ABSTRACT: We may always wonder as to why we need any kind of a dispute mechanism. The simple answer would be just because of the reason that when anything involves the opinions and viewpoint of more than one person, there is always a difference of opinion, no matter what. To resolve these disputes in a fair and just manner, there is always the requisite of a body or authority. This necessity has paved the way for such dispute mechanisms worldwide that revolves around resolving the grievances that arise between two or more parties. When the parties are still not satisfied with the decision of the adjudicating authority, then arises the need of an appellate authority, as the right to appeal is a statutory right.
The objective of this paper would be to critically evaluate the model of appeal, review and revision under the GST Act, analysing the current method adapted and is at apt at this point of time and as well as is it future proof or are there any changes that are needed to the current model.
Introduction:
GST is a form of Indirect Tax, levied on manufacture, sale and consumption of goods as well as services at the central level that embodies several tax categories such as the service tax, excise tax, entry tax, etc. GST registration has been made compulsory for establishments having a turnover of more than 40 lakh rupees and in special category states, the said amount is half of the same, i.e. 20 lakh rupees. Registration is not an option, but all sellers are bound to register themselves under this single tax scheme, as it puts an end to several complex process of tax returns. The whole process is also environment friendly because of the fact that the entire process happens online and after successful registration, there will be a unique 15 digit PAN based alpha numeric number called as the GSTIN which is the Goods and Service Tax Identification Number. This number helps in identifying the specific business as it is unique to that region.
Under GST, the legal disputes are usually rooted in two obligations, one being Tax-related and the other being Procedure-related. When there are such obligations, the same are usually verified by a qualified GST officer during audits, examination, which is not a new thing in Tax laws. In the case when it appears that there is a dispute arising out of the same, the same is taken up by a departmental officer, which is a quasi-judicial process and the is initiated before the department and the same results in an initial order, which is also termed in many ways as the assessment order, adjudication order, order-in-original, etc.
There are also restrictions that are applicable on appeals in cases such as when the order is with respect to transfer the proceedings from one officer to another officer, when the order allows the payment of tax and other monies, sanctioning of prosecution under the Act and so on. But in all the other cases, there is always a provision for appealing to the First Appellate Authority.
Dispute Mechanism:
We may always wonder as to why do we need any kind of a dispute mechanism. The simple answer would be just because of the reason that when anything involves the opinions and viewpoint of more than one person, there is always a difference of opinion, no matter what. To resolve these disputes in a fair and just manner, there is always the requisite of a body or authority. This necessity has paved the way for such dispute mechanisms worldwide that revolves around resolving the grievances that arise between two or more parties. When the parties are still not satisfied with the decision of the adjudicating authority, then arises the need of an appellate authority, as the right to appeal is a statutory right.
Right’s under law:
Under the Code of Civil Procedure, 1908, the substantive right to Review is provided to be exercised under certain circumstances of Section 114 and in simple words, a Review means carefully looking into, a reconsideration or a revision, which is usually done by the same court. Similarly, the revisional jurisdiction is defined under section 115 of CPC and involves the re-examination of a case and the power of revision lies in a court that is superior to the court that had decided the case earlier. Whereas, an Appeal even though not defined in CPC, in simple terms means the continuation of the original proceedings before the superior court and arises soon after the pronouncement of a judgment.
As the right to appeal is a statutory right, when Law imposes obligations it is highly necessary that there should also be an appellate authority to appeal against the adjudicating authority. In the case of Tax Laws, these obligations can be broadly classified into tax related and procedure related. The Appellate Authority follows the principles of natural justice and is authorized to pass an order modifying or annulling the decision or the order which is appealed against, but it shall not refer the case back to the authority that had passed the initial order. Such order should also be a “speaking order” as well.
