GOVERNMENT
TIGHTENS TAX RECOVERY NORMS
[Tax payer will get just 30 days to obtain a stay on
disputed indirect tax]
The Central Board of Excise and Customs (C.B.E.C.) has
sought to initiate recovery proceedings on custom, excise and service tax
orders raised if the tax evader is unable to obtain a stay within 90 days.
After
30 days of filing of an appeal together with a stay application by the taxpayer
with the Commissioner (Appeals) or the Customs, Excise and Service Tax Tribunal
(CESTAT), the indirect tax authorities will move to recover the demands raised,
even if the stay application has not been heard. In case of appeals before the
courts, even the 30 days period is not available and recovery will be,
initiated immediately, according to CBEC circular issued some days back.
Particularly,
it is difficult for taxpayers to obtain a stay order within such a short time.
The irony is that the law itself permits the appellate authorities, both the
Commissioner (Appeals) and the higher authority CESTAT to hear a stay petition
within six months from the date of filing a stay appeal. There are various
other situations outlined in this circular, but the essence in each case is the
same-it all boils down to expediting recovery proceedings.
For
indirect tax matters, the taxpayer when filing a litigation appeal in parallel
also files a stay application. Prior to the issue of this circular, dated
January 1, 2013, which is addressed to the chief commissioners, the indirect
tax authorities did not resort to coercive action to recover the demand raised,
till the stay application was heard. This circular has also rescinded seven
earlier circulars, some of which were more beneficial to the tax saver.
This
circular will not only impact India Inc-both large and small entities-but will
also impact service providers and professionals that pay service tax. Bipin
Sapra, partner, Ernst & Young, said : "While this circular refers
specifically to excise, the procedure set out would be applicable to service
tax matters also." Today almost all services, apart from 17 exempt heads
under the negative list, such as school educational services, public transport,
healthcare, services provided by an individual
advocate
to other individuals, to name a few, are covered under the service tax net and taxed at 12.36%.
Ramifications
of this circular are wide, as the cash flow situation now arising owing to
prompt payment of service tax demand, may cascade down to consumers through
higher pricing.
Sunil
Gabhawalla, a chartered accountant, said : "The circular is draconian and
detrimental to the interests of taxpayers. Taxpayers will have to follow up
aggressively to ensure they get a stay within 30 days.
However,
if for instance, the Commissioner (Appeals) or the Tribunal bench does not hear
the matter due to huge pendency or non-availability of bench members, it may be
difficult to obtain the stay. Typically, even the government department
representatives ask for an alternative date for hearing of the stay application
which results in delays."
A
government official said : "This circular was issued after a Supreme Court
order. The Supreme Court in the case of Krishna Sales had observed : 'As it is
well known, mere filing of appeal does not operate as a stay or suspension of
the order appealed against'." He also added that taxpayers delay hearing
proceedings to buy time to pay the demands. An added procedural problem arises
for taxpayers.
"Once
a stay is obtained, refund will have to be given. However obtaining a refund is
time consuming. The circular will cause an added administrative burden to both
taxpayers and tax authorities," added Sapra.
During the first
half of the current financial year 2013-13, indirect tax collections had arisen
at a low rate of 15.6% to Rs. 2.17 lacs crore only. The government has fixed
the target of indirect tax collection, comprising customs, excise and service
tax, at Rs.5.05 lacs crore for the current fiscal.
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