The CESTAT New Delhi Bench in CC Allahabad Vs Petro Carbon set aside the Order of the Commissioner Allahabad and allowed the department’s appeal in Petro Carbon Ind. Ltd. The matter came before the Tribunal after the Order was reviewed by the Board and appeal filed by the Commissioner consequent to the review order.
The Tribunal has observed that Commissioner has wrongly concluded that the difference between weigh slips and invoices was just 1-2%. Also the argument advanced that the weight difference is due to jute bags used for packing is not convincing. Only 2450 jute bags were used as against 35203 plastic bags during the material period. The average difference is around 4-5% and not 1-2%. This cannot be due to the weight of bags.
Accordingly, the matter was remanded back to the Commissioner for a de novo consideration on the specific points covered by the Board’s review order. This matter therefore has not been concluded. Whether indeed there was clandestine removal by Petro Carbon is yet to be established/determined.
Our additional Comments: These comments have nothing to do with this case but relevant for ensuring good tax administration and tax compliance of all taxes. In cases where clandestine removal is proved/established, the indirect tax authorities should not stop at making cases under excise law alone. It should also be ensure that the such cases are examined from a direct tax and sales tax evasion angles.
Transactions involving clandestine removal / sale can happen only if the entire chain of transactions remain unaccounted. This means in cases where clandestine removal is involved, its not just that one particular tax. If excise is evaded, it is probable that the raw material supplier and service providers also participated, also it is not just excise. To remain out of the tax net, all taxes have to necessarily be evaded to avoid being exposed. So it would be income tax, VAT, CST, Octroi or entry tax, and so on. What is the tax administrations stated strategy on this?
We are told by experts that the quantum of such transactions that remain unaccounted and underground in the Indian economy would be almost 35% of the total!
So in a economy which exceeds $ 1.8 trillion, 35% of that would be Rs 37.8 Lac Crores. This is more than three times India’s Budget for 2014-15 which is Rs 11.9 Lac Crores.
Even if we assume that the direct and indirect taxes on unaccounted transactions is at a low 20% (current rates : excise / service tax -12.36%, VAT - 12.5/5%, Corporate tax on profits assuming a 10% profit would be around 3.3%). This would be Rs 7.56 Lac Crores! This is a little less than Rs 9.77 Lac Crores which is the estimated central tax revenue for 2014-15.
Apart from all this, a part of this large money floating in the under ground economy finds its way out of the country. This is because as the laws against corruption and black money get tighter within India, to escape from discovery it is moved out of India. When the nation is starved of money to develop and provide basic necessities to its poor citizens, the money goes missing.
Isn’t this what the tax authorities should be pursuing? Isn't this what the CBEC, CBDT and the Revenue Secretary should be concerned about?
Instead if you go over the judgements of the Tribunals, almost 8 out of 10 cases are open and shut cases in favour of the assessee. Many times, decisions of tribunals, Courts and even Supreme Court are ignored. There cannot be and should not be any dispute in such cases? Shouldn't they be called to explain as to how and why they are getting it wrong consistently? Such orders whether intentionally or unintentionally harass the honest tax payer, it takes away the time of the appellate authorities which could have been spent on more useful/fruitful work and over decreases the credibility of the tax organization.
Why are such orders passed? Even when favourable orders are passed, on the face of it they appear incorrect. What is the underlying reason for adjudicating authorities to get it wrong consistently case after case?