ASSESSEE’S RIGHTS AGAINST DELAY

January 30, 2010

A tax assessee has to deal with the problem of delay almost every time it interacts with the tax authorities. This delay is sometimes due to the system of tax administration, which imposes unnecessary and unreasonable restrictions in the name of checking evasion of taxes. Sometime it is arbitrary whim of the tax administrator, employed to harass an assessee. Sometimes it is a trick to extort corrupt money from the assessee. For whatever purpose this delay is employed, it always results in cost escalation in the normal business process, which is extremely harmful to any economy in the fiercely competitive world. This paper seeks to examine the various steps taken by the state to curb this delay and various remedial measures available to an assessee in case of unreasonable and inordinate delay.

In the administration of Custom, Central Excise and Service tax; the corruption money is euphemistically called “SPEED MONEY”. This phrase refers to the fact that bribe is paid to speed up your file in the taxation department. Thus if you pay the speed money, your files will be speedly cleared and if you refuse, your files will not be cleared on one ground or the other. If the tax administrator is smart enough, he will raise some objection in your documentation, he will call for more documents to examine your case and numerous other tricks he has under his sleeve. Even when he is not smart, he can always make your file missing.

Although numerous circular has been issued by the CBEC directing its officers to work efficiently and expeditiously. There are numerous judgments of superior courts castigating inordinate delays. There are many provisions in the statute itself fixing a time limit. Nevertheless delay occurs. And every assessee knows it happens due to malafide of the departmental officers. Sometime the assessee shows the courage to bring such delay into the notice of the superior officers. But no person has ever been held responsible for any delay. This author is not aware of any instance where any action was ever taken against any officer of the department for delay. This state of affairs clearly points out to the fact that whatever remedies are available against delay, is available on paper only. This paper also seeks to examine the reasons for this state of affairs and suggest remedial measures against this malaise.

The Citizen Charter has been issued by the Central Board of Excise and Customs as its commitment to the responsive and efficient tax administration. It gives a right in the hand of the assessee to force the tax administration to comply with their duty. The text of the citizen charter reads as,

“CITIZEN’S CHARTER”

This Charter is a declaration of our mission, values and standards, and our Commitment to achieve excellence in the formulation and implementation of Customs and Central Excise policies and procedures for the benefit of the Trade and Industries, who are our partners in progress.

Our Commitment

We shall carryout our tasks with

• Integrity and Judiciousness

• Courtesy and Understanding

• Objectivity and transparency

• Promptness and efficiency

We shall encourage and assist Voluntary tax compliance by our Clients.

Our expectation

We expect you to be prompt and reasonable in fulfilling your duty and legal obligations and be true and honest in furnishing information to us.

Our Standards

We Shall

• Acknowledge declarations intimations, applications, returns and all communication on the spot and in any case within 7 days of their receipt.

• Respond to all communication within 15 working days of its receipt.

• Settle any disputes relating to declarations or assessment within 10 working days of written or oral explanation.

The importance of the charter has been explained by the Commissioner of Central Excise (Appeals), in the matter of Thanjavur Spinning Mills [2004 (163) E.L.T. 278 (Commr. Appl.)], wherein the Commissioner (Appeals) declares,

“This Citizen’s Charter is a Magna Carta reflecting the higher aspirations of the Department. It is a noble document propounding the Department’s ideals, vision and to frame and mould the thinking of the officials to the challenges of democracy, freedom, transparency and human dignity. Every official needs to act with profound conviction to dedicate his official life to the attainment of these objectives. If we have the courage to make the right decisions and if we have an abiding faith that only the right will ultimately survive, we shall know that we are helping to build a nation in which the finer values of man’s spirit may flower. The Citizen’s Charter is a vision of something great and tremendous, a call to a heroic mission, the challenge of a truly national message. It is a time of challenge and change. Let us apply ourselves to that which is presented to us, as our appropriate object, and let the sacred obligations, which have devolved on our Department sink deep into our hearts. There is opened to us a noble pursuit, to which the spirit of the times strongly invites us. Let our conceptions be enlarged to the circle of our duties. Let us convince the people that our system is the best, let us extend our ideas over the whole of the vast field in which we are called to act. In keeping with the noble ideals enshrined in the Citizen’s Charter the Appellant deserved to get a prompt reply for their petition dated 27-8-2001. However, the mystical secrets of office procedure denied them a timely reply. We have to push aside the fateful and inexorable realism of such complacency. The Appellants, seem to be asking the Department whether in this time of relentless challenge do we have those qualities of adjustment, those characteristics of a dynamic office, which are requisite to meet the accelerating rate of change, which is the overriding characteristic of our time? The highest ethical concepts is enshrined in our Citizen Charter but if we fail to perform our share of duties and responsibilities, the visions enshrined and displayed will mean no more than a name carved deeply into marble on an expensive crematory mausoleum. There is no particular inspiration in reading headstones in a graveyard.”

The Board has always emphasized the needs of an assessee friendly and responsive tax administration. In Circular No. 24/2000-Cus., dated 30th Mar. 2000, the board says, “the Hon’ble Minister of State of Finance (Revenue) has expressed his anguish over the indifferent and unresponsive approach and lack of sensitivity of our officers even to the genuine representations/complaints by general public. The field officers did not even bother to forward representation to the Government and recommend condonation at their own initiative till the matter was brought to Minister’s notice by a VIP. The Hon’ble Minister has observed that the rule and regulations should be used to the benefit of our citizens rather than applying them mechanically creating more work for everybody.”

