Between 2012-13 and 2017-18, as a result, tax arrears rose 2.3 times, from Rs 4,86,180 crore to Rs 11,22,752 crore, while direct taxes rose a much slower 1.8 times.
Even before Pranab Mukherjee’s infamous retrospective tax amendment, but more so after that, reams were written about India’s tax terrorism. In the case of MNCs operating out of India, for instance, the taxman added back tens of thousands of crores of rupees to their incomes and then levied taxes on this. The disputed taxes, or arrears, kept mounting, but when the cases finally reached the courts, they tended to get dismissed more often than not. Between 2012-13 and 2017-18, as a result, tax arrears rose 2.3 times, from Rs 4,86,180 crore to Rs 11,22,752 crore, while direct taxes rose a much slower 1.8 times. Over time, the government tried to fix this by signing Advance Pricing Agreements (APAs) with various companies to pre-determine the tax treatment. And when it came to the success of government cases, as a CAG report on indirect taxes points out, the success ratio of the department’s appeal against the adjudication orders has gone down from 33% in FY14 to 27% in FY16 at various forums—it fell from 34% to 18% in the high courts and from 19% to 11% in SC.
What takes the cake, however, is a case before the Karnataka High Court, a case in the court has fined a tax official—the Commissioner of Service Tax (Appeals)—one lakh rupees from his personal funds and said that, if this money is not deposited, the revenue secretary should take disciplinary action against him. In this case, XL Health Corporation challenged an order against it that was passed by Suresh Kumar, the Commissioner of Service Tax (Appeals). The Cestat, the appellate forum for this, turned down Kumar’s order and said, “I also find that unjust enrichment is not applicable and has been specifically excluded … the order has clearly travelled beyond the show-cause notice …”. You would think this was the end of the matter. Yet, when XL filed an appeal on the same case but for a later period, Kumar didn’t even take into account what the Cestat had said. Nor was this an oversight since, he wrote, “I have discussed the issue in detail … and do not find any reason to change my mind or findings thereof …” And when the case then went to the Karnataka High Court, the department wrote “there were no new facts which necessitated going through the rigmarole or formality of hearing and is nothing but time wasting tactics being adopted by the petitioner”.
Hardly surprising, then, that the Karnataka High Court has said that it will not tolerate this indiscipline—in its words, “it is this kind of lack of judicial discipline which, if it goes unpunished, will lead to more litigation and chaos and such public servants are actually a threat to the society”. It is to be hoped that the government will take strict action even if Kumar deposits the Rs 1 lakh from his own funds. Equally important, the government needs to start taking strict action—and make this public along with the reasons in each case—against taxmen that unnecessarily harass taxpayers; this should include, for instance, tax officials who file large tax cases against individuals/companies but habitually find their cases getting dismissed in the higher courts.