1. Working of the Enforcement Branch in the Sales Tax Department

From time to time, the working – right or wrong – of the Enforcement Branch (Enf. Br.) comes to surface when eyebrows are raised by the concerned people. As a watchdog of the Department, its existence is undoubtedly required so long as it is able to unearth the legitimate loss of revenue by unscrupulous dealers. But, seldom this is done by the Enf. Br. Here is a case, shared with me by our senior brother. His client was visited by the Enf. Br. The visit yielded a revenue loss of Rs. 7 lakhs or nearabout as per the estimation of the Branch, which may be right or wrong. The dealer confessed to the said estimate and requested the visiting officers that he is prepared to make the revenue loss good the next day morning by depositing the money into Government Treasury. At the same time he requested them that his books of account may not be taken into custody. The officers were surprised by his outright admission and co-operation. However, they advised his dealer that instead of depositing Rs. 7 Lakhs into Government Treasury, he should deposit only Rs. 70,000/- and balance amount should be paid to them to earn their goodwill, and they will not officially touch his books of account. His client was pressurized and persuaded. Ultimately, he gave in to the pressure of Enf. Br. and informed accordingly to his sales tax consultant. On receipt of this confirmation, our senior brother informed him that he is no longer his client and that their relationship stands closed forever. Such types of stories/ cases are repeatedly told in the Bar rooms, time and again. Many a times, aggrieved dealers as well as their authorized representatives do meet the Commissioner and apprise him on such visits. Quite likely, keeping in mind the past and present history of the working of the Enf. Br., it appears that the Hon’ble Commissioner, Shri B.C. Khatua, took a appropriate decision to stop the visits of the Enf. Br. for some time and asked them to concentrate in finalizing the assessments so that demands can be raised, in respect of cases which are pending on their files for long years. To our mind, this was the right decision taken by the Learned Commissioner. However, to our surprise, the ‘Loksatta’ Report dated 9-10-2006 (published as an extension of this column), is miles away from the real revenue-yielding approach adopted ever by the said Branch. To put it bluntly, the working of the Branch is quite painful vis-à-vis dealers who are visited. We do not know whether the Government has a revenue collection statistics and the salary payment made to this branch over the years. If the same is made available and depicts a healthy picture, then only its existence can be justified, otherwise not.

2. Notwithstanding the above, the main difficulty is that the Enf. Br. in its working is not dealer friendly, which policy is outlined by the Hon’ble Finance Minister in its every Budget Speech. It is in this context, we say and submit that the working of the Branch is of a highhanded nature and according to their whims and fancies. The ‘Loksatta’ report has given an opportunity in the matter for discussion and debate over the working of the Branch. To join in the debate, I may illustrate this point and share our recent experience, when my client, a reputed private limited company, were visited by the said Branch. The Enf. Br. carried out their visit for two long days and even sealed their office premises at a prestigious office and location at the end of the first day without getting any evidence of any kind of tax evasion. The main point in this connection, therefore, is, whether the Enf. Br. was right in putting a seal on the office premises of my client, and thereby lowering down their credibility, prestige and reputation in the eyes of their neighbours. At least I am of the opinion that there is never any objectivity and planning in Enf. Br. visits and the dealers are in great pain when they are visited. In this particular case, after paying a visit for long two days, the Enf. Br. served on my client a notice in Form 36 calling upon them to furnish certain information within the next 48 hours, which too were Saturday and Sunday, respectively. However, voluminous suffering of dealers goes on for years together, and no solution is found out for the same so far. Shri B.C. Khatua, may, therefore, kindly focus his energy and attention onto this vexed problem. In this context, the Hon’ble Commissioner may be aware that the Central Government is thinking to replace ‘VAT’ with ‘GST’ in the near future. As per Business Standard Report dated 6-10-2006, they have quoted Mr. R. Sekar, Jt. Secretary (TRU)-II CBEC, when recently he spoke at a function in Mumbai, as under:–

"Referring to section 73, he said the service tax scheme, unlike the Customs Act, did not have a provision for prosecution of defaulters. The farthest the service tax scheme goes is to impose a penal interest on unpaid tax dues. The Government wants to keep the scheme assessee-friendly, and administer it differently from other traditional harsh tax regimes. It believes that no service provider would like to earn the stigma of being branded as a tax evader, as his credibility suffers in the market. And that is an enough deterrent."

State Government may, therefore, consider and implement the above policy statement of the Union Government, if it plans to revamp the working of the Enforcement Branch.

3. The main purpose of writing the above is, to focus the attention of the Government that all is not well with the working of the Enf. Br. and, therefore, the Commissioner was right in stopping the visits of the Enf. Br. He being the head of the Department should have last word in the management of the Enf. Br. We do not know as to who is that highly placed official, who shared with the ‘Loksatta Correspondent’, his views that there is a loss of revenue worth hundreds crore of rupees in the absence of Enf. Br. visits, on the eve of Dassera and Diwali festivals. As such, the information given to Loksatta to this extent, in our opinion, is erroneous and misleading. As against this background, the Sales Tax Cases in Volume 148 Part 2 dated 15-10-2006 under caption "We Thought you’d Like to know" compiled an item of information which read: "No raids to be conducted by tax officials on Delhi traders". This has been done to avoid the traders from undue trouble during the festive season, Delhi Minister for Finance and Planning A.K. Walia said instructions have been issued to the Department of trade and taxes to ensure that there is no harassment of the traders during the season and the field staff should be more soft and courteous with traders.

