The return of the Revenue Raj

Amidst the complexity, anomaly and litigation surrounding indirect taxes, there comes a controversial circular dated January 1, 2013, from the Central Board of Excise And Customs, directing departmental officers to recover confirmed demands during pendency of stay applications. The circular overturns seven previous circulars on the issue and stipulates recovery of confirmed demands when stay applications are not disposed within 30 days of filing before the Commissioner (Appeals) and the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). Moreover, where stay applications are filed before the High Courts and Supreme Court, the 30-day period is unavailable and recovery can be initiated immediately after the order.

What comes as a surprise is that the CBEC relied on the two-decade-old Apex Court verdict in the case of Krishna Sales Pvt Ltd in issuing the circular. That case pertained to the limited aspect of release of goods detained at customs, and has no direct bearing on the context in which the current circular has been issued. The CBEC has ignored a plethora of verdicts from various Tribunals, High Courts and the Apex Court which, over a period of time, categorically held that assessees cannot be punished for matters that may be completely beyond their control (listing/ hearing and grant of stay by the Tribunal/ courts). The circular goes against the practical aspects of indirect tax litigations and the law laid down by courts over the years.

However, it is heartening to note that the High Court of Andhra Pradesh has issued an interim stay on recovery proceedings or coercive action by the department, albeit with limited application to the assessee’s case.

The circular lacks foresight and is, without doubt, out of sync with reality, as the appellate authorities are flooded with huge volumes of stay petitions. It is practically impossible for appellate authorities to hear all stay petitions within 30 days of filing and pass orders on them. The circular leaves assessees in a hapless situation, forcing them to approach the High Court every time the department lands at their doorstep with the recovery notice. This, in turn, will swamp the courts with new petitions.

The Goods and Services Tax is waiting in the wings and the country is looking forward to an indirect tax regime that can be a win-win for both the department and assessees.

However, in its eagerness to resolve the issue of recovery of dues, the CBEC appears unmindful of the newer set of issues that could crop up. The best way forward would be to re-examine the circular and amend the recovery principles to ensure the assessee does not face undue harassment or injustice.

Vivek Pachisia is Tax Partner, Ernst & Young

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