CBIC moving to set up large battery of lawyers to fight rising number of GST litigations

Central Board of Indirect Taxes & Custom (CBIC) has a new challenge on its hands, apart from collecting more taxes and prompting people to comply with the tax law. The new challenge is the increasing number of litigations, especially related to Goods & Services Tax (GST).

The good news is that CBIC is gearing up to put in place a large battery of lawyers to fight these cases.

“It has been deliberated that an increasing number of petitions related to GST and other taxation as well as policy matters are being filed before High Courts. Further, there is a growing trend of approaching High Courts directly, sometimes even against issue of summons, thereby bypassing the statutory appellate mechanism,” CBIC said in a communication to Principal Chief Commissioners, Chief Commissioners, Principal Director Generals and Director Generals.

Further it was mentioned that, for efficacious representation and defence, it was deliberated that the Department of Revenue should have a larger pool of resources in terms of a greater number of Counsels to appear in High Courts. All the officials have been urged to recommend “more Senior and Junior Counsels for handling cases of indirect taxation pertaining before High Courts and other fora.” The letter clearly says that names already recommended should not be sent again. Also, new names should be forwarded by March 31.

So, why’s there an increasing number of cases? Tarun Gulati, Senior Advocate in the Supreme Court feels the overly aggressive attitude of tax authorities seen over the last year has led to several unnecessary measures like demands being coerced without issuing show cause notices, making arrests to coerce recoveries, etc. “The tax payer has no resort but to approach courts. The abuse of powers and excessive use of it is so rampant that there is no option but to knock on the doors of the court,” he said.

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Smita Singh, Partner (Indirect Tax, Customs & Trade Group) with Singh & Associates, says input tax credit and the issue of fake invoices lately have been the biggest causes of litigation in the GST regime. Government officials have been swift in their attempt to nab taxpayers dealing in fake invoices or involved in huge tax evasion. To add to this critical aspect of GST is the power to arrest for the violation of GST laws.

“Section 133 provides GST officers the power to arrest a person in case he has reason to believe of any wrongdoing and tax evasion. Although such powers have been challenged by taxpayers through writ petitions, contrary views were expressed by the High Courts of Telangana and Bombay, and on appeal, the Supreme Court directed the constitution of a larger bench to decide the issue, which is still pending,” she said.

Further, she said that almost five lakh tax disputes are pending before courts, including before quasi-judicial authorities, valued at over ₹8-lakh crore, which may necessitate another Sabka Viswas Dispute Resolution Scheme only for old Custom, Excise and Service Tax-related cases. “For GST-related disputes, it is too early to expect amnesty schemes from the government,” she said.