The Hindu Business Line : Powering up the High-Power Committees

IT WAS Franklin Delano Roosevelt who said "We want a Supreme Court which will do justice under the Constitution, not over it. In our courts, we want a government of laws and not of men." It would not be an exaggeration to state that the Supreme Court of India has followed the first limb of the above quote in letter and spirit. Over the years, it has handed out landmark judgments on a wide variety of issues.

Tax litigation is probably as common as tax laws themselves. The tendency to cross swords with each other at the slightest provocation is inherent in both the Department as well as taxpayers. What is surprising is that this happens in many cases where the litigant knows that they are on a slippery wicket because of the availability of decided cases of the Supreme Court/High Court or clear guidelines/circulars. Frequent changes in tax laws have only added fuel to the fire.

High-powered committee

In 1994, the Supreme Court, in Oil and Natural Gas Commission vs CCE (1994 70 ELT 45), decided to make a beginning to minimise the itch with government companies to file appeals in a New York minute. The Supreme Court was deciding on the working of the High-Power Committees (HPCs) set up in Government with the express intent of preventing disputes. Since the HPC concept was new, it took time to catch on and the ONGC case gave the apex court an opportunity to further express its views on the HPC concept.

The court noted that the purpose of setting up the HPC was to ensure that as far as possible the controversies between ministries and public sector undertakings and between public sector undertakings themselves are resolved by recourse to the HPC and time consuming and expensive litigation avoided.

In an earlier judgment, the Supreme Court, quoting from the Chief Conservator of Forests vs Collector (2003 3 SCC 472) decision, had ruled that "no litigation should come to court or to a Tribunal without the matter having been first examined by the Committee and its clearance for litigation. Government may include a representative of the Ministry concerned in a specific case and one from the Ministry of Finance in the Committee. Senior officers only should be nominated so that the Committee would function with status, control and discipline" and that "all the matters pending as on today, either instituted by the Union of India or any of the public sector undertakings, shall within one month from today be referred by the appellant or the petitioner, as the case may be, to the High Power Committee".

The HPC is required to submit a half-yearly report to the Supreme Court on how it has fared during the previous six months.

The phrase that some people will never learn would apply perfectly to tax litigation. In Mahanagar Telephone Nigam Ltd vs Chairman CBDT (2004 267 ITR 647 SC), MTNL was given a show-cause notice (SCN) by the CBDT in the normal course. MTNL wanted to approach the court against the SCN. The court decided the issue on merits without clearance from the HPC. The HPC advised MTNL not to file a writ petition against a SCN.

The matter was dragged on to the SC which ruled that litigation should not be encouraged against an SCN. The HPC decision merely emphasises the well-settled position, and is an eminently fair and correct one.

The purpose of the decision was to prevent frivolous litigation and the rights of MTNL were not being affected. The Supreme Court clarified that MTNL could approach the courts against an appealable order and chided the court, for dealing with the matter on merits, and MTNL, for not maintaining discipline and wasting public money and the time of the courts.

Expand the scope

The apex court has taken a small step towards settling the mass of tax litigation in India. While this could reduce tax litigation of public sector undertakings, evolving a similar law for other taxpayers and the Department to deter them from getting into frivolous litigation may be worth the effort.

(The author is a Hyderabad-based chartered accountant.)

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