Saturday, July 4, 2009


Tax dodging is a unique phenomenon to crush the economic discipline and austerity. Moved in an anti-clockwise motion in the normal and systematic way in the broad economic platform, a tax dodging activity can be well termed as a gross crime in the socio- economic scenario of national life. No applause or appreciation is ever hailed for such unhealthy, polluted, anti-social and anti-economic odds. A harmonious voice of condemnation is always warranted for such undesired workmanship. ‘Necessity is the mother of invention’- this symbolic gospel truth is always existent in the pre- concept of mind of the tax dodgers in the process. When any mal-activity is foiled, frustrated or apprehended, the tax dodgers search out new gallery to adopt new art of tax evasion. Tax dodging activities were very much in vogue in the ancient mythological era, it continues now and shall continue till eternity, of course, with some new, diverted or modified methods worked out in the formulated net-works. The tax dodging episode, in fact, is not a unilateral exercise. Some sort concurrence, connivance or collusion must be there at different angles more particularly with the tax machinery. The famous diplomat and economist of the Mauryya era Kautilya or Chanakya rightly recorded – “Thus, the king shall first reform the administration, by punishing appropriately those officers, who deal in wealth, they duly corrected, shall use the right punishments to ensure the good conduct of the people of the towns and the countryside.” This rigid view was, no doubt, a product of his valued experience and it obviously forms a guide line of the day in the field of economic regime.

In the British era, the tax measures in the States were adopted under the Government of India Act, 1935. Two tax laws, namely; the Assam Agricultural Income Tax Act, the Assam Sales of Motor Spirit and Lubricants Taxation Act were enacted in 1939 in Assam as the maiden venture to make yield of revenue. The tax law on the sales or purchases of goods - ‘the Assam Sales Tax Act, 1947’ came into force from 24.12.1947 in the post- independent period, while the Assam Finance (Sales Tax) Act, 1956 was enacted by the State Legislatures with the vested power under clause 54 of the State List in the Seventh Schedule of the Constitution of India, The Central Sales Tax Act, 1956, a Government of India Act, came into operation from 5.1.1957 under clause 92A of the Union List in the Seventh Schedule of the Constitution. The Central Sales Tax Act, 1956 still remains in force, while the sales tax laws enacted at different times, were repealed and ultimately the birth to the Assam Value Added Tax Act, 2003 took place from 1.05.2005. In fact, the State’s tax resources are generated from nine tax measures with the current tax yield of Rs. 3592.88 against Rs. 2864.44 in 2007-08.

‘Evasion and avoidance of tax are brothers twine’. When there is measure of tax, there is always attempt to evade or avoid tax. The traders try to derive extra fiscal benefits by adopting fraudulent means and thereby indulging the tax dodging activities. Tax collected on the sales or purchases of goods is an indirect one, and the burden of such tax ultimately falls on the consumers. A portion of the sale or purchase is not exposed in the books of accounts and is suppressed with result that the tax due is evaded. With the expansion of trade velocity and trade dimensions, the magnitude of evasion of taxes is gaining the momentum. In the present hi-tech era, the unscrupulous traders use to adopt a unique technique to evade tax through computer devises on which no easy access can be had by the tax machinery. Even odd transactions are removed from the computer at frequent intervals and restored in the C.D. to avoid easy reach of others.

The race of evasion of tax starts at the entry point and ends at the point of sales made to the consumers. Amongst innumerable ways, the import of goods in fake names with fictitious addresses, misclassification of the goods and suppression of sales in fraudulent way are prominently prevalent. A dearth of adequate preventive measures to arrest or avert the multifarious ways of evasion of taxes, has the consequential adverse effect in the revenue generation exercise. The check posts have not been equipped with skilled man- power, requisite amenities, facilities and other allied infrastructure. No compact/ comprehensive platform has been erected for inspection of the goods vehicles, unloading and verification of the goods as well as preserving the seized goods safely in a befitting manner. The lack of the officers’ sincerity, devotion and integrity is another reckoning factor. Pressure or influences at different angles in normal functioning of the officials with some ulterior motive behind, uses to demoralize them. Adequate counter-check in the way side, at the delivery point or at the godown is rarely undertaken. The race thus ends uninterrupted with a negative approach towards the State revenue making the State Coffer an utter victim.