One Nation, One Tax:
The year 2017 witnessed one of the biggest and the most important economic reforms in the nation which was received with open arms. With the intention of simplifying the tax regime, the Goods and Services Tax (GST), that was a long pending idea which was proposed almost two decades ago and forgotten in the pipeline, which after a lot of debates and oppositions was finally implemented with effect from the 1st of July. GST was widely announced as ‘one nation, one tax’ by the government.
Being the fact that the main motto behind the implementation of GST was to make things simpler and transparent, it was still bombarded with various new challenges in almost all aspects relating to documentation, tax rates, unclear complex transactions and so on. The notifications and clarifications issued by the authorities expeditiously helped resolve a huge number of issues quickly.
GST brought along with it several benefits such as providing a wider tax base, rationalizing the tax structure, elimination of multiple indirect taxes and harmony between the central and state administrations. It was also appealing, as the essential items like food and medicine were made tax free, i.e. no GST was implied on them.
Appeals under GST:
GST that is implemented in our country is a dual GST and as such, when a person or even when the authority is not satisfied with the decision of the lower authority, there is always an appealable authority which goes from the bottom to the top starting from the Adjudicating Authority to the Appellate Authority and from there to the Appellate Tribunal and at last to the High Court and finally the Supreme Court. This is the common hierarchy when there is a dispute under the GST regime.
Even though the GST Appellate Tribunal (GSTAT) is the second forum for GST disputes, in the case of dispute between the center and the state, it would be the first and for holding a trial, as per the Code of Civil Procedure, these appellate tribunals are vested with similar powers to that of a Civil Court.
The National Bench at New Delhi constitutes of a National President, who is the Head along with two Technical Members, one from the state and another from the Centre. Under this would be the Regional Benches, further divided into State and Area Bench. The number of Area Benches that can be constituted is not limited. For revision of any order, the time limit is fixed to three years from the date of passing of the original order, which can be relaxed further due to certain circumstances.
Chapter XVIII of the CGST Act provides for an appeal and review mechanism for dispute resolution under the GST regime and Section 107 of the GST Act deals with the provisions of appeals to the appellate authority. When a person feels that he is not satisfied with the decision given by the Adjudicating authority, he can file an appeal for its revision within a period of three months by filing the same in the prescribed format, citing the grounds for the same.
Aggrieved by the order passed against him by an adjudicating authority, any tax payer or an aggrieved person can make an application in FORM GST APL-01 along with necessary documents and deposit the admitted amount along with 10% of the disputed amount and submit it to the Appellate Authority within three months from the date of communication of the decision or order. Payment of the above said amounts is also considered as a stay on the recovery proceedings as well. In the event when the Commissioner himself wants to satisfy with the legality of any order or decision, an application may be filed to the Appellate Authority under FORM GST APL-03, within six months from the date of communication of the decision or order. The Appellate Tribunal also has the option of refusing an appeal in the primary stage itself. According to Section 121, there are also certain decisions and orders that are non-appealable.
The jurisdiction for further appeal of the orders passed by the appellate or the revisional authority lies with the National or the Regional Bench of the Appellate jurisdiction and here, the time limit would be three months and filed as per FORM GST APL – 05 as prescribed under rule 110 of the CGST Rules, 2017. Starting from the date of communication of the order or a decision, the revision of the same cannot be done within seven months or after three years from the date of Communication of the order. Similarly, further appeals to the High Court needs to be done within 180 days, but the Hon’ble Court also has the powers to condone delays if any.
In an interesting development, in September 2019, the Madras High Court had also held that constitution of the GST Appellate Tribunal, which would be a quasi-judicial body, to be Unconstitutional (in the current format), stating that keeping in view of the primacy of the judicial members, the number of technical members cannot exceed the same.