To make the tax administration real efficient and responsive to the need of public the CBEC issued Circular No.  393/26/98-CX, dated 2-6-1998, wherein it directed that,

1.All declarations, intimations, etc. when sent by FAX, E-mail, by Post or by Courier shall be accepted by the filed formations;

2. Appointments should be given also on E-mail on request from the trade;

3. All queries by E-mail should be accepted and the answers should be sent by E-mail;

4. Any query received from the trade must be answered within a maximum of four weeks from the date of receipt.

The above directions have been reiterated by the CBEC Central Excise Manual of supplementary instructions in para 3.4.These instructions give certain very important right to the assessee.

The law has always been very clear on the exercise of powers and discretion conferred by a rule of law. The Citizen Charter re-enforces these values and give them a strong and clear legal footing. Integrity, judiciousness and reasonableness are not mere legal rhetoric but sound legal principles on which our constitution is based upon.

The Right to Information Act, 2005.

The department of Central Excise and Customs is a public authority within the meaning of the Right to Information Act, 2005 and hence, they are bound by the provisions of the Act. As per Section 4(b)(iii) of the Act, the authority has to publish the norms set by it for discharge of its functions. As per Section 4(b)(ii) of the Act it has to publish the power and duties of its officers and employees and the procedure followed by then in discharge of its functions. The citizen charter is, at the most, a skeleton of the norms set by the CBEC. Further the Central Board of Excise and Customs has not prepared any document, which specify the duties of its officers and employees. Nevertheless, certain information has been made public on the CBEC web site, which again give valuable rights to the assessee.

The Governance in India has largely been a declaration of powers of the officers and employees of the Government. This is probably a colonial legacy when the government was British and the “native public” was there to be ruled. There cannot be any declaration of rights of people or duty of the Government towards people, who are “Ghulam” of a foreign power. Unfortunately even after independence the mindset continues. Thus every Act provided for the powers of the officers but was invariably silent on the duties of the officers. Off course, the gap was filled by the judicial pronouncements, but these are neither sufficient nor expresses the will of the elected legislatures. The Central Board of Excise and Customs have not notified till now the duties of its officers and employees till now. The duty imposed by the Right to Information Act is a public duty, which must be done, sooner than later.

Section 4(d) of the Act provides that every public authority shall give reasons for its decisions, irrelevant of the fact that the decision is administrative or quasi-judicial. In UOI v/s Mohan Lal Kooper [AIR 1974 SC 87], the Supreme Court observed that reasons are the link between the materials on which certain conclusions are based and actual conclusions. They disclosed how the mind is applied to the subject-matter for a decision whether it is purely administrative or quasi-judicial and reveal a rational nexus between the facts considered and conclusions reached. Fair play in action requires that every authority should record reasons for its decisions, whether administrative or quasi-judicial. Every citizen has a right to know as to on what basis a decision has been taken which may affect his situation. Recording of reasons is an assurance of the fact that the authority has applied its mind to the facts and circumstances of the case before arriving at any decision. Further it fecilitates proper supervision on the authority concerned by higher administration or by the process of judicial review. An decision, action or order of any statutory or public authority, bereft of reasoning, would be arbitrary, unfair and unjust and violative of Article 14 of the Constitution of India, and would deemed to have been arrived at by unfair procedure offending Article 21 of the Constitution of India [Krishna Swami v/s UOI, AIR 1993 SC 1407]. The Right to Information Act, 2002 merely says what was always law of the land as per the binding judgments of the Supreme Court. However, enforcement of a statutory provision is always easier as compared to enforcement of a judge-made law. 

Unjustified delay is an act of the authority for which citizens can seek information including reasons for delay. The Right to Information Act, 2005 gives valuable rights to the citizens against delay. Any delay in violation of Citizens Charter, in violation of the statutory provided time limit or otherwise inordinate delay has to be explained with reasons as per section 4(1)(d) of the Act. The citizen has a right to seek reasons for such delays and the authorities are bound to provide reasons. Further when any such delay is brought to the notice of superior officers, he has to take appropriate action against such delay. The assessee has a right to seek information from him as to what action has been taken.

Statutory Provisions:

There are various provisions in the law under which certain particular acts have to be done within a specified time schedule. For example a demand can be raised only within the time specified in Section 11A of the Central Excise Act, 1944 or under section 28 of the Customs Act, 1962. In certain other situations, like refund under Section 11B, there are provisions for interest as a penalty for delay. Certain other situations are covered by CBEC instructions and Citizen’s Charter. For example the Board has directed that adjudication order should be issued within 7 days of personal hearing (Circular No. ). Similarly the Board has directed that drawback claim should be decided within 3 days in case of EDI shipping bills and within 5 days in case of manual shipping bills. There is no need to repeat here that these circulars are known more for their violation than for implementation.

Nevertheless, there are many situations for which there is no time limit has been specified and assessees are at the mercy of the departmental officers. Due to such delaying tactics of the officers, the assessee suffers huge losses for which there is no provision under the Customs or Central Excise law. In some cases the assessees have raised this point before higher judiciary with favourable results.

When the goods are detained in port area, it results in huge demurrage liability on the importer. In Shipping Corporation v. C L Jain Woolen Mills, [2001 (129) ELT 561(SC)], the apex court held that if seizure and consequent detention was held to be illegal, the demurrage should be paid by the Customs department. Various High Courts took the same view. For example Delhi High Court in Trishul Impex v. UOI [1992 (58) ELT 182], In R C Fabrics v. UOI [1995 (76) ELT 9], Kolkata High Court in Surabhi Leather v. CC [1992 (59) ELT 253], Andhra Pradesh High Court in Sujana Steels v. CCE [2002 (141) ELT 343], Madras High Court in Anuma Precisions Tolls v. CC [2002 (121) ELT 309], took the view that Customs department is liable to pay demurrage in cases of unjustified seizure and detention of goods.

