SALES TAX LAW IN ASSAM

Dealers’ Accounts, Returns, Documents, Evidences Are To Be Treated As Confidential-Otherwise?

   The sales tax laws, currently operative in the State of Assam, are the Assam Value Added Tax Act, 2003 (VAT Act) and the Central Sales Tax Act, 1956 (CST Act). The former governs the sales and purchases of goods including the levy and realization of tax with other allied matters within the State of Assam, while the latter identically governs the sales and purchases of the goods made in the course of inter-State trade or commerce. Except some few provisions like registration, requirement of security, institution of case in the court of law, imposition of penalty, stock transfer and export of goods etc. all other provisions of the CST Act are governed by the VAT Act. A dealer, registered under the VAT Act and/or the CST Act, has to submit return in accordance with the provisions of said Acts in the prescribed manner after which, the taxing authorities of the State of Assam (the Assistant Commissioner of Taxes or the Superintendent of Taxes) takes up the proceedings for assessment of tax under the Acts, as detailed in the VAT Act. A dealer may at any time, require appearing before such taxing authority for the purpose of verification of the books of accounts with other documents and evidences. He may also require to appear accordingly for the hearing of the assessment proceedings and to produce the books of accounts, documents and evidences etc. pertaining to the return submitted by him for verification or examinations by the said taxing authority for the purpose of levy of tax with entertainment of the claims of sales made at the concessional rate of tax or for exemption of taxes, as the case may be.  If the taxing authority finds any disparity, discrepancy or irregularity in the books of accounts and it has the reasons to suspect that there was evasion of taxes, the said authority may seize such books accounts etc. assigning specific reasons to be recorded in writing and grant such dealer a receipt, pertaining to such seizure. Such seized books of accounts can be retained in the custody of the seizing authority for so long as it may be necessary, but it can not be retained beyond one hundred twenty days without the approval of the Commissioner of Taxes, Assam. No books of accounts can be retained by the taxing authority merely by granting a receipt without making any formal seizure and this may be counted as illegal and unauthorized possession.

The VAT Act provided that all particulars contained in any statement, return furnished or accounts or documents, produced by a dealer in accordance with the said Act or in any record of evidence given in the course of any proceedings under the Act (other than the proceedings in the criminal court), or any proceedings relating to the recovery of demand, for the purpose of the VAT Act, are to be treated as confidential and notwithstanding anything contained in the Indian Evidence Act, 1872, no court saves, as aforesaid, is entitled to require any Government servant to produce record or any part thereof or give evidence before it in respect. The said Act, however, relaxed the restrictions and laid down that this can be made available for the following purposes:

(i)for the purpose of any prosecution under the Indian Penal Code, 1860 or the Prevention of Corruption Act or this Act or any other law for the time being in force; (ii) for furnishing any particulars to the Government or person in execution of the VAT Act; (iii) such disclosure may be occasioned by lawful employment under the said Act or of any notice or the recovery of any demand; (iv) for any such particulars  to the Civil Court in any suit to which the Government, which relates to any matter arising out of the proceeding of the VAT Act; (v) any particulars to the officers, appointed by the Comptroller and Auditor General of India for the purpose of audit; (vi) to the authorities conducting the departmental proceedings against the taxing authorities; (vii) to the Central and the State Government authorities for the purpose of levy and realization of tax; (viii) to Bureau of Investigation (Economic Offence) and the Statistical authorities; (ix) to the Central Government for administration of any law in force in India and (x) for publication of any particulars of the dealers in the public interest. These restrictions and relaxations of the VAT Act as well will govern in the books of accounts, documents and evidences under the CST Act, as enunciated in the CST Act. The Act also provides in this context that if any employee of  the Government discloses any of the particulars, referred to the above, he shall on conviction be punished with imprisonment, which may extend to six months or with fine or both. Such prosecution is however, to be instituted without the previous sanction of the Government.