In the event of whenever there is a decision passed by the adjudicating authority and the person feels that he is aggrieved by that order or decision, there is always an option to appeal against the same under Sec 107 of the act. Any individual can file an appeal in the form GST APL-01, under Sec 107 (1) within a period of 3 months starting from the date on which the said decision or order was communicated to him and the duration for the department to file an appeal would be 6 months and the same needs to be done under Sec 107 (2) in form GST APL-03. Along with the said time limit, under certain satisfactory conditions, the delay to file an appeal may be condoned up to a period of one month in both the cases. To facilitate the parties, there is also an option to file the appeal through electronic medium as well.
When the order or decision is passed by the Deputy Commissioner, the Assistant Commissioner or the Superintendent an appeal lies before the Additional Commissioner and whereas if it is against the order of the Additional or the Joint Commissioner, then the appeal comes to the Commissioner. According to Sec 107 (13), usually an appeal is decided within a year as there would not be more than 3 adjournments granted. This timeline is excluding the duration of any stay by any court or tribunal.
It is also to be noted that there are also some decisions or orders as provided for in Section 121 that are not appealable. After inquiry, the earlier decision passed by the authority can be confirmed, modified, or annulled, and the same needs to be communicated to both the parties, i.e. the appellant and as well as the respondent and as well as the jurisdictional Commissioner. But under any circumstances, the appellate authority is bound not to refer the case back to the authority which had passed the earlier order.
Suppression:
In the event of tax evasion, suppression of facts, short payments, late or non-filing of taxes, such offences are dealt strictly, and penalties are imposed with the intention of reducing corruption and as well as collecting the taxes effectively. In the case of not providing or maintaining accurate information, it may also result in the inspection of the location and as well as seizure. It may also result to arrest and prosecution. Whereas mere inaction or non-disclosure of facts without any deliberate intention[1] or omission to provide correct information which was not willfully done to evade duty[2] or in the event of not disclosing the facts that are not required[3] or when the department is always aware of the said facts[4] does not amount to suppression.
Review:
In the event when the Department feels that the decision or order passed by the primary or the initial adjudicating authority of the appellate authority is in dispute, then it can file a Review application/appeal. In the event if the Commissioner reviews and feels that the order passed by the authorities in not proper, he would pass necessary orders mentioning the grounds and the subordinate would be directed to file an appeal before the appellate authority. In the event if the order of the appellate or the revisional authority is reviewed, then the subordinate would be directed to file an appeal before the Tribunal. The time limit to review an order and filing of the appeal by the subordinate is six months from the date of communication of the order.
It was held in several cases[5] that the Commissioner had no power of condonation beyond the statutorily prescribed period for filing the appeal[6] and even one day of delay also cannot be condoned[7]. As the authorities are created by the Statute, they do not have the power to condone the delay by applying the limitation act until and unless the statute empowers them to do so[8].
Revision:
Sec 2 (99) of the act defines Revisional Authority and in the event the authority feels that the orders passed by its subordinate is erroneous, Sec 108 of the Act authorizes the authority to call for and examine the orders and decisions passed by the subordinates. An order cannot be revised if it has been already appealed for before the appellate authority or the tribunal or the High Court or Supreme Court. It cannot also be revised if it is already subjected to a revision earlier.
Authorized Representative:
To appear before the authorities such as the GST officer, the appellate authority and as well as the appellate tribunal, a person can authorise a representative to appear or represent on his behalf. Broadly, an authorised representative can be a relative, a regular employee, an advocate, a chartered accountant or a cost accountant, a company secretary, a GST practitioner, a retired officer of the Commercial tax department who has completed more than a year after his resignation or retirement and so on. Until and unless the above said persons are not barred by law, they can act as an authorized representative.
Jurisdiction:
The tribunal is a two-tiered structure, consisting of the National and Regional benches, and the State and Area Benches to hear appeals against the orders passed by the appellate or the revisional authorities. The National or the Regional Benches can hear appeals in cases, where one of the issues involved relates to the place of supply and in the rest of the cases the State or the Area Benches shall hear appeals have the jurisdiction to hear appeals.
