The Hindu Business Line : Collect taxes like the bee — gather honey from flowers without causing pain

REGARDING tax, sage Ved Vyas in his famous epic Mahabharat said thus: "State Tax be such which should not prove to be a burden on the subject; the King should behave like those bees which collect honey without causing harm to the tree."

Thus begins the verdict of Justice R. K. Agrawal of the Allahabad High Court in the Triveni Fuels case. If you're looking for a parallel of such a sedate start, the book Tax Law Design and Drafting, available on www.imf.org, has one in a chapter titled `law of tax administration and procedure' by Richard K. Gordon. It begins with the quote, though translated differently as, "The Ruler should act like a bee which collects honey without causing pain to the plant."

For those keen on tracing authoritative sources for the quote, Book 12: Santi Parva: Rajadharmanusasana Parva of the epic, available in translation on www.sacred-texts.com may help. "The king should take wealth from his subjects at the proper time... Like an intelligent man milking his cow every day, the king should milk his kingdom every day. As the bee collects honey from flowers gradually, the king should draw wealth gradually from his kingdom for storing it," is how Bhishma counsels Yudhishthira.

Beyond milk and honey, ancient wisdom fills in with the details too. Such as, the king should take note of the sales and the purchases, the state of the roads, the food and dress, and the stocks and profits of those that are engaged in trade, before levying taxes. "Ascertaining on all occasions the extent of the manufactures, the receipts and expenses of those that are engaged in them, and the state of the arts, the king should levy taxes upon the artisans in respect of the arts they follow," speaks of the present-day service tax, one might say. The king, may take high taxes, says Bhishma, but hastens to add that such levies should never emasculate the citizens.

"No tax should be levied without ascertaining the outturn and the amount of labour that has been necessary to produce it. Nobody would work or seek for outturns without sufficient cause. The king should, after reflection, levy taxes in such a way that he and the person who labours to produce the article taxed may both share the value. The king should not, by his thirst, destroy his own foundations as also those of others. He should always avoid those acts in consequence of which he may become an object of hatred to his people," is some more snatch from the sacred text on the ideal tax system.

Elsewhere in the Parva, there's an intoxicating analogy — that the king should always act heedfully (in the matter of levying his taxes) "after examining the incomes and expenses of his subjects like men repairing to a full-grown palmyra for drawing its juice". Pretty exciting to think that taxing can be as much fun as nectar and juice, but we may only end up sighing for what we may be missing now in our tax regime.

Returning to the bee quote and the case, the second para of Justice Agrawal's ruling reads: "The aforesaid golden words were reiterated by the famous economist and statesman Vishnu Gupta, popularly known as Chanakya alias Kautilya, of the Maurya period in his famous treatise Arthashastram written near about 320 BC. The aforesaid golden words, which fell from the pen of sage Ved Vyas and reiterated by Kautilya, are the foundation stone of State taxation in our country. However, while making the refund, this principle is conveniently forgotten by the authorities."

And there's more about what vexed the court: "How far the Trade Tax authorities can go in order to ensure that the target fixed for collecting the revenue in a fiscal year is achieved and they are not asked to give explanation for the shortfall, can be seen in the present case."

Hoping you would read the text of the judgment for further details let me wrap with just one more citation for the Kautilya lead, in case you'd like to pursue it. Balbir S. Sihag of the University of Massachusetts has written an article titled Kautilya on the scope and methodology of accounting, organisational design and the role of ethics in ancient India, available on www.findarticles.com. Sihag's piece cites `incentives to encourage creation of wealth in the private sector' that the ascetic adviser had spoken about.

For instance, Kautilya had recommended that anyone who brings new land under cultivation should be granted exemption from payment of agricultural taxes for a period of two years. Similar tax holiday from water rates was available for building or improving irrigation facilities. Kautilya had cautioned against too heavy taxation particularly in frontier regions, because "disgruntled taxpayers could flee to neighbouring countries".

Well, such fleeing may not be an option for most of us, though! But Boban had a different idea, as you'd know from the next case that came up before the Kerala High Court.

Toys in a toss

TRICHUR Traders, Kunnamkulam, filed a bill of entry for goods indicated as 3,600 pieces of toys packed in 50 cartons of 72 pieces each, adding up to 15,000 kg. When the Customs authorities in Cochin Port examined, they found the weight to be only 2,050 kg.

The Customs House Agent had produced the contents of container TEXU 2222222 for Customs examination in the guise of the contents of container IALU 1201439, but on further examination, it was found that the contents of the latter container were "7,80,000 batteries, 33,000 CF lamps, garments worth Rs 4,10,400 and 27 other items of assorted quantity having a value of about Rs 1,80,875."

The text of Justice K. T. Sankaran's decision notes that Boban, the first accused in the case, a businessman who had studied up to the tenth standard and `ignorant of the Customs laws', had admitted that three months earlier he had imported a container with CF lamps, batteries, garments and so on.

"He could not clear the same since they attracted prohibitions and high rate of duty. Therefore, he re-exported the same. Accused No 1 went to Dubai and again imported the same goods with the intention to get the same cleared by adopting dubious methods... Duty to the tune of Rs 3 crore has already been evaded by dubious acts of the gang... "

Cement in silos

IN THE Silos, cement is extracted with the help of an Aeration System. Aerated cement is extracted from a number of ports (Openings) in the bottom of the Silos, which are connected to the respective extraction zones. The sequence and the rates of Extraction system from the various zones of the Silos are programmed to optimise the homogenisation process.

It is observed that there is no chemical change in the cement inside the Silos. The cement is subjected to blowing of air through Aeration System in order to keep the cement in homogenous form which will facilitate easy flow and loading of cement into the bags. Thus it can be drawn that there is no manufacturing process involved in the plant. (Technical Committee's views cited in Ultra Tech Cement Ltd vs Principal Secretary Department of Industries and Commerce, Karnataka High Court)

Tailpiece

"I like to maintain arm's length relationship with people."

"With some, double that length may be necessary!"

Detaxification@TheHindu.co.in

D. Murali

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