On its part, CBEC has issued various guidelines so that harassment of the importer is not done and demurrage charges do not become payable. Instructions have been issued in Chapter 16, para 5 of the CBEC Customs Manual, 2001. The circular, 42/2001 dated 31.07.2001 says that erring officers were held liable. However, this author is not aware of any case when any erring officer was ever found accountable. In fact, this author is aware of a recent case when goods were illegally detained by a premier investigating agency of the Customs and the goods were not released despite the provisions of law were brought to the notice of senior officers.

In case of North Eastern states, there are provisions in Notification No. 32/99 and 33/99 of Central Excise that the amount of duty paid in cash shall be refunded by 15th of next month. In case of any delay in verification, the amount should be refunded provisionally by that date. Despite such clear-cut provision, this author is ware of some cases where the amount has not been refunded, even when such acts were brought to the notice of senior officers.

It is difficult to imagine that whatever is happening at the ground level is not known to the senior officers or board. And if is really not known, it speaks of their competence. And if the law is not implemented despite the facts were brought to their notice, their bonafide is in doubt.

RIGHTS OF THE ASSESSEE HAS TO BE EXCERCISED BY THE ASSESSEE:

The protection of law is available only to vigilant citizens. Law cannot protect those persons who sleep over their right. If our citizens are of the opinion that their rights against government officers will be protected by the government, their rights against junior officers will be protected by senior officers- it is merely a wishful thinking. Unjustified delay by the department and its officers are negligence and dereliction of their duties. It is a “Civil Wrong”, an actionable claim in the court of law. In cases of unjustified delay, the erring officers personally and the department vicariously is liable to compensate the assessee.

Although we have inherited our legal system from the British Common Law, unfortunately the law of torts didn’t get enough attention in our country. Claiming compensation against the government was further made difficult by the doctrine of sovereign protection, procedural protection under Section 80 of the Code of Civil Procedure and “good faith” clause protection extended to government servants under various laws.

Section 155 of the Customs Act, 1962 protects the officers and government, if the action has been taken in good faith. The action can be initiated only after giving the person one month notice. The action can be initiated within three month from the date of cause of action. Similar provision has been made under Section 40 of the Central Excise Act. These provisions are extremely loaded against the assessee and gives too much protection to the government and its officers. Therefore it is not surprising that probably no proceeding has ever been initiated against any of the officers at any point of time. These laws are primarily responsible for rampant corruption in our government, rampant human rights abuses by our government agencies, rampant redtapism, rampant ignorance of pleas of common man in the power corridors and rampant lack of accountability and sincerety in the government officers.

Nevertheless, even these laws can be made to work, if the assessee is vigilant of their rights. Ignorance of laws and sleeping over your rights can never be justified on any ground. Despite such laws, the assessee is still empowered to move the civil court to claim compensation against any unjustified delay. Mere initiation of such action by the assessee will have a salutary effect on the administration of Customs and Central Excise.

SUGGESTION:

The law should be amended to include certain sections, which protects citizens against the unlawful actions of the officers. Justice requires that in the administration of taxation laws, genuine concern of the citizens must be kept in mind. Justice is the sole purpose of any law. A law cannot be justified on the ground of existence of legislative power but it can be justified only when it furthers the ends of justice. Taxation can never be justified merely on the ground of revenue collection, but has be justified only on the basis of lager justice in the society. St. Augustine said in “The City of God”,

“JUSTICE BEING TAKEN AWAY, THEN

WHAT ARE KINGDOMS, BUT GREAT ROBBERIES?

FOR WHAT ARE ROBBERIES THEMSELVES,

BUT LITTLE KINGDOMS.”

A law devoid of justice is nothing but a tool of robbery.

Secondly, in the law there must be procedure through which citizens can enforce their rights. It will not be out of place to suggest that even Commissioner(Appeals) or CESTAT can be empowered to receive citizen’s complaints against various form of harassment and delay and may be empowered to issue directions or order compensation. Speedy adjudication of taxation issue is important, but speedy stoppage of harassment is even more important.

CONCLUSION:

Unjustified delay is violation of basic spirit of the customs and central excise law, apart from being outright violation of Citizen’s Charter and CBEC instructions. It is civil wrong and an assessee can claim compensation for that. There is a need to amend the laws to make it more assessee friendly so that he may not face undue harassment in the hand of assessee. 






By: Rajesh Kumar (Advocate)

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RIGHT OF AN ASSESSEE WHEN SUMMONED

January 8, 2010

To investigate evasion of taxes, the officers are empowered to summon a person or documents and record statements. It is legally expected that the officer summoning a person will record voluntary statement of the person summoned. Nevertheless, over-zealous officers do violate this legal mandate and attempt to threat or coerce or induce the person summoned into stating the things they wish. Although legally such threat/coercion/inducement makes the statement involuntary and not admissible in any proceeding, including departmental proceeding, it is almost impossible to establish for and assessee to establish such threat/coercion/inducement.

Further in the summon proceeding, presence of advocates are not allowed. The Supreme Court held in Poolpandi that a person being interrogated under Section 14 of the Central Excise Act or under Section 108 of the Customs Act is not an accused nor can he plead that there is a possibility of being made an accused in future. Hence, he has no right to ask for his advocate presence during enquiry. The whole logic of this judgment fails when the first question is asked from a person summoned, an answer of which is likely to implicate the person summoned in any offence.