When there is a substantial question of law, an appeal can be filed before the High Court as per Sec 117 of the CGST Act 2017, within a period of 180 days starting from the date of the receipt of the order appealed against before the State Bench or the Area Bench of the Tribunal and in the event when an order is passed by the National or the Regional Bench, the appeal lies to the Supreme Court.
Hierarchy:
The order in which the appeals are needed to be filed and the authorities they lie to along with the relevant sections are as here under:
Appeal
Order passed by
Appeal lies to
Under section
1st
Adjudicating authority
First appellate authority
107
Revision powers of the Commissioner
108
2nd
First appellate authority
Appellate tribunal
109-110
3rd
Appellate tribunal
High court
111-116
4th
High court
Supreme court
117-118
Confusions:
It’s almost three years since the implementation of GST, but still there are a lot of confusions between the tax payers and the authorities and it is not uncommon to have a difference in opinion when there is a new law and as well as due to the reason that there were also some flaws that were rectified at a later stage, still there is a lot of disputes that have been raising in numbers day in and out.
Recently because of the reason that as the appellate authority did not have further remedies with the appellant and as such as the cases were pending for more than one year, which is against the provision of section 107(13) and also as because in some cases the appellant is left with no option as the Appellant tribunals are not operating, the CBIC had issued an order in Order No.9/2019-Central Tax, on 3/12/2019 and again a circular has been issued very recently on 18/3/2020, in Circular No.: 132/2/2020-GST, as per which, as the appellate tribunal had not been constituted in view of the order by Madras High Court in case of Revenue Bar Assn. v. Union of India and therefore the appeal cannot be filed within three months from the date of communication of the order.
Hence, as of now, the prescribed time limit to make application to appellate tribunal will be counted from the date on which President or the State President enters office, which means that as of now, the time limit for filing an appeal against the first appellate authority is not yet specified and as such it would be extended until the appellate tribunals are constituted and till then the circular holds good. But in the case of extreme emergency when there are enough grounds, the only option is that of an appeal to be filed before the High Court by way of a Writ. Even though a Writ or an SLP is filed, it is still necessary to file an appeal before limitation as it may get time barred[9].
Advance Ruling:
An advance ruling brings a certain level of confidence in the applicant as it helps the applicant in planning his activities well in advance, which are liable for payment of GST. Another good thing about the ruling given by the Authority of Advance Ruling is that it binds both the parties, i.e. the applicant and the Government authorities as well. This concept, which was earlier introduced in the Income tax law was later introduced to the indirect tax due to its high admiration. This process also helps in boosting the confidence of the investors who are a bit concerned about the litigations as they have a clear picture in respect of the complex provisions of tax laws.
Authority for Advance Ruling (AAR):
In India, the Authority for Advance Ruling (AAR) works as a separate quasi-judicial independent body and in the event when there is ambiguity, Advance ruling helps in providing relief from litigation that might cost huge amount of penalties and interests, by avoiding future disputes. The provisions for Advance Ruling are governed by the Sections 95 to 106 of the CGST ACT, 2017.
Initially, an application is made to the Authority for Advance Ruling (AAR) which is in every state and comprises of one member each of CGST and SGST, who are appointed by the Central and the State Government, respectively. To make an Application for Advance Ruling under GST, the registered person needs to deposit a fee of Rs. 5000 and apply through Form No. ARA01.
An Advance ruling is applicable for:
(a) classification of any goods or services or both.
(b) applicability of a notification issued under the provisions of this Act.
(c) determination of time and value of supply of goods or services or both.
(d) admissibility of input tax credit of tax paid or deemed to have been paid.
(e) determination of the liability to pay tax on any goods or services or both.
(f) whether applicant is required to be registered.
(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.
The authority also saves a lot of time as it gives a speedy disposal by pronouncing the decision within a period of 90 days from the date of receipt of application, but in the event of a question that is already pending or decided in any proceedings under any provisions of the act, the application for Advance Ruling will not be admitted.
