similar exercise should be done in the Direct Taxes side too.

This may make a lot of consultants lose their work, but consistency and clarity are far more important than consultancy.

The NTT option

The second option could be the formation of NTT which would, apart from giving employment to some of the retiring bureaucrats in their home towns, would also bring in uniformity and judicial consistency in high court orders.

Hopefully, it would also speed up the wheels of justice in matters of taxation but more can be said only after seeing its empirical functioning.

Taxpayers need not be surprised if Chidambaram comes out with a distinctively amended National Tax Tribunal in this Budget.

Powered by