Do not terrorise the goose that lays golden eggs

EXPERT EYE

The finance minister may have a job in his hand to collect revenue but there is no need to terrorise the taxpayers by threatening to arrest them and attach their property at the drop of a hat.

This will not serve the purpose stated in the Taxation Laws (Amendment) Bill No. 74 of 2005 introduced in the Lok Sabha for amending Income Tax, Customs & Central Excise Acts to be discussed in the monsoon session.

Some of the provisions relating to empowerment of officers to arrest taxpayers, to attach property etc. only serve the purpose of threatening the taxpayers, while its avowed purpose is to "plug loopholes leading to leakage of revenue".

It is a complete misunderstanding of the situation that revenue arrears are not being collected because of lack of power of Customs and central excise officers. It is also not based on a proper understanding of what is an arrears.

When a show-cause memo is issued asking for extra duty, it is not arrears. The law provides for adjudication, appeal before the commissioner appeal, tribunal, high courts and the Supreme Court. If a stay is granted at any stage, there is no arrears.

If the arrears is understood in this way and an analysis is made of the reasons and the stages where they are pending, it will be found that most of it is pending in stay orders given by tribunals and courts.

So the action lies in finalising the cases in these proceedings by actions at different courts.

It is also to be understood that in the ultimate analysis only a percentage of cases are won by the revenue department and the largest number of cases are lost. So all the revenue said to be pending are not arrears. Much of it will be cases of refund or simply deleting them from the list of arrears.

A new sub-Section 28BA has been proposed for the purpose of attaching provisionally any property belonging to the person on whom notice is served for duty which has not been levied even before adjudication of the case. This is likely to be used as a draconian power in the hands of irresponsible officers for harassment.

The reasons being that these are cases in which only the show-cause memo has been issued and not adjudicated. In more than half of the cases, the show-cause memos are dropped at the adjudication stage and the first-appeal stage.

In the second-appeal stage before the tribunal, again a large percentage of cases is dropped. The exact figures are not available but from experience I can say that about 80 per cent of the cases are dropped ultimately. Even that is a modest figure. So just because a show-cause memo has been issued under Section 28(1) and the case has not yet been adjudicated, the power to attach property even on a provisional basis is not only highly irrational but extremely dangerous.

While the power has been given to the commissioner and the chief commissioner, it is still not a safe proposition at all considering that a junior officer can always threaten action for attachment. And senior officers have also been so very revenue minded considering that all the time they are being told to collect revenue.

The concept of "revenue due to the government" has got blurred. It is no guarantee that the senior officers will exercise this power so prudently and sparingly considering the number of cases where appeals are filed in a routine manner by senior officers before commissioner appeal, tribunal, and even high courts and the Supreme Court.

Another amendment has been proposed of Section 104 of the Customs Act which gives the power to arrest even for offence under Section 132 (false declaration) 133 (obstruction of officers) and 135A (preparation for exports).

Giving a false declaration is just a matter of opinion. If something is declared as resin and it turns out to be rubber it is a misdeclaration. If something is declared as newsprint and it is found to be not newsprint due to the wood pulp content being slightly lower, it becomes a misdeclaration.

So the power to arrest for misdeclaration is totally uncalled for. It is very likely to be misused by the officers for reasons not so respectable.

In any case, if the misdeclaration is serious enough, it amounts to evasion of revenue in which case Section 135 is attracted. So the power of arrest for such cases is already there. To make it more explicit to provoke officers to misuse it.

In regard to Section 135 A of the Customs Act relating to preparation for export, it is well known that the distinction between preparation and attempt is well recognised in law though the distinction is wafer thin.

Quoting from a famous judgment, taking a matchbox is preparation while striking it and blowing it off seeing a person is an attempt. It was enough that preparation is punishable with imprisonment. It is enough that the offence of attempt makes a person liable to arrest and not preparation, which is an early stage. This may tantamount to an anti-export stance.

Similar powers have also been proposed for central excise officers as well.

The whole tragedy about this amendment is that customs officers are being given power to arrest and attach property for circumstances, which are wholly unnecessary. For one thing, enough powers are already there. For another the arrears of revenue is not because they do not have enough power but because they do not use the existing power.

Let there be a proper analysis of the reasons for arrears and the way in which it can be liquidated. The analysis need not be left to the departmental officers only.

Some outsiders also should be taken in that task force which would be a fact-finding one. It is only at that stage that the issue of extra empowerment may be decided.

At present, the proposed empowerment can only amount to terrorising the taxpayers. Too frequent amendment of any Act is bad enough. Too much amendment immediately after the Budget is too bad.

smukher2000@yahoo.co