Appellate Authority for Advance Ruling (AAAR):
In the event of grievances in the decision passed by the Authority for Advance Ruling, the appeal lies in the Appellate Authority for Advance Ruling (AAAR) which also is located in every state and comprises of the Chief Commissioner of CGST as designated by the Board and the Commissioner of SGST having jurisdiction over the applicant.
The aggrieved party, i.e. the applicant or concerned or the judicial officer needs to appeal before the AAAR within a period of 30 days from the date from when the dater of communication of the order by the AAR by depositing a fees of Rs. 10,000/- through Form-ARA-02. There is also a delay condonation up to a period of 30more days on satisfactory. In the event if the appeal is filed by the concerned officer, no fees needs to be deposited, but the same needs to be done upon Form-ARA-03. Even in this case, the order would be passed within 90days from the date of appeal being filed.
In the event of a difference of opinion between the members of the appellate authority, no advance ruling can be passed in respect of that question under appeal and in the event if there appears an error on the face of the record, both the authorities have vested powers in them to amend their respective orders within a period of six months from the date of order.
Applicability of Advance Ruling:
Even though the rulings passed by both the authorities binds the applicant and as well as the concerned/judicial officer, the same would not be binding on others who are third parties, but the facts arrived can be used as a guiding principle. An Advance ruling is held to be void or ab-initio in the event if it is discovered that the order was obtained by way of fraud or suppression/misrepresentation of facts the order.
Taxes, both direct and indirect are very crucial for the economy of any country. Coming to India, contrary to GST which was an Indirect tax, levied on manufacture, sale and consumption of goods and services, which was implemented in India from July 2017, Income tax is a direct tax that is been in place since a very long time. It is levied on the income of the person. If a person makes income from India and is a not a resident of the country, still he is liable to pax taxes for the income made in India. Apart from one similarity between the two that they both are borne by the consumer, there are a lot of differences between them.
Comparison between GST and Income Tax:
GST
Income Tax
Indirect tax
Direct tax
Levied on consumption
Levied on profit/income
Returns are filed monthly/quarterly
Returns are filed annually
Has five slabs
Has Seven slabs
Can claim refund
Cannot claim refund
General period of limitation for review of a GST return and raising of a demand is 33 months, and the period of limitation for issue of an order is three years from the due date for furnishing of the annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to.
Required to be completed within 12 months from the end of the relevant financial year and is extended by 12 months in transfer pricing cases.
GST laws provide for imposition of penalties in case of non-payment of tax, or short payment, or erroneous refund, or wrongful availment or utilisation of input tax credit.
The tax authorities may impose a penalty in case of under-reporting of income or in case of misreporting of income by a taxpayer in the tax return.
The penalties are calculated as a percentage of the tax amount due to be paid to the government. Depending on the nature of contravention or violation, the penalty amount ranges from 10 per cent of the tax amount to an amount equal to the tax due, namely, 100 per cent of the tax amount.
Under-reporting of income is 50 per cent of the amount of tax payable on the under-reported income. The penalty amount for misreporting of income is 200 per cent of the amount of tax payable on the under-reported income. Similarly, the penalty amount for non-withholding or non-payment of tax withheld is 100 per cent of the amount of tax not withheld or paid. Penalty for offences related to not furnishing returns and not complying with notices can be up to 10,000 rupees per offence.
The tax dispute first arises before the tax authority, which acts in a quasi-judicial manner. It acts as both investigator and adjudicator. The powers of the first appellate body are co-extensive and coterminous to the primary tax authority. The second appellate forum is also a quasi-judicial one - the Income Tax Appellate Tribunal (ITAT), where the appeal is heard in a manner like that of a civil court. The next two appellate fora, the High Court and the Supreme Court, are formal civil courts that deal with only those matters that involve a substantial question of law.
The dispute is first adjudicated before the Adjudicating authority. In case of an appeal, it is brought before the First appellate authority and then the Appellate tribunal.
