GST Council & FM: CBIC cannot have the prerogative to cheat the assessee by manipulative interpretation – Part II
India enjoys the dubious distinction of being one of the most litigious country & the ground-reality is that bad that you might not be in a position to get a decision during your lifetime! Despite this, there is no responsibility & accountability in the system. If you find the underlying reason then you will be compelled to conclude that it is all because of the inept & corrupt bureaucracy. All this because the honesty of intention & implementation is missing. First the bureaucracy will insert the loopholes for manipulative interpretation & then be more concerned about you take care of me & I will take care of you rather than the intention of the provisions of the law & strict implementation thereof. Therefore, the Indian bureaucracy carries no trust & respect of the taxpayers & position is still worsening.
Also Read: CBIC cannot cheat assessee by manipulative interpretation -Part I
In the first part we saw how cheating is being advanced at the level of the CBIC & if that is the position of the CBIC then you can very well imagine what must be prevailing at the adjudication level. I have often heard from the leading practitioners that up to the level of the tribunal, there is no scope for justice & compelled to agree & bow down my head in shame. Beyond that level the cost of litigation is simply prohibitive therefore there is no scope for justice for the small businesses & the whims & fancy of the bureaucracy rules (read corruption is rampant). At the adjudication level, the officials think, they are even beyond the Supreme Court & get away with anything because they are not accountable. They know how to bring the small businesses to the knees because even lengthening the litigation is very costly for the taxpayer.
Now, we examine three situations. All arising out of manipulative interpretation but then there is God, as you will see it. The first is a case, where the exporter effected exports under the erstwhile Central Ex. regime under the rebate & discharged duty liability on the CIF value of exports as the contract with the foreign buyer states very clearly that the delivery of goods stands completed once the goods are delivered at their warehouse & put to test & pass the Quality Control parameters & duly accepted by the buyer. All along it was clear that the CIF value is the transaction value on which the duty liability is to be discharged & this practice continued up to 2009 (under the New Valuation rules introduced in 2000) but suddenly thereafter freight & insurance was excluded for the discharge of duty liability (saying that FOB value shown in the shipping bill is the assessable value because freight & insurance beyond the port of shipment is not part of the assessable value & cannot be subject to duty). Everybody in the department knew that there is no such provision in the law but then right up to the Revisionary Authority, nobody was ready to bow down & acknowledge the truth. The authorities were put to strict notice to specify any such provision but to no avail. It was also pointed out that any CBEC circular to the effect that freight & insurance beyond the port of shipment is not includible in assessable value is a piece of trash because the definition of Transaction Value appears in the CEA, 1944 therefore any manipulative interpretation is beyond the reach of the CBEC. It was beyond doubt that the Charging Section under the CEA stated duty liability is to be discharged on Transaction Value & Transaction Value definition given in S 4 (3) (d) includes Outward handling i.e. freight & insurance. Further, it was absolutely clear that sub clause (v) of the Condition 3 of the Notification No. 19/04(NT) dtd. 6.9.04 that the relevant jurisdictional C. Ex. officer shall verify the duty paid or payable. Additionally, 3(b)(ii) of the Notification No. 19/04(NT) dtd. 6.9.04 explicitly authorizes the rebate sanctioning authority to only compare the ARE- 1 copies received from the Excise & the customs authorities & nothing beyond that. There is no power vested in the rebate sanctioning authority to re-open the assessment/reduce the rebate amount without challenging the assessment because this is against the basic tenets of law & the law down by the Supreme Court. Further, in respect of the self- assessment being carried out, please note that even self-assessment needs to be challenged before any re-assessment is carried out. CBEC circular issued from F. No. 224/37/2005-CX. 6, dated 24-12-2008, which pertains to the duties & responsibilities of the Central Excise officers was cited which stated very clearly that the particulars of assessment and correctness of duty paid or payable indicated on ARE-1/ARE-2 is to be verified by the relevant jurisdictional officials. However, everything fell on deaf ears but then there is God & justice is there visible & forcing the hand of the authorities. The point of law is that the reduced amount of rebate did not belong to the government in any case therefore this was excess lying as voluntary deposit with the government. Now under S 142 (3) of the CGST Act, 2017 under the transitional provisions contained in the law, this excess lying with the department needs to be paid in cash. The moral of the story is that cheating is unacceptable & it would have been better if the CBEC did not indulge in it but respected the written word of the law & long-time practice of assessment. However, to my utter surprise, I was once again subjected to a rude shock i.e. the PCRA, Mumbai tells me that there is no authority vested to rectify a wrong committed by the lower authority but then they can simply remand the case for granting justice. I fail to understand that why then Revisionary Authority should ever exist without commensurate authority to grant justice. I am back to square one & awaiting another nasty surprise because as pointed out earlier, the adjudicating authority simply think that they are beyond the Supreme Court even then why will they care for the remand for justice by the RA. Please understand, how much time, energy & efforts of all concerned have been wasted for no reasons, all because of the manipulation.
