Profession Tax Amnesty Scheme

Like monsoon, we have amnesty schemes under Profession Tax at regular intervals, if not annually. Now, Govt. Resolution No.PFT-1107/C.A.16/Taxation-3 Mantralaya dt. 10th August, 2007 has announced the amnesty scheme and as a result, the Commr. of Profession Tax has also issued a Trade Circular No. 57T of 2007 dt. 23-8-2007 explaining the salient features of the scheme. I would not like to reproduce the scheme here but would definitely want to highlight certain issues arising out of the said scheme.

1. As it always happens with any Amnesty Schemes, there is a clear-cut discrimination favouring unregistered / unenrolled persons vis-à-vis registered / enrolled persons. The first category who are obvious defaulters have been exempted from whole of tax / interest / penalty etc. in respect of liability prior to 1-4-2002, whereas the registered / enrolled persons who have not discharged their liability for periods prior to 1-4-2002 are not so exempted. In fact, the degree of callousness is the same in case of both the categories of dealers and, therefore, they ought to have been treated equally.

2. The scheme has not considered an eventuality where the person obtains registration / enrolment somewhere between 1-4-2002 to 31-3-2007 although liable to pay tax from an earlier date. For example, a person gets registered under Profession Tax Act from 1-4-2004 although he had attracted liability from 1-4-1999 as an employer. In that case, will he be treated as registered or unregistered employer? Decision as regards this status is important since it will decide the liability for the period prior to 1-4-2002.

3. Both registered and unregistered persons are required to pay 10% of the interest and penalty leviable / due under the Act. The only penalty provision on the statute is section 10 of the Profession Tax Act, for failure to pay the tax as per provisions of law. There are penalties for failure to obtain registration / enrolment u/ss.5(5) and 5(6). The maximum amount of penalties are prescribed therein. How to compute amount of penalties in such a case where levy and quantum of penalty is a discretionary matter? The interest is mandatory and is leviable at a fixed rate. But, so is not the case with penalties. The penalties leviable/due should not have been considered at all where it is not actually levied. In earlier amnesty scheme, unquantified penalties were not considered and the same policy ought to have been followed here.

4. The circular of the Commr. of Sales Tax explains that no statutory orders will be passed under the amnesty scheme and no appeal can be filed against the same. Does it mean that no amnesty orders will be passed? How will the dept. convey their decision about grant or denial of the amnesty to the concerned employer/person? There has to be some communication from the dept. to protect the dealer from future harassment.

5. The Commr. of Sales Tax also ought to have explained the manner and mode of payment of profession tax; i.e., whether payment for entire assessment year is to be made in a single challan although the employer is liable to pay monthly liability ?

6. The Commr. of Sales Tax should also introduce a system to check the applications and amount of payment beforehand in order to avoid denial of amnesty on some technical grounds. He should instruct the profession tax officers to verify the applications and convey the correctness or otherwise to the respective persons. This will avoid the anxiety related to acceptance or rejection of amnesty benefits. At least, such communication pointing out to the dealers any short payments etc. should be made immediately after the applications are lodged with them. This is required since dealer may lose entire benefit of amnesty for a trivial amount of short payment.

There could be many more other points which may surface while administering the scheme. The dept. has to take the stock of such issues from time to time and issue clarified circular.

CSTAA provisions:

We are aware that the observations of the Supreme Court in the case of M/s. Ashok Leyland Ltd. vs. Union of India. (105 STC 152) led to establishment of Central Sales Tax Appellate Authority (CSTAA). Enabling provisions were made in Chapter VI of the C.S.T. Act in sections 19 to 26 by Act 41 of 2001. However, they were brought into force only from 17-3-2005 by issuance of a notification on even date. It is further notified that Income Tax Advance Ruling Authority is authorised to deal with appeals involving issues u/ss. 6A and 9 of the C.S.T. Act as required under Chapter VI as CSTAA.

Recently, the said authority viz., CSTAA has delivered a judgment in the case of M/s. Ramco Industries vs. Asstt. Commr. of Taxes (9 VST 70). It is held that appeal to the CSTAA lies only against the appeal orders passed by highest appellate authority of the State; i.e., Tribunal or equivalent authority irrespective of the fact, whether such appeal lies before such Tribunal under the General Sales Tax Law of the State. Certain issues crop up out of the entire development.

1. Under sec. 25(1) of the C.S.T. act, all appeals filed before CSTAA shall be transferred to Tribunal if they are not so filed against the orders of the Tribunal. The question arises as to how many dealers in Maharashtra have approached CSTAA against assessment order or First Appeal order involving issues u/ss. 6A and 9 i.e., disallowance of stock transfer claims. On an average, there appears total ignorance of these provisions in the State.

2. Under section 20 of the C.S.T. Act, an appeal against Tribunal order lies to CSTAA alone where issues relating to ss. 6A and 9 are involved. It means that reference provisions under B.S.T. Act. or MVAT Act are inapplicable so far as such judgments of the Tribunal are concerned . The dealer has to necessarily prefer an appeal to CSTAA. How many dealers are aware of this legal position? If they apply for reference u/s. 61 of the B.S.T. Act. inadvertently, such references are likely to be turned down by the High Court in future. By then, the time limit to make an appeal before CSTAA is exhausted and the dealer is left with no remedy. As per the first proviso to section 20, CSTAA can condone the delay only up to 150 days from the date of service. Therefore, appeals before CSTAA also cannot be filed being time-barred in absence of enabling provisions for condonation of delay. This could have serious repercussions on the dealers as well as revenue.

3. Under newly inserted rule 13(4)(h), the State Govt. can make rules for the “proper functioning of the authority constituted under section 19”. The said rules have not yet been framed. Thus, the trade is not aware about the procedure to be followed in filing such appeals; i.e., form of appeal memo, supporting documents and orders, fees payable etc. In view of the obligatory provisions of the C.S.T. Act in respect of the said appeals, it is absolutely necessary to frame such rules at the earliest.

4. To facilitate the adjudication process of the CSTAA, it is necessary to send the first/second Appeal and assessment record to such authority at New Delhi. There should be administrative instructions in this respect to the concerned authorities in the matter of despatch of relevant files to New Delhi since these files are moving out of the Sales Tax dept. in this case.

5. Since large number of matters arise out of sections 6A and 9 in Maharashtra, especially Mumbai, it is advisable to have a separate bench of CSTAA in Mumbai as well. The Sales Tax dept. also should make efforts to have such bench in Mumbai.