The author is of the opinion that a right to consult an advocate doesn’t emanate from the fact that a person is an accused or likely to be made one in future. Right to consult an advocate is not limited only to persons covered under Article 22 of the Constitution. Every person, whether an accused or not, whether an suspect or not has a right to consult a legal practitioner at any point to time when he feels that his right is being violated or likely to be violated. The right is as fundamental as Right to life itself. Thus, if, for example, a person is being abused by the interrogating officer, during an enquiry under Customs or Central Excise Act, he has every right to consult an advocate, then and there. It cannot be argued that the person being interrogated listen to the abuses till the time enquiry proceeds and only then he can consult an advocate. Off Course, owing to the Supreme Court judgment, a person cannot claim that he should be interrogated only in presence of a lawyer, but the presence of a lawyer can be allowed by the inquiry officer, if a request is made. However, once a request for presence of a lawyer is made to the inquiry officer, it cannot be rejected arbitrarily or without valid reasons. If any request of presence of a lawyer is arbitrarily rejected, the Courts may draw an adverse inference against the statement recorded in such proceeding.

In view of such provisions, it become very necessary for the person summoned to know his rights so that it cannot be protected even without the assistance of a lawyer. This paper is an attempt to enumerate certain rights which a person has when he is summoned in an inquiry pertaining to Customs or Central Excise.

Only Gazetted Officers can summon:

Only the gazetted officers are empowered either to summon persons or to call for documents. Superintendent of Central Excise is the lowest level gazetted officer in the Central Excise department. No officer below the rank of Superintendent can exercise power conferred under Section 14 of the Central Excise Act [Notification No. 9/99- C.E., (N.T.), dated 10-2-1999]. In Customs, appraiser is the lowest level gazetted officer. Further only the officer conducting the enquiry can summon a person or to call for document. When no enquiry is being conducted no person can be summoned or no document can be called for. Only the material necessary for the enquiry can be summoned. Every summon issued under the Act shall be in writing, in duplicate, and shall state the purpose for which it is issued, and shall be signed by the officer issuing it and shall also bear his official seal, if he has any [Rule 204 of the erstwhile Central Excise Rules, 1944].

An authorized officer can summon a person or documents outside his territorial jurisdiction if the cause of action has arisen within his jurisdiction. The Karnataka High Court held, in Raletronics Ltd. v/s UOI, “The power of investigation and collecting materials which may lead to further enquiry or adjudication is part of the machinery created by the law to prevent tax evasion. The machinery provisions in a fiscal legislation are to be liberally construed so as to effectuate the purpose behind the said machinery. Therefore, I am of the view that when the cause of action arises within the territorial jurisdiction of a particular officer, he is competent to have the matter investigated even in an area outside his jurisdiction. It is not a case of stretching the jurisdiction beyond his territory at all.”

Persons should be summoned in normal working hours:

Normally persons should be summoned in normal working hours on a working day. The Board has instructed vide Circular, wherein it has stated that, “Instances have come to the notice of the Board wherein Central Excise officers while carrying out investigations and searches have summoned persons for questioning at odd hours thereby inviting unnecessary criticism. This has also adversely affected image of the department. As far as possible the recording of statements of persons where it is not possible to postpone the same should be completed immediately after search of the premises search. While recording statements etc., due courtesy should be extended. If any person is to be summoned he should ordinarily be summoned on a working day and during normal working hours.”

Summons should be issued only for justified reasons. It must not be a harassing technique. It is a legal power to be exercised in a judicious manner in furtherance of the aim for which it is granted. In a circumstance, when the CBEC received some complaints about abuse of Section 14 of the Act, it instructed, in the Circular, “Action under this section is to be taken only as a last resort in cases where assessees are not co-operating or investigations are to be completed expeditiously. This section should not be used for harassing the top management for forcing them to pay up demands, which are disputed by them. For recovery of demands normal procedure under the law should be followed. If any instance of issue of summon to Managing Directors and other Directors without justification is noticed, a serious view will be taken by the Board. Collectors will be held personally responsible for enforcing these instructions in their charges.”

Summoning Documents:

Documents can be summoned only when they are in possession or in control of the person from whom they are being summoned. For example, if some documents are in the possession of the Income Tax department, they cannot be summoned from an assessee even when those documents belong to the assessee. In that case a simple letter to the officer summoning the documents informing him about the whereabouts of documents can be sufficient.

In Hindustan Safety Glass Work Ltd. v/s Assistant Collector of Central Excise, the Court held that wholesale demand for production of a large number of documents, which can possibly have no relevance to the enquiry made by the Assistant Collector. This obviously is not permissible in law. No fishing enquiry can be conducted under section 14 of the Act. There cannot be wholesale summon of documents not relevant to the enquiry under this provision. While approving the observations the Punjab & Haryana High Court held in K C Vanaspati v/s Asst. Collector  held “as the documents required to be produced have no relevance to the inquiry involved, but it is an attempt to collect material by wholesale production of documents during a fishing inquiry. No doubt, the Allahabad High Court had set aside the summons for production of wholesale documents by holding that the Collector cannot make fishing inquiry but should have summoned the relevant record only.”

Summons for documents must clearly specify the documents, which the authority propose to summon. The authority must apply his mind with respect to the necessity to obtain and examine the documents mentioned in the order- Barium Chemicals v/s UOI [AIR 1972 SC 591]. In this case the summons the Supreme Court set aside the summon on the ground of vagueness.