When in course of verification or examination of the accounts, a taxing authority is primarily convinced that there is any evasion of taxes or any attempt thereof or any misuse of the declaration issued or any false or fabricated documents and declaration were produced by him or there is any other violation of the provisions of Acts is there, the taxing he may  provide such dealer an opportunity to submit his written reply as well as of being heard, specifying the charges for institution of a case in the court of law or for imposition of penalty under the provisions of the Act. The offence may as well be compounded, if such dealer offers any prayer and subject to a mutual agreement, arrived between the two to a departmental compromise in this respect with quantum of composition money to be paid. This applies to the cases under the CST Act, which are governed by the VAT Act. There is, however, restriction in respect of the cases under the CST Act where restrictions are obviously there for imposition of penalty or compounding the offences. The institution of cases in the court of law is the ultimate course of action in such cases. In the case of institution of case under the VAT Act, previous sanction of the Commissioner is to be obtained, while previous sanction of the State Government is necessary in respect of the cases exclusively governed by the CST Act. However, before taking up any coercive measure, the assessment of tax is to be completed and the quantum of tax liabilities is to be ascertained. The contemplated penal measure is to be recorded in the said order in absence of which it may be construed that the latter action is product of after thought of the taxing authority.

         A news item pertaining to the evasion of taxes amounting to about ten crore of rupees by two dealers of Guwahati was published in a section of dailies at the instance of the taxing authorities of Guwahati stating , inter-alia, that Ezahars were lodged before the Dispur Police Station in that respect.  No good citizens will ever appreciate or encourage such tax dodging activities by any unscrupulous dealers and will always appreciate the coercive measures to be taken in this behalf in accordance with the provisions of the law enforced in this respect.  The following pertinent questions have dragged us to utter confusion :-

(a) Whether the delinquent dealers were provided with any opportunity of being heard for the alleged foul play adopted by them before lodging ezahar, as in the quasi-judicial proceedings it it seems to be very much incumbent?

(b) Whether they were informed of their additional liabilities to pay the evaded tax to the extent of about ten crore of rupees by serving the demand notice after assessment, which is the normal custom of the taxation department?

( c) Whether there has been any amendment of the VAT Act as well as the Central Act relaxing the mandatory provisions that the returns, accounts, documents and evidences submitted by the dealers before the taxing authority have ceased to be confidential making the same access to the police officers by way of filing F.I.R. under the Indian Penal Code ignoring or superseding the restrictions under the VAT and the CST Act, if already there?

As an officer working in the tax department for long thirty two years and enjoying more than 18 years of post retirement period, we are very much confused for adoption of such a way of action. We hope, the benign Government will kindly be pleased to clarify for our future knowledge.

                                                                                                                       
(Mrinal Kanti Chakrabartty)
R. G. Barua Road, Lakhimipath,Guwahati-781024

Taxation Department- Power Exercise Scenario (Upliftment of economy in a righteous way)

Appointment and Delegation of powers

 The tax administration of Assam was being carried on in a disciplined way within the ambit and competence of the taxation laws, operative in the State. There are as many as nine taxation laws eight of which were enacted by the State Legislature, while one being by Parliament. Each law plays the pivotal role towards the augmentation of revenue to the State Exchequer. The Commissioner of Taxes, Assam is the supreme authority for the purpose of administration of the taxation laws and is appointed by the Government of Assam for the purpose of carrying out the purposes of the Act along with the officials of different cadres right from the rank of the Additional Commissioners of Taxes to the grass root level, the Inspectors of Taxes, specifying the area of functioning in respect of each of the officers. The Commissioner is equipped with the supreme powers to carry on the administration of the Acts, while for the smooth conduct of the administration; he has been empowered to delegate his powers to the officers, appointed to assist him befitting to their status, subject to the conditions and restrictions, as envisaged in the Acts and the rules framed thereunder. It is the prerogative of the Commissioner to assign the powers, to detail the functions of the taxing authority to the best of his judgment in consideration of the knowledge of law, working ability and other allied factors. In the past, the posting of the officers in the important revenue areas were made in consideration of seniority and capability to run the revenue administration, beset with, the neck of proper collection of revenue including the arrear taxes as well as to prevent, detect and arrest the evasion of taxes by the tax dodgers. A dossier of the officers was maintained thereon. As the days are going on, such mode of consideration has been taken a good bye. In the past, the opinion and recommendation of the Commissioner in the matter of posting and transfer, used to gain priority, but now in reverse to that the political views and recommendation are gaining the momentum in many cases. The posting of officers in the check posts and other important areas depends on the choice of the officers and not in the interest of public service. Naturally, erosion has been taken place in the proper and zealous functioning and there has been gradual deterioration of the administration. The Commissioner sometimes fails to exert power and a set-back becomes obvious.