2. CJI issues directive to Bombay High Court – "Clear those one crore cases now!"

1. Times of India (Mumbai Mirror) dated 11-10-2006, reported that CJI Y.K. Sabharwal has written two letters addressed to the Chief Justice of the Bombay High Court, expressing his displeasure and dismay at the staggering one and half crore cases pending in Mumbai Courts. The pendency of cases quoted is as under:–

Number of pending cases as on August 2006

2. The CJI calling attention to the staggering one and half crore cases pending in Mumbai’s Magistrate Courts alone (the highest in the country), Sabarwal says if 1,62,34,223 criminal cases were pending in Mumbai alone how come no adequate measures have been taken to rectify the situation so far. He further said: "if a case is pending for more than six months, I want a reason why it has been extended and that should be recorded in writing by the concerned judge."
    

3. Hon’ble Justice Shri Harjit Singh Bedi, who took over as Chief Justice of Bombay High Court recently, said that we will look into these concerns on top priority.

3. In last month’s Review, I wrote on attracting Stamp-Duty on "Works Contract"

The said piece of writing was based on a ‘Stamp Duty Ready Reckoner’ of 2006 authored by Shri. Santosh Kumar and Sunit Gupta. However, I was not satisfied with Article 63 of the stamp-duty, they quoted in the above Ready Reckoner. With great efforts I could procure a copy of Maharashtra Act No. XII of 2006 dated 27-4-2006. For the purpose of our practice, I noticed the following two entries in the said Act, which I am reproducing
below: -

In the Schedule-I appended to the Principal Act, –

Entry No.	Description of the Entry	Rate of duty
Article 5(B)(vi)	Project under Built, Operate and Transfer (BOT) system, whether with or without toll or fee collection rights	One rupee for every rupees 1,000 or part thereof of the contractual value subject to minimum of rupees 100 and maximum of rupees 5,00,000
	Article 63 WORKS CONTRACT, that is to say, a contract for works and labour or services involving transfer of property in goods (whether as goods or in some other form) in its execution and includes a sub-contract, -
	(a) where the amount or value set forth in such contract does not exceed rupees ten lakh	One hundred rupees
	(b) where it exceeds rupees ten lakh	One hundred rupees plus 100 rupees for every rupees 1,00,000 or part thereof, above rupees ten lakh, subject to the maximum of rupees five lakh

4. Writ Petition No. 2042 of 2006

The Hon’ble High Court of Bombay, Bench at Aurangabad, has admitted the above writ petition as a PIL filed by Shri Omprakash Nanakramji Ladda, Chartered Accountant, and passed the following order dated 28-9-2006, wherefrom relevant extract is reproduced below for the information of our members and readers:–

"3. This petition, which is filed in public interest, by chartered accountant, challenges a Notification issued by the Commissioner under section 17(1) of the Act. Section 17(1) provides that every registered dealer who holds a certificate of registration which is valid on the date of issuance of Notification in the Official Gazette, shall obtain in lieu of the existing certificate, a fresh certificate of registration as provided in the said section. The interim relief, i.e. sought is to stay the entire process of issuing fresh registration certificate. The said relief is not capable of being granted and the same is rejected."

In the above PIL Writ, the above petitioner has sought for the following reliefs:–

"1-A. Kindly quash and set-aside the Notifications dated 21-11-2005 and
25-11-2005 and also Trade Circular dated 19-11-2005, on the ground that these are beyond the powers under the law and contrary to the specific provisions (Section 16(1) Second Proviso, 17, 10, 83 and Rules 73 and 45) of MVAT Acts/Rules.

3-A. Kindly direct respondent No. 2 (Sales Tax Department) to refund the amount of Rs. 2,000/- to each dealer from whom it is collected illegally during the period 29-12-2005 to 31-12-2005 as extra fees.

3-B. Kindly direct respondent No. 2, to refund the amount of Rs. 5,000/- collected illegally to each dealer who has not submitted TIN application up to 31-12-2005 and has been forced to apply again for fresh certificate u/s 16 if dealer wishes to continue the existing certificate."

5. RTI National Convention

A Three-day National Convention on "One Year of RTI" from October 13 was held at Delhi and the same was inaugurated by the President. Prime Minister Manmohan Singh had delivered the valedictory address.

2. The said convention was organized by the Central Information Commission at Vigyan Bhawan, to mark the completion of a year of the implementation of the Right to Information Act. The same was attended by stake holders from all over the country to discuss various suggestions and ideas that may come up for deliberations, so that necessary changes in the Act may be effected. In his valedictory address, the Prime Minister assured to standby the said Act, and see that the purpose for which it has been enacted is richly served. In the said seminar success stories as well as tales of failures were marshaled. The following information of scoreboard was released by the CIC.

Total appeals till Sept., 2006	3,059	Cases disposed	1,531	Percentage	71%
Every month, the Commission receives cases	Over 2000 and the number is growing
The penalty clause was invoked	Only in two cases. One of them was withdrawn
Time limit for hearing	It takes 6 months to hear an appeal
An information seeker threatened the CICs after an unfavourable decision	CIC therefore wants security