When there is a substantial question of law, an appeal can be filed before the High Court as per Sec 117 of the CGST Act 2017 and the finally the Supreme court
As the Income tax department and the GST authorities would be sharing data, to counter the anomalies and mismatches between the GST returns and the Income Tax Returns, it has made business persons to make sure that they maintain their records in a transparent way that their IT and GST returns correlate, as any mis match would certainly attract severe legal action.
Amnesty scheme:
The recent Amnesty Scheme announced by the Kerala and the West Bengal Government is a laudable step in order to decrease the litigations along with recovering of the arrears long pending under the earlier several forms of taxes such as the VAT, General Sales Tax Act and several other taxes. This scheme allows the waiver of the interest and penalties and is applicable for pending tax arrears including cases and appeals. This is a win-win situation for both the tax payer and as well as the authority as the disputes can be settled amicably and the tax payer is saving a lot of time and money as there would be no further litigation and as well as the penalties and interest are waived off and even the authority generates huge revenue instead of long pending appeals and unrecovered pending dues.
Such well thought schemes are certain to work towards reducing the huge load of appeals and disputes pending before the appellate authorities. As such it would be highly commendable if all the states bring out such schemes so that tens and thousands of cases and appeals leading to blockage of revenue chocking the tax authorities and as well as causing great loss of valuable time and energy of the adjudicating authorities would be decreased to a major extent if not completely cleared off. This would be generating a lot of revenue to the tax authorities as well and there would be further clarity in future litigations if any as they would be coming under the new GST regime.
Conclusion:
India is a big nation consisting of 36 entities (28 states and 8 union territories) and having a population that is about to reach 1.4 billion by the end of the year. For such a big place, it is equally hard to apply one single concept across the nation as several states would have several political issues before implementing a single concept that would bring all of the entities under a single umbrella due to the political seesaw prevailing widely and the raising opposition, without understanding the true outcome.
GST is a well thought and developed concept and since its first implementation in France in the year 1954, almost 160 countries have adopted the same in one form or the other because of the fact that it would be applicable across the nation uniformly. GST also helps in eliminating tax on tax i.e. double taxation. I do not mean to say that GST has become a fool proof idea or neither a vague one. But at this point of time, as it’s a fairly new concept that has been implemented throughout the country and as all new things are not perfect at the very first instance and there is always some or the other thing that needs to be attended, similarly there are still some flaws that needs to be addressed to and seeing the current trend in which the authorities are making timely amendments and releasing circulars along with the list of FAQ’s, it is not late that the promise of GST’s “one nation one tax” would certainly be delivered very soon.
REFERENCES:
· “Be Ready for New Challenges in GST Regime” CMA Ashok Nawal Published in Articles section of www.manupatra.com
· Appeals and Review Mechanism under GST by National Academy of Customs, Indirect Taxes & Narcotics.
· Advance Ruling Mechanism in GST by National Academy of Customs, Indirect Taxes & Narcotics.
· Chapter 19 “Appeals, review, and revision” by Indirect Taxes Committee of ICAI
[1] Collector v/s Chemphar Drugs 40 ELT 276 (SC)
[2] CCE v/s Ballarpur Industries Ltd 11 STT 6(SC)
[3] CCE v/s Ranka Wine 322 ELT 410(Sc)
[4] Pushpam Pharmaceuticals Co v/s CCE 78 ELT 401(SC)
[5] Amchong Tea Estate vs. Union of India, 2010(257) ELT 3(SC)
[6] Singh Enterprises Vs CCE 2008 3 SCC 70
[7] Uttam Sucrotech International (P) Ltd Vs UoI - 2011 (264) ELT 502 (Del)
[8] Om Prakash v. Ashwini Kumar Barsi (2010) 258 ELT 5 (SC),
[9] UOI v/s West Coast Paper Mills 135 STC 265 (SC)
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