Amendments to the Appeal provisions in Customs, Central Excise and Service Tax made by Finance Act, 2014- A logical review.
Definition: An appeal is a serious, urgent or heartfelt request by an aggrieved person to someone who has a superior authority over the person by whose act the aggrieved person was put to pain.
The basic principal of law is that the law has to play the functional role of harmonizing the conflicting interests of individuals in the society by maintaining an equilibrium between the freedoms of individuals on the one hand and social welfare on the other.
It is true that the state authorities have to legislate new laws or amend the existing laws for the welfare of the society. We cannot enact laws in a manner which does not maintain the equilibrium and tilt towards one side be it towards the society or towards the state authorities.
Right to appeal is a fundamental right within the meaning of natural justice. The law in India has been derived out of the best practices of law used to be practiced by all types of religion we have. Laws in India respects all the religions, all sections of society and is against inequalities and differentiations. One of the basic common principle in all formations of law is the right to appeal ensuring that the aggrieved is not put to unwarranted pain and hardship.
Conditional right to appeal is logically against the natural justice. It may prove fatal for the smooth functioning of judiciary and may inflict pain on aggrieved in case he is not able to fulfil the conditions before making an appeal to higher authorities against a valid ground.
In case the state considers that allowing the appeal after fulfilling certain pre conditions is of utmost importance to discipline a section of society in that case the enactment has to be done in such a way that the officials responsible for the implementation of such laws are also accountable for misuse for the sake of maintaining equilibrium being a basic principle of law on which the whole system of judiciary is dependent upon.
Impact of conditional right to appeal.
From August 6th, 2014, appeals against the demand notices issued by the authorities of excise and service tax, can be filed by the aggrieved assesses only after depositing a sum of 7.5% or 10% of the demand amount as applicable subject to a maximum deposit of Rs 10 crores. Why the state was compelled to introduce such a harsh step is not known but one thing is sure that this is against the basic principle of natural justice. The said enactment misses logic and is fatal for small and medium business houses. As we are aware that the success rate of the department in disputed cases is around 20% when it come before the court of law. Under such circumstances it is assumed that to discipline 20% of the so called violator assessee the provisions were amended in such a manner which will create hardship for 80% of the honest and genuine assessee whose working capital will get blocked in pre-deposit for around 20 years which is presently the period required to complete the legal process.
The most important issue here is whether the assessing authorities issuing demands without following the best judicial practices and losing the cases at judicial level will be subject to some sort of restrain or disciplinary action by the department. If not under such circumstances amendment is biased and anti-tax payers. It is unfortunate that in our country for penalizing few law breakers laws are amended in such a manner that it makes the life of the general masses difficult.
Let us assume that an aggrieved assessee pays the required amount of pre deposit and waits for justice. Do the department has requisite numbers of commissioners and tribunal members who can assure justice in a reasonable time frame? Assesses having a demand of around hundred crores, whether genuine or not will be at loss as they will be required to deposit Rs 10 crores the maximum amount fixed for submission of appeal. On the other hand assesses facing a demand of say 1000 crores has also to deposit Rs 10 crores being the maximum amount fixed for submission of appeal. Thus this provision is anti-small business houses and hence defies the logic of natural justice.
Again a mechanism is required within the department to ensure that the demands are issued on merits and not on adhoc basis to please the superiors resulting in achieving the targets for revenue collection. To make the provisions more logic the amount collected through pre deposits must not be accounted towards the targeted budgeted revenue collection.
At last it is being felt that such type of unilateral and harsh provisions will prove deterrent towards majority of appeals which as per present scenario are genuine and may also help in triggering of unfair and unwarranted practice within the working of the department.
DILIP K RAINA –Chartered Accountant:
B.Com; FCA (ICAI); PGDFM; PGDCA; DBM;
Cert. IFRS (ICAEW); NCFM Capital
Market (Dealers Module);
Microsoft Certified IT Professional: Application for Microsoft Dynamics
NAV (ERP) & AXAPTA (ERP)
CAclubindia