Now, we move to the second story of manipulation & the cases being compelled to reach the High Court driven by the idiocy of Let the courts decide as the bureaucracy enjoys pretending to not to comprehend anything. This, I believe, only happens in India. The facts of this case are that an EOU is allowed to export under bond only under the erstwhile C. Ex. regime. The EOU exports 100% of the products manufactured therefore not in a position to utilize the Cenvat credit availed on some of the bulk liquid cargo procured through importers & services. It is crystal clear that complete duty exemption is available to the EOU both in respect of the Raw materials as well as the Capital goods either procured through imports or domestically. Finally, taxes & duties cannot be exported therefore this Cenvat credit never belonged to the department in any case & should have been refunded to the exporter as soon as the ER 2 Return was filed by the EOU. However, if things were made so simple, who will come & take care of the officials. Therefore, an elaborate refund procedure is devised by the bureaucracy. There is no time limit applicable to the refund of accumulated Cenvat credit under S 11 B for filing the refund claim. There is no time limit specified in the Rule as well as the notification but simply a reference is made to the S 11 B to introduce the mischief of manipulative interpretation & impose a restriction of 1 year. The policy makers know everything & the following is highlighted but to no avail.
Rule 5 for refund of accumulated cenvat credit is antithetical to duty payment specified in S 11 B. Rule 5 operates when exports are conducted under Bond/LUT whereas S 11B only applies when goods are cleared on the payment of duty. See clause (B) under Explanation in S 11B.
EOU was exempt from duty payment both domestic as well as import procurements therefore any duty payment from the EOU never belonged to the department in any case.
Under Rule 5, Quarterly claim have to be filed in respect of accumulated Cenvat credit. Therefore, claim can be filed at the end of the quarter only. The time limit is 1 year, which can only start from the close of the quarter. The refund of accumulated Cenvat credit filed on 31.7.13 in respect of July-Sep 12 quarter but exporter is denied refund on exports effected between 1.7.13 through 30.7.13 because 1 year under S 11 B is w.e.f. the date of exports. Thus, Exporter is not getting 1 year time to file the claim as specified in the law. This is impractical & untenable in terms of the implementation of the law therefore the error cannot be allowed to continue. Refund of accumulated Cenvat credit has nothing to do with the date of export.
S 11 B is clear that legislature has imposed limitation on refund of duty & interest thereon & this cannot be stretched to include refund of accumulated Cenvat credit. S 11B is very specific & clear about in which cases, it applies.
ER-2 Returns filed by EOU establish the refund of accumulated Cenvat credit. Refund application is procedural only. Procedural infarction cannot result in denial of substantive entitlement.
Hon’ble Madras HC GTN Engg. is bad law because paragraph 15 clearly acknowledges, no limitation, therefore it cannot be read into the law.
However, everything falls on deaf ears but then once again the God comes to ensure that the justice is done.
Once again, under S 142 (3) of the CGST Act, 2017, the re-credit arising in terms of Notfn. 27/2012 CE (NT) dtd. 18.6.12 has to be refunded in cash as re-credit is not possible due to the change in taxation regime & advent of GST comes to the rescue of the manipulation introduced & perpetuated by the bureaucracy. However, still the cases are languishing at various stages. Is it not fair enough that the stock of the situation is taken & decision taken to end the litigation & grant refund in cash in a gentleman like manner!
Now, we come to the third & the final story of unnecessary unending harassment by the bureaucracy in respect of the transitional credits. The assessee conducted imports in March 2017 but could not take the goods to the factory in Mumbai due to paucity of storage space. The C. Ex. law permitted assessee a year to bring the goods to the factory & when the last lot was brought in, avail the Cenvat credit. A similar provision exists in the GST regime. However, the assessee brought the last lot of goods in the factory in & claimed the credit in TRAN 1 filed in December as per the extended date. As an abundant precaution, the assessee wrote to the then Principal chief Commissioner & the Chairperson, CBIC for the validation of the credit, which was the vested right of the assessee. It is pertinent to point out that it was pointed out that the substantive right of the assessee cannot be misappropriated or jeopardized due to any procedural lapse under any circumstances. However, when the honesty of intention & implementation is missing & there is no accountability in the system, no one cares. More than three years have lapsed but there is no reply. The point is simple that when these officials are paid handsome salaries then why they are not held responsible for time bound action & why should the assessee suffer for no fault of theirs. Here again, there are several High Court decisions upholding the rights of the assessee but then the point is why the officials do not examine the issue & gracefully accept that the credit is validly availed & close the issue once & for all.
To my mind, the administration is put in place to ensure trade in accordance with the law & not for harassing the assesses to no end. However, the Indian bureaucracy still continues to excel in creating loopholes for exploitation & on the other hand indulge in manipulative interpretations. If we really want small & medium enterprises to thrive & grow big then it is imperative that such dubious conduct is not resorted to. It is essential that there is almost mathematical accuracy & transparency in the law so that a software programme run on the CBIC platform can very easily implement the same & there is no reason even for the officials to look into the returns filed by the assessee leave aside the audits. As a matter of fact, IGST entries are like debit & credit in a passbook of a bank & if we can’t get this even right then what are we capable of really!
(Author can be reached at rajivgupta.pec@gmail.com)
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