INTRODUCTION
The Indian Tax regime has an influence over corporate governance by either imposing liabilities or offering tax privileges; contrastingly, corporate governance has an impact on management of a company’s tax affairs. The Central Board of Indirect Taxes and Customs (CBIC) has recently issued Guidelines for launching prosecution under Goods and Service Tax. The guidelines are being implemented in order to protect innocent taxpayers from harassment by the GST officers. These guidelines limit the potential for abuse of the provision and give tax authorities clarity regarding the process to be followed when bringing legal action under the Act.
In accordance with Section 159 of the Central Goods and Service Tax Act, 2017 (“CGST Act”) Act, the rules stipulate that the Pr. Commissioner, Commissioner, or any other officer designated by the aforementioned authority may disclose the details of the tax-payer to the public in “the deserving cases”, keeping in mind the interest of the public. Moreover, such unfettered blanket powers pave the way for malpractices by the Central Board of Indirect Taxes and Customs (CBIC) to harass taxpayers, call for scrutiny on any basis which in turn affects the business and market image of the business.
The paper aims to critically analyze CBIC Guidelines with reference to Section 159 of the CGST Act and the probable arbitrary use of power by tax-officers, the paper further highlights constitutional provisions to discern the arbitrary nature of the provision. The paper also aims to provide an analysis of the implications of Section 159 on ease of doing business and corporate governance.
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ARBITRARY USE OF POWER: “THE DESERVING CASES”
The CBIC Guidelines aim to limit the potential for abuse of innocent taxpayers from being harassed by GST Officials. However, there exists an ambiguity in several provisions laid down by the CBIC. For the purpose of this paper, the Author shall analyze the underlying lacunae and ambiguity in Section 159 of CGST Act. A comprehensive reading of the Guidelines and the CGST Act of the aforementioned Section stipulates that the Pr. Commissioner, Commissioner or any other officer designated by the above-stated authority may disclose the details of the person convicted under the Act.
The basis for determining this publication is undetermined; the CBIC Guidelines put forth that such disclosure must be done keeping in mind the interest of the public and shall only be done in “the deserving cases”. The point of ambiguity is that the Guidelines do not lay down circumstances in which such an unfettered power is to be exercised. The publication of information is not limited to the details of the person convicted, GST Officials can also publish any information in relation to the proceeding or the prosecution of that individual. The only condition required to be satisfied is that the publication must be done in public interest. Such unfettered power allows a tremendous scope to the GST Officials to arbitrarily apply the provision.
Right to privacy has been laid down by Hon’ble Supreme Court as a fundamental right under Art. 21 of the Constitution of India in the case of K.S. Puttaswamy (Retd.) and Anr. v. Union of India [(2017) 10 SCC 1]. However, Right to Privacy is not an absolute right, it is subjected to reasonable restrictions in public interest. In the case of Mr. X v. Hospital Z [(2003) 1 SCC 500], the Hon’ble Supreme Court held that such reasonable restrictions can be imposed according to the procedure established by law. Further, in the case of Maneka Gandhi v. Union of India [AIR 1978 SC 597], the Hon’ble Supreme Court observed that the procedure established by law under Art. 21 of the Constitution ‘fair and just’, ‘reasonable’ and not ‘arbitrary, fanciful or oppressive’. Section 159 of CGST Act violates the Right to Privacy of the person convicted by publishing information privy to them.
In the case of E.P Royappa v. State of Tamil Nadu [1974 AIR 555], the Hon’ble Supreme Court introduced the principle of manifest arbitrariness. A legislation or subordinate legislation can be declared as void if it is ultra vires to Article 14 and its legislative object is capricious, irrational and without a determining principle. The provisions of the Section do not fall under the reasonable restrictions provided in Art. 21 of the Constitution as there is no definite criteria of what constitutes ‘public interest’ in accordance with information being published by the Tax Official. The Guidelines do not clear the already existing ambiguity but it adds a layer of undetermined principle, thereby violating the Right to Privacy of the persons convicted.
IMPLICATIONS ON EASE OF DOING BUSINESS AND CORPORATE GOVERNANCE
The Indian Tax regime has an influence over corporate governance by either imposing liabilities or offering tax privileges; contrastingly, corporate governance has an impact on management of a company’s tax affairs. Ease of doing business is a combined outcome of simplified rules and procedures which promote smooth business operation generally taking into account the strategies used for Corporate Governance.
The implications of Section 159 of CGST Act are such that the unrestricted power to publish information of a person convicted can lead to the misuse of law. Moreover, the Explanation provided in Section 159 clarifies that in case of a firm, company, or other association of people, the Commissioner has the discretion to publish the details of the Managing Director, Agents, Partners, Secretaries, Treasurer or Members of the Company. An example of the misuse can be considered as demand for a bribe, using threat or force to extort money from a person convicted for not publishing their information. In a scenario where the information gets published, the scrutiny on indeterminate basis affects the conduct of the business and the market image of the business.
Moreover, the publication of information acts as a means of threat to get a forceful testimony, if at all, there exists a possibility that prosecution can be initiated. Such unfettered blanket powers at the hands of the Tax Official serve as the death of the market image of the business and thereby impedes the day-to-day conduct of business.
WAY FORWARD
The Author is of the opinion that primarily two criteria must be established to check whether a case is deserving of publication:
Firstly, the CBIC should prescribe a monetary threshold; only the cases in which the amount involved is above the limit should be considered for publication;
Secondly, the publication of information must only be done if the person convicted is a habitual offender.
However, these two criteria should not be exhaustive, the Tax Official must determine and scrutinize whether a case deserves to be published in lieu of public interest. However, such an application of mind must be done only if both the conditions mentioned previously are satisfied, this shall ensure that the market image of the persons convicted and their right to privacy are both maintained and protected by the Tax Official while keeping in mind the interest of the public.
CONCLUSION
The CBIC Guidelines aim to limit the potential for abuse of innocent taxpayers from being harassed by Tax Officials. However, Section 159 of the CGST Act confers discretionary power to the Tax Official, such blanket power instead of limiting the potential for abuse, broadens the scope for misuse of law.
Right to Privacy is a fundamental right, publication of information done capriciously, irrationally and without a determining principle does not fall under reasonable restrictions even if it is in the name of preserving public interest. The Guidelines have conferred an unfettered discretion to the Tax Officials of applying this Section as per their whims and fancies as there is no basis on which the authorities can decide a case to be ‘deserving’.
Moreover, in recent times, a positive approach to taxation has been taken by increasing tax incentives; contrastingly, such a provision falls right into the rabbit hole of a negative strategy being implemented by the Tax Officials. The Section does not prescribe any monetary threshold to be considered as a deserving case, which in turn creates a fear of scrutiny. The fear negatively impacts the business by being an antithesis to the principle of ‘ease of doing business’. In conclusion, the Central Government must cure the defects arising from Section 159 of the CGST Act to save innocent taxpayers from harassment by Tax Officials.
Author Bio