Power to summon documents is a general power, which can be exercised in various situations like enquiry and investigation of offences, adjudication proceedings, enquiry so as to decide about any conditional exemption etc. The Calcutta High Court observed in Meera Chemical Inds. Ltd. v/s D P Anand,“Section 14, in my opinion, is a general power which can be exercised by a duly authorised officer, for any kind of investigation under the Act or the Rules. It is not restricted to any particular matter arising under the Act, nor is it excluded by reason of any circumstance.”

The power under Section 14 may be exercised at the request of the assessee. In adjudication proceeding, if any document is required by the assessee as defense document and the same is not in control or in possession of the assessee, the assessee can request the adjudicating authority to summon those documents. Even at the time of investigation the accused or suspect may request the investigating officer to summon documents which may be helpful in establishing the innocence of the suspect or accused. However before requesting the authority to summon documents steps must be taken by the assessee to procure those documents if possible by reasonable diligence. In Shree Synthetics Ltd. v/s UOI, the Supreme Court observed, “It is, therefore, open to the appellant to apply to the Assistant Collector, Baroda for a copy of the said order which may be supplied to him in accordance with the rules. If, however, the copy is refused to be furnished by the said Assistant Collector, it may then be open to the appellant to request the Assistant Collector, Ujjain to summon the same from the other Assistant Collector.”

Summon has to be served:

The summons under Section 14 of the Central Excise Act or under Section 108 of the Customs Act has to be served. The service of the summons must be to the proper person. Thus when the authority want to summon some documents from a company, service of summon to an employee is not proper. In Chajja Textile Limited v/s Commissioner of Central Excise, the Tribunal discarded statement recorded under section 14 of the Central Excise Act because summon was not served properly.

No detention for long hours:

The Central Excise or Custom officer has no power to detain a person for long hours in the name of enquiry or under the guise of summons of persons. The Madras High Court in Roshan Biwee v/s Joint Secretary held,

“since at the stage of enquiry or investigation or interrogation held under Section 107 or Section 108 of the Customs Act, the person required or summoned for such enquiry or examination is not arrested, nor has he become any accused, therefore, if in a given case, the Customs officials detain any person required or summoned under the provisions of the Customs Act for a prolonged period, even exceeding 24 hours, or keeps him in closed doors as a captive prisoner surrounded by officials or locks him in a room or confines him to an office premises, he does so at his peril, because Sections 107 and 108 of the Customs Act do not authorise the Customs Officer to detain a person for a prolonged custody and deprive him of the elementary facilities and privileges to which he is entitled. In such a situation, the Officer must have overstepped his limits and thus violated the provisions of Article 22(2) of the Constitution.”

Normally it is expected that any enquiry should be conducted during office hours and if the enquiry cannot be completed before the fall of the day it should be postponed to the next day. The Madras High Court held, in Anil G. Merchant v/s DRI,

“Neither the provisions of Section 107 nor Section 108 nor any other provision in the Customs Act, 1962 or the Rules framed thereunder restrict the right of the Customs Officer to require the person to appear before him only at stated hours. Normally, such interrogation or examination will be done during the normal office hours or during day time.” The Kerala high Court in Prakash Kumar Choudhary v/s UOI directed, “we make it clear that every endeavour should be made to close the examination of the appellant before sunset and if for any reason it cannot be so closed, the same should be resumed only in the next day morning.”

Statement recorded must be voluntary:

The statements recorded under these Sections are admissible in evidence even against the maker of the statements. Such statements are admissible even if retracted later.

However to be admissible, the statement must be voluntary. An Excise or Custom officer cannot compel a person to give statement. There should not be any threat to give the statement.

Section 14(2) of the Central Excise Act and Section 108(3) of the customs Act specifically provides that all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined. Hence there is no right to silence.

No violence can be used against the person summoned:

No violence can be used against a person giving the statement. Violence doesn’t merely means physical violence. It includes abusive language, threat of violence or any other legal injury. It needn’t be directed against the person summoned, it can be against anyone in whom the person summoned is generally interested.

Use of any form of violence against the person summoned is a crime under the provisions of the Indian Penal Code and a person subjected to such violence can approach the police or the judicial forum to seek justice against any form such violence. In Mahendra Jain vs. Union of India, the Calcutta High Court observed that,

“it is true to say that the interrogating officers should have appropriate right for the purpose of interro­gation but such right should not exceed the limit of the human right. There is no law which say that as against the summons Customs authorities will proceed for interrogation as per their sweet will forcibly keeping in their custody for indefinite period. If it is done then it has to be construed as informal custody. Therefore, the law relating to accused in a custody has to be expressly or impliedly, applicable. If accused can get all benefits under Article 21 of the Constitution a person in such informal custody can say that he is also entitled to get relief under Article 21 of the Constitution of India. It cannot be said that the authority will behave in violation of Article 21 without declaring one as accused and Court will give premium to such illegality.”

The Court further added that now a days, custodial violence is not unknown to the people and Court cannot refrain from taking any Judicial notice. If such violation exceeds the personal right and liberty as given under Article 21 of the Constitution of India, the writ Court is justifiable entertain, the writ petition and pass an appropriate order. It is significant to note that custodial violence is not an ordinary violence even if one has been taken in the custody as against any criminal charges. The declaration has to be made whether the person concerned is formally accused or not. It is not be misused for extracting statements by force.

