The case begins with the Commissioner, Haldia passing an adjudication order nearly seven years ago, in December 2007. Apparently mishandling and poor strategy by revenue has ensured this matter doesn’t move past even the next stage i.e. Tribunal in seven years. From the looks of it, even now, the department seems doubtful it will progress quickly.
Again apparent from the decision, it's because the department which should have provided certain documents (which were with the department) to the assessee did not do so before, during or even after the adjudication. As a result, the assessee has claimed they are unable to file a proper reply the notice. And the matter drags on. The department now fears that tracing out the old records will be a challenge. So far in the three weeks provided by the Tribunal they have not been able to find it. Isn’t this a surprise?
It’s not as if nothing has happened during the intervening seven years. The Tribunal has been kept engaged, the High Court has been kept busy. How? The Tribunal has passed two orders and the High Court petitioned to intervene twice. But did these proceedings result in any movement of the case? Obviously not! The case is where it started seven years ago when the Commissioner passed an order!
The first order of the Tribunal dated 09.06.2009 directed the assessee to make a deposit Rs.2 Crores. Not satisfied, they moved the High Court seeking directions to the Tribunal to rehear the stay application and to decide it afresh. Even then, the assessee’s grievance before the High Court was documents necessary for filing the reply was not provided to them. However Instead of providing the documents, the department contended the matter was just dragging on and Government is suffering a loss.
How does one conclude there is a Government loss unless the merits of the case is determined? Once all the facts are properly determined, only then a conclusion can be made that there was a loss. But it could well be possible that the conclusion in the notice is wrong.
So the High Court passed an order on 13.11.2013 saying the appellant’s interest also needs to be protected. The Court stated that observations of the Single Bench should not come in the way of the Tribunal in disposing of the matter afresh. So the Court directed the Tribunal to decide the matter afresh within four weeks and pass a fresh order.
Accordingly, the Tribunal by Order dated 07.05.2014 very meticulously, and specifically listed the tasks and time lines for the tasks to be completed by the revenue and the assessee. The list has been carefully prepared to ensure accountability on both sides. Obviously, the main focus in the order was on the documents which the assessee was clamoring for.
The Tribunal directed the assessee to specify exactly the documents they needed and gave them only one week for this. The Tribunal provided three weeks thereafter to the revenue to trace out and provide the documents to the assessee. The assessee completed the task. But the Revenue was unable to trace the documents and missed the deadline. Then the department approached the Tribunal with a miscellaneous application apprehending a delay and non-compliance with the High Court's order. The Tribunal has dismissed the application saying there is no default yet by the assessee (implying the documents have to be provided first by the department and only then there will be a default by the assessee).
What does this mean? This means the assessee stays put and has to do nothing till the documents are produced to them by the department. The assessee has done its part. They have not defaulted. Nothing will move till the Department finds the documents and if they don’t, they will probably have to give up the case. After seven years, finding documents will indeed be a challenge.
So, from this case what conclusions can we draw? What is our diagnosis?
Well we don’t know all the facts of this case, so we’ll not comment on this specific case. But in a generic sense, when drawing up notices, one important pre-requisite is that all documents relied upon in the notice should be provided to the noticee. Otherwise, one is leaving an escape route open. This should be done even if the assessee does not ask for it. Naturally this is based on the principles of natural justice. These principle are not negotiable. A person cannot be held for a breach without a proper opportunity. If the records were required, they should have been provided. This is the first thing an adjudicating officer should know.
If in a case documents, records etc. are seized or withdrawn, they should returned or provided once the notice issued. If the records are not provided, with each passing year its retrieval becomes more difficult. In this specific case, the error could have been rectified even when the assessee approached the Court and made this a grievance around 5 years ago.
By the way, why do investigating authorities and adjudicating authorities do this? Is it arrogance? High-handedness? Demonstration of power? This is not the only case of this type. Doesn't such action cause damage to Government revenue? The department has review cells to review notices, adjudication orders and Tribunal orders. Do these cells examine this critical aspect which results in cases dragging on or they only review orders favourable to the assessee? Such irrational behavior which results in potential loss to Government revenue needs correction?