A OPEN REQUEST LETTER TO HON'BLE FINANCE MINISTER OF INDIA

[GOKARNESAN.S SUBRAMANIAN]

AN OPEN REQUEST LETTER TO THE HON’BLE FINANCE MINISTER OF INDIA

From

S. Gokarnesan, Advocate, Chennai

Respected Sir

I write this letter to your good-self on behalf of the Trade and Industry.

First of All, I sincerely convey my thanks to the present Government for having taken various forward steps and measures to make INDIA – EASE OF DOING BUSINESS.

However, I am of the view that the following issue, which   seems to be against the above policy of ‘Ease of Doing Business’. To make it specific,   I wish to bring the following to the kind attention of your good-self  Sir.

Issue:- Adjudication Power of Central Excise and Service Tax officers - Monetary Limits revised

1. Vide Circular No. 1049/37/2016-CX., dated 29-9-2016 (F.No. 267/40/2016-CX. 8), the Government has revised the monetary limit to the Central Excise / Service Tax Officers in Adjudication process on litigations.

2. It is reliably learnt that consequent to introduction of proposed GST in July 2017, the Ministry wants to speed up and complete the Adjudication in all pending show cause notices on central excise and service tax matters with a time frame of 31.3.2017 and to enable for smooth transmission to GST.  The revised powers are tabled below:

Sl. No.	Central Excise Officer	Monetary Limits of duty/tax/credit demand for Central Excise and Service Tax
1.	Superintendent	Not exceeding rupees ten lakh
2.	Deputy/Assistant Commissioner	Above ten lakh but not exceeding rupees fifty lakh
3.	Additional/Joint Commissioner	Above fifty lakh but not exceeding rupees two crore
4.	Commissioner	Without limit i.e. cases exceeding rupees two crores

3. Consequent to the increase in monetary limit to Officers below the Rank of Commissioners, files relating to cases pending with Commissioners have been transferred to the Lower Adjudicating Authorities with a specific instructions to complete the adjudication before 31.3.2017.

4. This letter emphasis the burden on the Assessees consequent to the above administrative changes with a lone motive of ‘speed up the adjudication on pending show cause notices’ without considering the difficulties to be faced by the Assessees by and large.

5. For example, prior to this revision,  show cause notices with a proposed demand of excise duty / service tax ranging between ₹ 50 lakhs to ₹ 2 crores are pending with the Commissioner for Adjudication. After this revised limit, these cases are to be adjudicated by Joint / Additional Commissioners.  Due to pressure from the Board to complete the process, most of the demand will be confirmed by these Officers.

6. On the point of Assessee, if the Order is passed by Commissioner confirming the demand,  Assessees have to prefer appeal before Hon’ble CESTAT with a mandatory pre-deposit of 7.5% of the total demand of duty / service tax paid.

7. Because of this revised monetary limit, the Assessees have to undergo two layer of appeals in as much as the case is adjudicated by the Officer below the rank of Commissioners.

• First Appeal with Commissioner (Appeals) on payment of mandatory pre-deposit of 7.5% of the total demand confirmed, within 60 days from the date of receipt of order. The Commissioner (Appeals), due to pile up of appeals similar to this, will take minimum one year to two years to hear the case and to pass the Appellate Order.

• If Commissioner (Appeals) also confirms the demand, the next Appeal lies with Hon’ble CESTAT within 90 days from the date of receipt of Order.  Here, the Assessees have to pay another 2.5% of the demand confirmed in addition to 7.5% already deposited with Commissioner (Appeals) to fulfill the mandatory requirement of 10% pre deposit. Unfortunately, there are conflict decisions of Hon’ble Tribunals on the quantum of pre-deposit. (i.e. whether the appellant is liable to pay 10% of the total demand in addition to 7.5% already paid with Commissioner (Appeals) or only 2.5% after taking into account the 7.5% already paid).  If 10% is insisted, then the Assessees have left with no option except to pay 17.5% in total as pre deposit, which is against the provisions of CE Act.

• In CESTAT, lots of cases are pending for disposal due to various administrative or other reasons.  Once the Appeal is filed, it will take minimum Five years to Ten years to get justice in CESTAT.

• On the other hand, had the case is adjudicated by Commissioner itself, then there is a considerable savings on time for Assessees since appeal lies directly with CESTAT .

• Altogether, the Assessees have to wait patiently for minimum 5 years to maximum 10 years right from the date of Adjudication completed by the Officers (below the Rank of Commissioner) till the Appeal disposed by CESTAT.

8. In order  not to put the Assessees in a difficult situation, I request the Hon’ble Finance Minister to consider the above and to make changes in the Central Excise Act / Finance Act (service tax) to enable the Trade and Industry to do ‘Ease of Busines’

1. Remove the statutory requirement of Appeal before Commissioner (Appeals) to avoid delay in disposal of such appeal by Commissioner (Appeals) in respect of Orders passed by Officers below the rank of Commissioner.