Remedy against abuse of power by the summoning officer:

As a lawyer, it is shameful to tell people that even if your right has been violated, you have no remedy. You cannot prosecute the guilty officer, for it is impossible to get the sanction of Central Government to prosecute an officer under Section 197 of the Code of Criminal Procedure. Officers cannot be prosecuted under Customs or Central Excise Act, as it is impossible to get the sanction of the Commissioner. Such provisions were enacted by the Britishers to maintain and perpetuate colonial rule, and Indian law is still carrying the legacy of colonial rules. The author is of the view that such provisions has specifically made to shield the guilty officials and block the progress of Rule of Law in the country. The remedy for suit for damages is better not exercised in the present Indian context.

The only remedy, which exists against such abuse summoning power is “freedom of expression”. This freedom of expression is basis of all rights which exist anywhere for common people. When any of the rights is violated, an assessee must express himself. He should bring such happening in the notice of other assessees, trade associations, media and authorities. He must insist that cognizance of such violation of assessee’s right should be taken and appropriate action be initiated.




By: Rajesh Kumar (Advocate)

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ASSESSEE’S RIGHTS AGAINST DELAY

January 6, 2010

A tax assessee has to deal with the problem of delay almost every time it interacts with the tax authorities. This delay is sometimes due to the system of tax administration, which imposes unnecessary and unreasonable restrictions in the name of checking evasion of taxes. Sometime it is arbitrary whim of the tax administrator, employed to harass an assessee. Sometimes it is a trick to extort corrupt money from the assessee. For whatever purpose this delay is employed, it always results in cost escalation in the normal business process, which is extremely harmful to any economy in the fiercely competitive world. This paper seeks to examine the various steps taken by the state to curb this delay and various remedial measures available to an assessee in case of unreasonable and inordinate delay.

In the administration of Custom, Central Excise and Service tax; the corruption money is euphemistically called “SPEED MONEY”. This phrase refers to the fact that bribe is paid to speed up your file in the taxation department. Thus if you pay the speed money, your files will be speedly cleared and if you refuse, your files will not be cleared on one ground or the other. If the tax administrator is smart enough, he will raise some objection in your documentation, he will call for more documents to examine your case and numerous other tricks he has under his sleeve. Even when he is not smart, he can always make your file missing.

Although numerous circular has been issued by the CBEC directing its officers to work efficiently and expeditiously. There are numerous judgments of superior courts castigating inordinate delays. There are many provisions in the statute itself fixing a time limit. Nevertheless delay occurs. And every assessee knows it happens due to malafide of the departmental officers. Sometime the assessee shows the courage to bring such delay into the notice of the superior officers. But no person has ever been held responsible for any delay. This author is not aware of any instance where any action was ever taken against any officer of the department for delay. This state of affairs clearly points out to the fact that whatever remedies are available against delay, is available on paper only. This paper also seeks to examine the reasons for this state of affairs and suggest remedial measures against this malaise.

The Citizen Charter has been issued by the Central Board of Excise and Customs as its commitment to the responsive and efficient tax administration. It gives a right in the hand of the assessee to force the tax administration to comply with their duty. The text of the citizen charter reads as,

“CITIZEN’S CHARTER”

This Charter is a declaration of our mission, values and standards, and our Commitment to achieve excellence in the formulation and implementation of Customs and Central Excise policies and procedures for the benefit of the Trade and Industries, who are our partners in progress.

Our Commitment

We shall carryout our tasks with

• Integrity and Judiciousness

• Courtesy and Understanding

• Objectivity and transparency

• Promptness and efficiency

We shall encourage and assist Voluntary tax compliance by our Clients.

Our expectation

We expect you to be prompt and reasonable in fulfilling your duty and legal obligations and be true and honest in furnishing information to us.

Our Standards

We Shall

• Acknowledge declarations intimations, applications, returns and all communication on the spot and in any case within 7 days of their receipt.

• Respond to all communication within 15 working days of its receipt.

• Settle any disputes relating to declarations or assessment within 10 working days of written or oral explanation.

The importance of the charter has been explained by the Commissioner of Central Excise (Appeals), in the matter of Thanjavur Spinning Mills [2004 (163) E.L.T. 278 (Commr. Appl.)], wherein the Commissioner (Appeals) declares,

“This Citizen’s Charter is a Magna Carta reflecting the higher aspirations of the Department. It is a noble document propounding the Department’s ideals, vision and to frame and mould the thinking of the officials to the challenges of democracy, freedom, transparency and human dignity. Every official needs to act with profound conviction to dedicate his official life to the attainment of these objectives. If we have the courage to make the right decisions and if we have an abiding faith that only the right will ultimately survive, we shall know that we are helping to build a nation in which the finer values of man’s spirit may flower. The Citizen’s Charter is a vision of something great and tremendous, a call to a heroic mission, the challenge of a truly national message. It is a time of challenge and change. Let us apply ourselves to that which is presented to us, as our appropriate object, and let the sacred obligations, which have devolved on our Department sink deep into our hearts. There is opened to us a noble pursuit, to which the spirit of the times strongly invites us. Let our conceptions be enlarged to the circle of our duties. Let us convince the people that our system is the best, let us extend our ideas over the whole of the vast field in which we are called to act. In keeping with the noble ideals enshrined in the Citizen’s Charter the Appellant deserved to get a prompt reply for their petition dated 27-8-2001. However, the mystical secrets of office procedure denied them a timely reply. We have to push aside the fateful and inexorable realism of such complacency. The Appellants, seem to be asking the Department whether in this time of relentless challenge do we have those qualities of adjustment, those characteristics of a dynamic office, which are requisite to meet the accelerating rate of change, which is the overriding characteristic of our time? The highest ethical concepts is enshrined in our Citizen Charter but if we fail to perform our share of duties and responsibilities, the visions enshrined and displayed will mean no more than a name carved deeply into marble on an expensive crematory mausoleum. There is no particular inspiration in reading headstones in a graveyard.”