Duties and resposibilities

The duties and responsibilities of the taxation officers have been widely tabled. In a brief (i) an Inspector of Taxes is meant for survey, inspection, checking, preventing and arresting  the evasion of taxes, collection of particulars from different sources for the purpose of verification of the same in the field as well as to take note at the time of assessments of taxes, besides other allied works; (ii) an Assistant Commissioner of Taxes or a Superintendent of Taxes of the unit is responsible for registration of a dealer, for realizing security money to ensure proper payment of tax and proper custody of statutory declaration forms; to make assessment and realization of tax including the arrears taxes, inspection, checking  and detection of evasion of taxes; general supervision of administration in the area and other allied works; (iii) a Deputy Commissioner of Taxes of the zone is to supervise the works of the officers of the units in all spheres including inspection of offices, looking into the position and progress of  collection of revenue with arrears, chalking out special drive for collection of revenue including the arrear taxes and maintenance of liaison with the Commissioner of Taxes,(iv) Deputy Commissioner of Taxes (Appeals) is to function as the appellate authority against the order of assessment imposition of penalty, passed by the Assistant Commissioners of Taxes and the Superintendents of Taxes, when aggrieved by a dealer,. The powers and functions of the Deputy Commissioner (Appeals) are independent and he is not act  by virtue of the powers by the Commissioner, but under the statute of law; (v) Joint Commissioner of Taxes is to discharge the powers and functions, assigned by the Commissioner on different subjects, to make inspection of the subordinate offices, hear revision petition and other allied matters; (v) Additional Commissioner of Taxes is to render assistance to the Commissioner in different matters including inspection, general and law administration,  hearing of revision petition and other allied matters. Each of the officers except the Deputy Commissioner(Appeals), as stated above, is equipped with the powers, delegated by the Commissioner befitting to their status as well as in consideration of the administrative needs.

Enforcement wing

(Repeal Act)

An Enforcement wing was created in the taxation department in the year 1964 for the purpose of checking, preventing and arresting evasion of taxes. In fact, there was no specific provision in the sales tax laws operative in the State to create such wing at the relevant times and the same used to run as a matter of convention. The wing was centrally operated, being manned by one Assistant Commissioner of Taxes with numbers of the Superintendent of Taxes and the Inspectors of Taxes, subject to the supervision and control of the Commissioner of Taxes. An Inspector of Taxes was posted in each unit for the purpose of collection of information and to provide assistance in different aspects to the central wing. In 1967-68, the said wing was decentralized and each zonal Assistant Commissioner was entrusted to head the zonal wing in their respective zones with the Superintendent of Taxes and Inspectors of Taxes placed at his disposal. In the year 1981, in addition to the existing set-up, another Enforcement wing was created centrally under a Deputy Commissioner of Taxes with the numbers of the Superintendent of Taxes. There had been complaints at different corners about the mal-functioning of the officers of the central wing as well harassment to the traders. A section of traders and professional personnel were on the heels to abolish the Enforcement wing. They could manage the bureaucratic and the political set-up of the relevant time and succeeded to dismantle this important wing including the zonal level wings late in December, 1983. Instead of bringing the officers, alleged to have been involved in mal-functioning, to book, the abolition or withdrawal of the wing was unfortunate and was detrimental to the interest of the State revenue. The officers might be bad, but the aim and object of the wing was revenue oriented. The funniest part of thing is that, the Government did not revive the said organization during these long 31 year and encouraged a section of unscrupulous traders to move freely towards evasion of taxes.