The Value Added Tax (VAT) regime, currently operative in Assam, is a self-designed system of levy of tax with its self -steering wheels. The success in this revenue venture can achieve, only when (i) the traders ensure the correct and accurate maintenance of accounts initially by preserving purchase vouchers, issuing sales invoices, (ii) the interim purchasing traders and the consumers are alert against any foul play in the deals and (iii) the tax machinery keeps proper vigilance on different ways and style adopted for evasion of taxes. Any sloth, lapse or dereliction in maintaining rigidity, harmony, austerity, integrity and transparency, no doubt, pose to be a serious threat to the State revenue generation exercise. The paramount necessity of the day is that the concept of VAT should be made aware to all. The Government of India, of late, is contemplating to replace VAT, by ‘Service and Goods Tax’ from 1st April, 2010. It well construe that there is a ‘but’ in the operative VAT system.
The policy adopted by the Government of India to abolish central sales tax in a phase manner (the 50% of which has already been materialized), is nothing but an act quite detrimental to the revenue interest of the States. The austerity in fiscal discipline has already been cracked and it is likely to be demolished fully, when the policy to do away with the same, is fully implemented. A chaotic condition will be knocking at the door in absence of any liaison or co-ordination maintained in the inter-States deals including stock transfer or export. The scope for levy of consignment tax, as incorporated in the Union List (92B) of the Constitution in 1982, is yet to be implemented by a separate central enactment to avert or prevent any fake stock transfer.
within the ambit and competence. The taxing authorities, as appointed by the Government to assist the Commissioner are well competent to decide the merit of any such pertinent question of law and any imposition made at any corner on the statutory power exercise scenario seems to be an overlapping of jurisdiction or intervening of the powers. The unfortunate part of thing is that even though the Commissioner is said to have directed the taxing authorities to imposed VAT on purchases of Flat with a retrospective effect from May, 2005, that is, from the date of coming into force of the VAT Law in Assam, he has not equipped the taxing authorities, namely; the Assistant Commissioners of Taxes and the Superintendents of Taxes to exercise the powers for registration of the dealers liable to pay tax under the VAT Law, to make assessments of tax to the dealers (except the power of self- assessment) and other allied important powers in the day to day administrative scenarios. The officers, on the other hand, are either without having being unaware of this vital requirements or without being conscious at all on the consequential effect on such unvested power exercise, keen to exercise such unvested powers in the course of their routine course of action presumably without any conviction of mind that the whole administrative system will be paralyzed. When it is well settled from the above concept of law that Flat is not a moveable property and out side the definition of goods, the scope for levy of tax on Flat purchase is not there.
The definition of goods, inter-alia’ laid down that all materials (whether as goods or in other forms) involved in execution of works contract are goods. If the construction of Flats are constructed through the contractors, naturally, the transfer of property in goods involved in such works contract is covered by the definition of sale, which has its obvious Constitutional footings with proper authority of law and the levy of tax on such goods is well attracted. The promoter of the Flats, however, generally come up with strong plea that they construct the Flats out of their own and the question of execution of works contract does not crop up. The actual state of affairs will come to the light on the nature of contract in course of scrutiny and examination of the contract deeds executed between the land ‘owner and the promoter’ and ‘the promoter and the flat purchasers’. It can not be fully agreed that the promoters alone play the pivotal role in the entire Flat construction exercise and there may be some agencies as well to act as contractors. That will be a product of investigation and vigilance. The taxing authorities, it is presumed have the access to some investigation and vigilance.
The materials used or utilized in connection with the construction of Flat are, no doubt, out of the purchases made locally or in the course of inter-State trade or commerce. The taxing authorities have the power to examine the documents and evidences to ascertain whether VAT has been charged against such purchases of goods by the sellers to proceed with as part of duty to ensure charging, payment and levy of tax properly, when such purchased of materials relates to within the State of Assam. If any such goods, covered by the Schedule of the Assam Entry Tax Act, 2008 are purchased from places out side the State of Assam for use or consumption, the taxing authorities have full power to undertake operation in the matter of deciding the liabilities under the said Act and to ensure proper levy and collection of tax. The taxation laws have provided ample powers to the taxing authorities, but such powers are to be exercised within the frame-work of law. Any powers exercised arbitrarily beyond the ambit and competence invites controversy and naturally a catastrophe in the revenue earning exercise becomes inevitable.

(Mrinal Kanti Chakrabartty)
“Rudra Bhawan”
R.G. Barua Road, 10-Lakhimipath,Guwahati-781024
(0361) 2457734