2. Provision to be made for a Direct Appeal to CESTAT against all Orders passed either by the Officers below the Rank of Commissioners or by the Commissioner (Adjudication) with a mandatory pre-deposit of 7.5% of the total demand.  In other words, the First Appeal itself with CESTAT only.

3. In CESTAT Administrations, request to create more Benches and also Post sufficient Members to handle the enormous appeals expected to be filed and also to clear the pending appeals.

If the above request is considered and implemented, it is a great help to assesses across the country to get justice in time which is the real example of taking measures towards ‘Ease of doing business’

I convey my sincere thanks to the Hon’ble Finance Minister on behalf of the Trade and Industry and expect a favourable response from you, Sir.

Thanks and Regards

S. Gokarnesan

Advocate

Chennai

98400 87349

Mail: [email protected]

Discussions to this article

[KASTURI SETHI]

Best proposals,Sir. De facto, Commissioner(Appeals) acts as Commissioner (Executive) in the interest of revenue. This reminds​ me of CESTAT judgement wherein it was held that Commissioner (Appeal) has no semi-judicial power. Govt. may or may not accept but by writing this article you have proved that you are worried about the assessees and I can say that you are not materialistic. This indicates that you have no lust for money. Your ideas are nobel and worth implementation.

[Subhash Modi]

A cat chasing a mouse; for the cat it is sport but for the mouse it is threat (of death). Litigation for the Government it is sport but for the assessee it is death. Ahmedabad Tribunal has already ruled that mandatory pre-deposit shall be 10% and not balance 2.5%. 7.5% blocked for 1 or 2 years till Commissioner (Appeals) decides and if adverse (usually the case) an additional 10% blocked till Tribunal decides 5 to 10 years later. If the deposit was made borrowing from Bank at 15 to 18% pa interest and on refund of pre-deposit interest is paid at statutory rate of 6% pa there is still a cost of 9 to 12% interest differential cost for average 7 years which translates to 84% of 17.5% (simple - not compounded) equals to 14.7% of the pre-deposited amount which is nothing but a non statutory penalty even if the appeal succeeds.

[GOKARNESAN.S SUBRAMANIAN]

The burden of interest liability has not been discussed in the said letter. If the demand is confirmed by CESTAT after 5 to 10 years, the asseessees have to pay interest right from the due date till the date of payment of the duty after the decision of CESTAT. As in the case of penalty, there is no upper limit fixed for interest. If interest is payable for 10 years the said interest amount exceeds the total demand. For interest sky is the limit. As such, if speedy disposal is on the card, then the assessee needs to pay only lesser quantum of interest. As rightly pointed out by Mr. Subhashdi, the interest burden will put the assessee in a fix. For the delay happened at Commissioner (Appeals) and CESTAT level in disposal of an appeal, the poor assessee to bear the interest burden though NO FAULT on them except to file an appeal as per the rights given in the Statute.

[MOHAN S]

The Government seems to be interested in collecting as much Revenue as possible ( Whether such revenue is fair or unfairly demanded) by this so called "Delegation of powers" to lower authorities. If Commissioners themselves are not acting judicially, it is futile expect the lower authorities like Superintendent to act in fair manner and render justice. Sadly the Finance minister appears to be guided solely by the CBEC whose only goal is to maximise revenue somehow. Sad state of affairs.

[ANIL ANIKHINDI]

Very correctly mentioned by you sir, The judiciary is running at Govt. cost (ultimately it is taxpayers money), but the assessee has no choice. Serous steps must be taken to reduce pendancy at various judiciary levels, right from Session Courts to Supreme Courts and Tribunals. It is seen many times that Supreme Court take cases only for political parties on urgent basis keeping all normal cases pending for years together.

CMA (Dr.) Anil Anikhindi,

Cost Accountant

[KASTURI SETHI]

Undoubtedly assessees are victims of inordinate delay in deciding the cases at all levels. At the same time success percentage of the cases booked by the department is very very low. Thus most of the Noticees escape the wrath of department in the form of interest but the rigours of litigation faced by the Noticee/assessees cannot be compensated. They undergo stress, tension for a long period in addition to time, money and energy wasted in lame SCNs. The failure percentage of the cases booked by the department must be considered seriously by the Govt. Not only Noticee suffer but also Govt.'s precious time, money (taxpayers' money) is also wasted.

[Ganeshan Kalyani]

Increment, promotion of the authority should be linked to the number of cases adjudicated. Performance review of the authority must be evaluated every year to consider their contribution. In private jobs these are basic criteria for increment,promotion etc. If one does not perform his duty then low rating is given and over a period of time ultimatum is given if performance was not been improved. In my view such type of system should be brought in the government department .in my view this is the best solution.