The Central Board of Excise and Customs (CBEC) is doing well to try and reduce the 1.09 lakh appeals against various indirect tax levies, given how the structure of the country’s indirect taxes system will dramatically alter after Goods and Service Tax (GST) is introduced—at which point, even the control over different sets of taxpayers may change between the Centre and the states. While litigation management is important given the amounts under appeal add up to around Rs 186,000 crore, it has become even more important now. Earlier this year, CBEC had initiated various steps to improve litigation management—this included steps like raising the threshold limit for filing departmental appeals in the SC, various high courts and the CESTAT which led to around 7,300 cases being withdrawn immediately since they fell below these limits.
According to a report in Business Standard, a target has been set to clear another 13,500 cases by December this year, and new steps are being planned to achieve this. For one, the adjudication powers of commissioner-level officers have been raised from Rs 50 lakh right now to Rs 2 crore—this is the segment where the pendency is the highest; cases with amounts between Rs 50 lakh and Rs 2 crore are to be disposed off by additional or joint commissioners. In addition, it is also proposed that excise officials be allowed to adjudicate service tax appeals. Given the department loses far more appeals than it wins—at all levels, from the appeals process within the department to even the Supreme Court—it is to be hoped tax officials doing the adjudication keep this in mind since the system will only work if the taxman adopts a more liberal approach.
But unless greater thought is applied to how the tax notices are being given, cases will continue to pile up faster than they are cleared—the arrest of an official of travel portal MakeMyTrip this year and the subsequent observations of the Delhi High Court show the taxman continues to be high-handed, especially since he also has the powers of arrest. At the end of 2012-13, Rs 29,524 crore of indirect tax demands were under dispute as compared to just Rs 1,940 crore that were not in cases that were between 1-2-years-old. At the end of 2013-14, the tax demanded in cases in the 1-2-year-old category rose to Rs 39,979 crore as compared to Rs 3,230 crore of demands that were not under dispute—at the end of 2014-15, the amounts under dispute were down slightly to Rs 35,626 crore, but this is still a very large amount. That’s something the CBEC needs to worry about—just clearing old cases won’t help if the taxman’s mindset doesn’t change.