AUGUST 23, 2019

By R Sridhar, Consulting Editor, TIOL

THE recent Circular of CBDT referenced as No. 17/2019 dated 8 August 2019 enhanced the limits for filing appeals in Income Tax matters before higher forums such as ITAT, High Courts and Supreme Court. It is important to appreciate that limits are being revisited with adequate time intervals bearing in mind relevant considerations. The Central Board of Indirect Taxes and Customs raised the limits for Central Excise and Service Tax legacy matters also vide its Instruction dated 22 August 2019 to the same monetary level as in Income Tax.

While the above is appreciated and acknowledged, it is pertinent to compare the exception to the monetary limits for appeals laid out in the Central Excise and Service Tax and the Income tax side. In this regard, it is the objective of this article to draw reference to certain differences in the approach adopted by the respective wings of the GOI. One important aspect such as audit objections which appear to be treated differently between the CBDT and CBIC is discussed below.

Audit objections accepted,

While the CBDT Circular mandates have (3 of 2018 dated 11 July 2018 read with amendment of August 2018) laid down that monetary limits will not apply to cases where a) Constitutional validity of provisions of the Act or Rules is under challenge b) where Board's instruction, order or notification or Circular has been held ultra vires c) where Revenue Audit objections have been accepted by the Department d) where additions relate to undisclosed foreign assets/bank accounts e) where addition is based on external information from agencies of the Government and f) cases where prosecution has been filed by the Department and is pending in appropriate forum. Strikingly similar is the CBIC Instruction F.No.390/Misc./163/2010-JC dated 17 August 2011 as updated by December 2015 instruction, as regards points a, b noted above. However it appears as regards Audit objections, the CBIC in the above instruction of August 2011 vide para 1.4 (Questions in tabular format) has indicated that even Audit objections accepted by the Department will be subject to the monetary limits while filing appeals before higher forums such as CESTAT, HC and SC.

Audit objections character in Excise and Service Tax and Prayer to CBDT

It is pertinent that in the erstwhile regime (Excise and Service tax) the assesse apart from handling and replying to internal audit objections of the Department also used to reply to revenue audit objections as and when the respective Range/Division forwards the same for assessee comments. Invariably disputes arising out of audit objections were important quantum in total matters litigated. Considering that the CBIC had accepted that appeals for audit objections accepted should be screened for monetary limits, it is humbly prayed, that the CBDT adopts the same approach.

The above derives importance in the light of the observations of the Hon High Court of Bombay order in the case of CCE Vs Techno Economic Services Pvt. Ltd. - 2010-TIOL-464-HC-MUM-CX wherein the Hon Court had desired that CBEC consider issuing Circular, on the lines of circulars issued by the CBDT, so as to reduce litigations arising out of indirect tax litigations. Considering that the Hon High Court desired uniformity, the same would equally apply to exceptions being carved out also.

Application of CBIC Board Instruction 22 August 2019 to Customs matters

While the Board Instruction dated 22 August 2019 relates to Excise and Service Tax matters, the earlier instruction F.No.390/Misc./163/2010-JC dated 17 December 2015 also applied to Customs matters. Considering this, a new instruction for Customs matters on monetary limits may be issued to maintain consistency.

Context under GST -Section 120 of the CGST Act

The CGST law provides that on the recommendations of the Council the Board may fix the monetary limits for filing appeals as it may deem fit from time to time. The CBEC instruction issued on 22 August 2019 pertains to appeals under the erstwhile regime and considering that litigation will arise in the GST regime also, a suitable limit under the law maybe fixed by the Council for Revenue appeals considering that filing of Annual Returns for 2017-18 date is fast approaching.

Litigation Policy - Under GST and Prayer

It is pertinent at this stage to refer, to the Circular F.No.390/Misc./163/2010-JC dated 20 October 2010 (under erstwhile regime) which elucidates the following

"The National Litigation Policy formulated by the Government of India aims to reduce Government litigation so that the Government ceases to be a compulsive litigant. The purpose underlying this Policy is to ensure that valuable time of the Courts is spent in resolving pending cases and in bringing down the average pendency time in the Courts. To achieve this, the Government should become an "efficient" and "responsible" litigant.

2. Accordingly the Policy lays down, inter alia, that in Revenue matters appeal shall not be filed if the amount involved is not very high and is less than the monetary limit fixed by the Revenue authorities. It also states that appeals shall not be filed if the matter is covered by a series of judgments of the Tribunal and the High Courts which have held the field and have not been challenged in the Supreme Court. The Policy also lays down that no appeal shall be filed where the assessee has acted in accordance with the long standing practice and also merely because of change of opinion on the part of the jurisdictional officers."

Prayer

It is important therefore for the GOI and States to take up the same before the GST Council and adopt a similar policy relevant to the current times. It is of particular significance to note the last 3 sentences of point 2 referred in the 2010 Circular.This is in the light of clarification Circulars being issued under the GST regime in areas/issues such as a) Post Sale Discounts, b) Taxability of Miscellaneous services inextricably linked to the principal exempted service of Transmission and Distribution of Electricity, which upstages all long standing practices followed by assessee and accepted by Revenue.