A well-thought-out plan should be launched by CBEC and CBDT to improve the performance of their departments in tribunals, high courts and the Supreme Court
Several litigants fail to move courts—either deliberately or by sheer neglect—to claim their rights within the limitation period set by the law. Generally, courts condone delay when satisfied about the ‘sufficient cause’ but, at times, ‘unreasonable and onerous’ conditions are imposed on litigants. The case of GMG Engineering Industries vs Issa Green Power Solution is a classic example of conditions imposed by lower courts while condoning the delay. The Madras High Court had confirmed the 2012 order of a trial court that asked the litigant to deposit R1.5 crore and R10 lakh, respectively, as a condition to condone the delay in filing the applications in two suits to set aside the ex parte decrees related to a factory sale. The lower court had taken into consideration ‘the dilatory tactics’ adopted by GMG in not appearing during hearings. But the apex court reduced the amount to R50,000, saying the parties had not even got a chance to contest the suits on merits and imposition of heavy financial burden, since they had given satisfactory explanation for the delay.
This is in contrast to any such harsh penalty being imposed on the government and its instrumentalities when the fact is that defaulters in filing appeals beyond the limitation period are the revenue departments. While courts often condone the delay of the government entities as huge public revenue is involved, inordinate delays in filing appeals for recovery of tax dues by the government have left courts fuming. Speaking through various orders, judges have pointed the needle of suspicion towards government officials who deliberately abet the delay for reasons best known to them.
Under the Income-tax Act, 1961, a specific period of limitation is provided for filing an appeal before any higher court or appellate authority. Under Section 260-A of the Act, a period of 120 days is being provided for filing an appeal in the high court from the order of the income tax tribunals. However, courts have the discretion to take a lenient view and condone the delay, but the government has been finding it tough to explain the reasons for undue delays, arising out of sheer negligence.
Dismayed by the apathy shown by the government and its officers towards its directions on such delays from time to time, in one case the Supreme Court had pulled up the Jharkhand government for filing its appeal against the Steel Authority of India for recovery of tax dues after a delay of more than 1,200 days.
The Supreme Court, in another case, slammed the revenue department for the ‘peculiar phenomenon’ of inordinate delays in filing appeals in high-stakes tax cases where huge revenue or tax demand is involved. It directed the finance and law ministries to act swiftly to remedy the situation and avoid revenue leakages caused by pliant officials. Such directions had come in a tax case involving Citibank where the department is still fighting for the recovery of R90 crore from the bank. In this case, there was a delay of 694 days (about two years) and 450 days in filing the appeals before the Supreme Court and the Bombay High Court, respectively.
The finance ministry in its annual report for 2014-15 had admitted that total direct tax demand of R6.75 lakh crore and indirect tax demand of R1.74 lakh crore were locked up in various courts. Of this, R5.5 lakh crore of direct tax demand was difficult to recover on account of stays granted by judicial authorities. As on October 31, 2014, the largest chunk of indirect tax demands—R1.31 lakh crore—were locked up in disputes at the CESTAT.
Some time ago, the government had told Parliament that 5,806 cases involving R2,707 crore in direct tax demands were locked in litigation before the apex court, and another 29,650 cases with a tax demand of R36,340 crore were pending in high courts. It also revealed that 2,855 disputes over indirect taxes, involving R8,130 crore, were pending in the Supreme Court and 14,626 cases amounting to R11,459 crore were pending in various high courts.
The minister of state for finance in September 2012 gave figures (for indirect taxes) to Parliament that between 2008-09 and 2011-12, nearly 85% cases were lost in the tribunal, 80% in high courts and 90% in the Supreme Court. For direct taxes on the basis of data taken from the Report of Standing Committee on Finance, it is found that during FY12, only 23% cases filed by taxpayers were decided in favour of the department at the tribunal level. At the high court level, the success rate for the department was 26% in FY10 and 36% in FY12. In the Supreme Court, the success rate was 14% in FY12. Legal experts feel these delays caused by lapses on the part of revenue officials at the Centre and states represent a systemic failure.
Senior counsel Vivek Tankha explains: “There is a complete systematic failure. This issue is not confined to any one department but is a pan-India problem. It is endemic not merely in states but also in different departments of the central government … there are vested interests that prevent expeditious resolution of cases.”
The government and its departments are under special obligation to ensure that they perform their duties with diligence and commitment. Every case filed irrespective of merits is burdening the judiciary, costing the exchequer and increasing the backlog.
One method to combat bureaucratic indolence is to impose a fine on government officials. In any case, this may not have any impact on the babus as they will just move one more file to pay the fine. The burden is back on the public.
A well-thought-out plan should be launched by CBEC and CBDT to improve the performance of their departments in tribunals, high courts and the Supreme Court. Top brass should personally examine the lost cases and ensure that corrective action is taken. The concept of public accountability and fixing of responsibility in discharge of official duties is of utmost importance and departmental actions should be taken against erring officers. Steps should be taken to streamline the working of revenue departments by putting in place a monitoring mechanism to ensure that desired results are achieved.