(AGST Act)

Previously, four taxation laws in relation to the sale and purchases of the goods were operative, but the same were amalgamated, consolidated to give birth to a single Act, namely; the Assam General Sales Tax Act, 1993 (AGST) with effect from the 1st July, 1993. This Act empowered the State Government (Government of Assam) to constitute a Bureau of Investigation or Vigilance or Enforcement wing consisting of the Officers, appointed by the Government for the purpose of collection of intelligence, enquiry and investigation in connection with the evasion of taxes. A vigilance group was constituted by the Commissioner of Taxes and the officers comprising of such group, were delegated with the powers, but the same was not constituted by the State Government, as laid down. The officers entrusted in the group as well created some displeasure in the name of checking of evasion of taxes, which created out rage amongst the different section of tax payers.

(VAT Act)

The AGST Act was repealed and in its place the Assam Value Added Tax Act, 2003 (VAT Act) came into operation from the 1st May, 2005. In the said Act, a provision to create a vigilance wing was incorporated as well. Unlike the AGST Act, the power to constitute a vigilance wing was vested to the Commissioner, but such group is to be constituted out of the officers, appointed by the State Government to assist the Commissioner. The vital part of such appointment is that the territorial jurisdiction of the officers is to be specified in such appointment made by the Government. The constitution of the vigilance wing by the Commissioner, therefore, has a pre-condition that the appointment of the tax officers for carrying out then purposes of the Act must contain the territorial jurisdiction, as notified by the Government. While constituting such vigilance wing the Commissioner can not specify the area out of his own, but it is relevant to the appointment. Within five days of coming of the VAT Act into force, the Commissioner by a notification delegated his powers to a set of officers to exercise powers under the said Act. The salient feature of such delegation of power was that, it was not preceded by any notification pertaining to the appointment made by the Government with the territorial jurisdiction. The said notification seemed to be not proper in the eye of law. However, with the transfer of the entire group of the officer, this wing ceased to function.

The delegation of power, as stated in the pre-para included,  inter-alia,  the power to make provisional assessment, re-assessment on the escaped or evaded taxes, to undertake the special mode of recovery, to levy interest, to purchase goods in case of under valuation, to compound offence, to impose penalty etc. Actually, the doctrine of separation of power, as envisaged in the Constitution and the definition of the term ‘Superintendent’ left no scope for such delegation of powers of assessment, re-assessment, imposition of penalty etc. Apparently the said delegation of power suffered from shortfall and impropriety.

Functioning of taxing authorities without legal authority

Presently, there is no such vigilance wing, constituted by the Commissioner in the manner, discussed above. It has been, however, learnt that a set of officers are being detailed to roam and function in the matter of inspection of the traders’ business premises, godown, transporters’ godown premises, to make interception of the goods vehicles and inspection thereof throughout the State of Assam. No appointment of such officers under the Act with the territorial jurisdiction was made by issue of notification by the Government and no delegation of power was conferred by the Commissioner in this respect. This seems to be a unique way of functioning currently, where the legal provisions have been given a good bye and some unwritten jungle laws have been introduced.

We have full moral support to undertake checking activities with drastic measures against the tax dodgers, but as a retired officer of the taxation department having prolonged profound experience in the taxation department, we do not deem it proper to keep our eyes closed on such ways of functioning, having no legal base or entity. We have no other ways, but to express our views in writing no matter if it reaches to the deaf ears. The proceedings undertaken for registration, requiring furnishing of security, orders pertaining to assessment, re-assessment, rectification of assessment, penalty, compounding of offences etc. by the officers, suffer from immense lacunae and are found to be fallacious. There is no effort or endevour to make the new comers adequately trained up for want of requisite infrastructure, such as providing training, holding workshops etc.

Conclusion

The prosperity of a State largely and fully depends on the utilization and mobilization of the resources available at its disposal and to make proper use thereof. The revenue collection is always incremental, but the trend of evasion leaps no bound. Unless the tax machinery is active and sincere and moves in a proper and righteous way, the drainage of revenue will continue by way of tax dodging activities.

(Mrinal Kanti Chakrabartty)

       Guwahati-24