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Experts term CBEC order to recover indirect taxes even when stay plea is pending in courts 'draconian'
January, 10th 2013

Terming the government decision to recover indirect taxes even when stay plea is pending in courts as "draconian", experts said the move has put the trade and industry into a quandary.

Hard-pressed for funds, the Central Board of Excise and Customs (CBEC) has directed taxmen to expedite recovery of indirect taxes in cases where stay order has not been obtained by assessee from the appellate authorities.

"The CBEC circular appears to be extremely draconian. The circular implies that coercive recovery proceedings will be initiated if the stay application has not been heard by the CESTAT within 30 days after filing an appeal," said Vivek Mishra, Leader Indirect tax, PwC India.

According to him, a large percentage of demands that are raised are successfully contested at the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) level.

As per the CBEC's directions recovery should be initiated after expiry of statutory period of 60 days for filing of appeal in case no appeal has been filed against a confirmatory order with Commissioner Appeals.

Senior Director, Deloitte (India), M S Mani said while trade and industry can ensure that stay applications are filed within the time limits, they cannot be expected to be accountable for the timely disposal of such applications.

"It has put trade and industry in a quandary as it goes against the established practice of not initiating recovery proceedings till disposal of stay applications," he said.

Since the taxpayers have no control over the tribunal/ courts to decide their stay petition within a given time, the initiation of recovery proceedings would create hardship to the taxpayers, experts said.

Mani said the initiation of recovery proceedings, which includes a recourse to the bank account of the company, while matters are sub-judice, "appears to be prompted by revenue considerations".

This, he added, is expected to result in trade and industry requesting High Courts to intervene in the interests of justice and to prevent "coercive action" by the revenue authorities.

Bipin Sapra, Tax Partner with Ernst & Young, said the move will cause administrative issues for taxpayers who have filed appeal and stay application but have not received any order.

The circular further said recovery should also be initiated in those cases where the assessee has not sought stay in its application before Commissioner Appeals.

The recovery process should also be initiated after the expiry of 30 days of filing of appeal in those cases where stay has not been granted by the Commissioner Appeals.

Indirect tax collections grew at a moderate rate of 16.8 per cent to Rs 2.92 lakh crore in the April-November period as against the annual growth target of 27 per cent.

Mishra added that the circular effectively implies that the government will be borrowing money from taxpayers, and returning it after a decision by the CESTAT.

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