The Board has always emphasized the needs of an assessee friendly and responsive tax administration. In Circular No. 24/2000-Cus., dated 30th Mar. 2000, the board says, “the Hon’ble Minister of State of Finance (Revenue) has expressed his anguish over the indifferent and unresponsive approach and lack of sensitivity of our officers even to the genuine representations/complaints by general public. The field officers did not even bother to forward representation to the Government and recommend condonation at their own initiative till the matter was brought to Minister’s notice by a VIP. The Hon’ble Minister has observed that the rule and regulations should be used to the benefit of our citizens rather than applying them mechanically creating more work for everybody.”

To make the tax administration real efficient and responsive to the need of public the CBEC issued Circular No.  393/26/98-CX, dated 2-6-1998, wherein it directed that,

1.All declarations, intimations, etc. when sent by FAX, E-mail, by Post or by Courier shall be accepted by the filed formations;

2. Appointments should be given also on E-mail on request from the trade;

3. All queries by E-mail should be accepted and the answers should be sent by E-mail;

4. Any query received from the trade must be answered within a maximum of four weeks from the date of receipt.

The above directions have been reiterated by the CBEC Central Excise Manual of supplementary instructions in para 3.4.These instructions give certain very important right to the assessee.

The law has always been very clear on the exercise of powers and discretion conferred by a rule of law. The Citizen Charter re-enforces these values and give them a strong and clear legal footing. Integrity, judiciousness and reasonableness are not mere legal rhetoric but sound legal principles on which our constitution is based upon.

The Right to Information Act, 2005.

The department of Central Excise and Customs is a public authority within the meaning of the Right to Information Act, 2005 and hence, they are bound by the provisions of the Act. As per Section 4(b)(iii) of the Act, the authority has to publish the norms set by it for discharge of its functions. As per Section 4(b)(ii) of the Act it has to publish the power and duties of its officers and employees and the procedure followed by then in discharge of its functions. The citizen charter is, at the most, a skeleton of the norms set by the CBEC. Further the Central Board of Excise and Customs has not prepared any document, which specify the duties of its officers and employees. Nevertheless, certain information has been made public on the CBEC web site, which again give valuable rights to the assessee.

The Governance in India has largely been a declaration of powers of the officers and employees of the Government. This is probably a colonial legacy when the government was British and the “native public” was there to be ruled. There cannot be any declaration of rights of people or duty of the Government towards people, who are “Ghulam” of a foreign power. Unfortunately even after independence the mindset continues. Thus every Act provided for the powers of the officers but was invariably silent on the duties of the officers. Off course, the gap was filled by the judicial pronouncements, but these are neither sufficient nor expresses the will of the elected legislatures. The Central Board of Excise and Customs have not notified till now the duties of its officers and employees till now. The duty imposed by the Right to Information Act is a public duty, which must be done, sooner than later.

Section 4(d) of the Act provides that every public authority shall give reasons for its decisions, irrelevant of the fact that the decision is administrative or quasi-judicial. In UOI v/s Mohan Lal Kooper [AIR 1974 SC 87], the Supreme Court observed that reasons are the link between the materials on which certain conclusions are based and actual conclusions. They disclosed how the mind is applied to the subject-matter for a decision whether it is purely administrative or quasi-judicial and reveal a rational nexus between the facts considered and conclusions reached. Fair play in action requires that every authority should record reasons for its decisions, whether administrative or quasi-judicial. Every citizen has a right to know as to on what basis a decision has been taken which may affect his situation. Recording of reasons is an assurance of the fact that the authority has applied its mind to the facts and circumstances of the case before arriving at any decision. Further it fecilitates proper supervision on the authority concerned by higher administration or by the process of judicial review. An decision, action or order of any statutory or public authority, bereft of reasoning, would be arbitrary, unfair and unjust and violative of Article 14 of the Constitution of India, and would deemed to have been arrived at by unfair procedure offending Article 21 of the Constitution of India [Krishna Swami v/s UOI, AIR 1993 SC 1407]. The Right to Information Act, 2002 merely says what was always law of the land as per the binding judgments of the Supreme Court. However, enforcement of a statutory provision is always easier as compared to enforcement of a judge-made law. 

Unjustified delay is an act of the authority for which citizens can seek information including reasons for delay. The Right to Information Act, 2005 gives valuable rights to the citizens against delay. Any delay in violation of Citizens Charter, in violation of the statutory provided time limit or otherwise inordinate delay has to be explained with reasons as per section 4(1)(d) of the Act. The citizen has a right to seek reasons for such delays and the authorities are bound to provide reasons. Further when any such delay is brought to the notice of superior officers, he has to take appropriate action against such delay. The assessee has a right to seek information from him as to what action has been taken.

Statutory Provisions:

There are various provisions in the law under which certain particular acts have to be done within a specified time schedule. For example a demand can be raised only within the time specified in Section 11A of the Central Excise Act, 1944 or under section 28 of the Customs Act, 1962. In certain other situations, like refund under Section 11B, there are provisions for interest as a penalty for delay. Certain other situations are covered by CBEC instructions and Citizen’s Charter. For example the Board has directed that adjudication order should be issued within 7 days of personal hearing (Circular No. ). Similarly the Board has directed that drawback claim should be decided within 3 days in case of EDI shipping bills and within 5 days in case of manual shipping bills. There is no need to repeat here that these circulars are known more for their violation than for implementation.

