M J Antony: Shaking off bureaucratic lethargy

OUT OF COURT

Though the era of licences and certificates is fading away, bureaucratic habits formed over decades are hard to break. The babus are quick to quote regulations which they themselves are slack in following but are tough on those who suffer the consequences of their neglect. The Supreme Court dealt with a few such cases recently, the victims being importers, small-scale industries and electricity consumers.

In Commissioner of Customs vs Tullow India Operations Ltd, the main issue was the interpretation of a notification under the Customs Act. ONGC, a government undertaking, and Tullow India both explored the seas for oil and the dispute was over the levy on imported software containing the seismic data. The companies claimed that the notification exempted them from paying the duty. The customs department rejected their stand. While Tullow India produced the necessary certificate to claim exemption, ONGC could not. Therefore, the matter went up to the Customs, Excise and Service Tax Appellate Tribunal. It rejected the ONGC's petition, leading to the appeal.

The Supreme Court, after examining the facts, remarked that both the companies were entitled to the exemption subject to the condition that they would produce the "essentiality certificate" granted by the Director General of Hydrocarbons. The court further pointed out that the grant of the certificate was not in the hands of the companies. It was the function of the government. In this case, the certificate was not granted within a reasonable time. The importers could not be blamed for that lapse by the authorities.

"If it is not within the power and control of the importers and depends upon the acts of public functionaries, non-compliance of such a condition, subject to just exceptions, cannot be held to be a condition precedent which would disable it from obtaining the benefit therefrom for all times to come," the Supreme Court emphasised.

The Directorate General of Hydrocarbons is under the ministry of petroleum and natural gas. Such a public functionary is supposed to grant the essentiality certificate within a reasonable time so as to enable the importers to avail of the benefits under the notifications. It should have been done as fast as possible. "But they did not choose to do so, probably having regard to the fact that no time schedule was prescribed," the judgement observed. The department was aware of the hardships likely to be suffered by the importers by its inaction. Thus, the Supreme Court indicted the department.

Earlier this year, the Supreme Court dealt with a case of a small-scale industry (SSI) which claimed exemption in excise under a notification by the West Bengal government (Commissioner of Central Excise vs MPV Engineering Industries). The unit started manufacturing cooling towers in 1986 after applying for registration. The certificate was issued only in 1988. Because of the administrative delay, the unit was denied the benefits allowed to SSIs.

When the dispute reached the Supreme Court, it accepted the unit's argument and stated: "Once it is found by the Director of Industries that the industry qualifies as a SSI unit, he is bound to issue the certificate of registration. However, no time-bound procedure has been provided. It may at times take several months or years for the competent authority to issue the certificate. In such a situation, can it be said that the SSI should be deprived of the benefit which would have accrued to it had the application for registration been disposed of immediately? In our view, it would be unreasonable to deprive a SSI of the benefit."

The case of State of UP vs Haji Ismail (1988) dealt with a similar case referring to sales tax. The Allahabad High Court held that when the authorities had delayed the issue of the necessary certificate, the dealer must be deemed to have held the certificate. On appeal, the Supreme Court ruled that if the dealer could produce the certificate at the time of assessment that would be enough, even if he could not manage to get it earlier.

Even the public is not free from the consequences of negligence or mala fide shown by the bureaucrats. Such was the case of a large number of agriculturists in Punjab State Electricity Board vs Zora Singh, decided a few months ago. They had applied for electricity connections, but the board directed them to deposit security amounts 13 years later. The board's circulars prescribed two months' time limit for giving connections after compliance with the demand notice. In the event, no one got electricity connections and the board blamed the agriculturists for not complying with the regulations. The consumer commission and the Supreme Court held that the board was not serious in implementing its own circulars. These cases should act as warning notes to those authorities who sit over applications, expecting that the delay would be rewarded sooner or later.