Nevertheless, there are many situations for which there is no time limit has been specified and assessees are at the mercy of the departmental officers. Due to such delaying tactics of the officers, the assessee suffers huge losses for which there is no provision under the Customs or Central Excise law. In some cases the assessees have raised this point before higher judiciary with favourable results.

When the goods are detained in port area, it results in huge demurrage liability on the importer. In Shipping Corporation v. C L Jain Woolen Mills, [2001 (129) ELT 561(SC)], the apex court held that if seizure and consequent detention was held to be illegal, the demurrage should be paid by the Customs department. Various High Courts took the same view. For example Delhi High Court in Trishul Impex v. UOI [1992 (58) ELT 182], In R C Fabrics v. UOI [1995 (76) ELT 9], Kolkata High Court in Surabhi Leather v. CC [1992 (59) ELT 253], Andhra Pradesh High Court in Sujana Steels v. CCE [2002 (141) ELT 343], Madras High Court in Anuma Precisions Tolls v. CC [2002 (121) ELT 309], took the view that Customs department is liable to pay demurrage in cases of unjustified seizure and detention of goods.

On its part, CBEC has issued various guidelines so that harassment of the importer is not done and demurrage charges do not become payable. Instructions have been issued in Chapter 16, para 5 of the CBEC Customs Manual, 2001. The circular, 42/2001 dated 31.07.2001 says that erring officers were held liable. However, this author is not aware of any case when any erring officer was ever found accountable. In fact, this author is aware of a recent case when goods were illegally detained by a premier investigating agency of the Customs and the goods were not released despite the provisions of law were brought to the notice of senior officers.

In case of North Eastern states, there are provisions in Notification No. 32/99 and 33/99 of Central Excise that the amount of duty paid in cash shall be refunded by 15th of next month. In case of any delay in verification, the amount should be refunded provisionally by that date. Despite such clear-cut provision, this author is ware of some cases where the amount has not been refunded, even when such acts were brought to the notice of senior officers.

It is difficult to imagine that whatever is happening at the ground level is not known to the senior officers or board. And if is really not known, it speaks of their competence. And if the law is not implemented despite the facts were brought to their notice, their bonafide is in doubt.

RIGHTS OF THE ASSESSEE HAS TO BE EXCERCISED BY THE ASSESSEE:

The protection of law is available only to vigilant citizens. Law cannot protect those persons who sleep over their right. If our citizens are of the opinion that their rights against government officers will be protected by the government, their rights against junior officers will be protected by senior officers- it is merely a wishful thinking. Unjustified delay by the department and its officers are negligence and dereliction of their duties. It is a “Civil Wrong”, an actionable claim in the court of law. In cases of unjustified delay, the erring officers personally and the department vicariously is liable to compensate the assessee.

Although we have inherited our legal system from the British Common Law, unfortunately the law of torts didn’t get enough attention in our country. Claiming compensation against the government was further made difficult by the doctrine of sovereign protection, procedural protection under Section 80 of the Code of Civil Procedure and “good faith” clause protection extended to government servants under various laws.

Section 155 of the Customs Act, 1962 protects the officers and government, if the action has been taken in good faith. The action can be initiated only after giving the person one month notice. The action can be initiated within three month from the date of cause of action. Similar provision has been made under Section 40 of the Central Excise Act. These provisions are extremely loaded against the assessee and gives too much protection to the government and its officers. Therefore it is not surprising that probably no proceeding has ever been initiated against any of the officers at any point of time. These laws are primarily responsible for rampant corruption in our government, rampant human rights abuses by our government agencies, rampant redtapism, rampant ignorance of pleas of common man in the power corridors and rampant lack of accountability and sincerety in the government officers.

Nevertheless, even these laws can be made to work, if the assessee is vigilant of their rights. Ignorance of laws and sleeping over your rights can never be justified on any ground. Despite such laws, the assessee is still empowered to move the civil court to claim compensation against any unjustified delay. Mere initiation of such action by the assessee will have a salutary effect on the administration of Customs and Central Excise.

SUGGESTION:

The law should be amended to include certain sections, which protects citizens against the unlawful actions of the officers. Justice requires that in the administration of taxation laws, genuine concern of the citizens must be kept in mind. Justice is the sole purpose of any law. A law cannot be justified on the ground of existence of legislative power but it can be justified only when it furthers the ends of justice. Taxation can never be justified merely on the ground of revenue collection, but has be justified only on the basis of lager justice in the society. St. Augustine said in “The City of God”,

“JUSTICE BEING TAKEN AWAY, THEN

WHAT ARE KINGDOMS, BUT GREAT ROBBERIES?

FOR WHAT ARE ROBBERIES THEMSELVES,

BUT LITTLE KINGDOMS.”

A law devoid of justice is nothing but a tool of robbery.

Secondly, in the law there must be procedure through which citizens can enforce their rights. It will not be out of place to suggest that even Commissioner(Appeals) or CESTAT can be empowered to receive citizen’s complaints against various form of harassment and delay and may be empowered to issue directions or order compensation. Speedy adjudication of taxation issue is important, but speedy stoppage of harassment is even more important.

CONCLUSION:

Unjustified delay is violation of basic spirit of the customs and central excise law, apart from being outright violation of Citizen’s Charter and CBEC instructions. It is civil wrong and an assessee can claim compensation for that. There is a need to amend the laws to make it more assessee friendly so that he may not face undue harassment in the hand of assessee.




By: Rajesh Kumar (Advocate)

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