In a PIL case, the Division Bench of J&K High Court has cast aspersions on the State Government for soft paddling on the realization of pending direct sales tax with shopkeepers, suppliers and marketers. Hundreds of evaders of sales tax have enormously benefitted by perpetrating fraud on the public exchequer. The Division Bench in a recent hearing expressed its displeasure on Government not seriously tackling the issue. Direct sales taxes running in crores of rupees remain outstanding against a number of defaulters. It has come to light that many tax evaders are no more traceable after they have swindled huge sums. There are others who have not paid taxes on the pretext that they are migrants and are exempted from paying taxes. Actually they are not migrants as they have not documents to prove that they are migrants. It is a simple matter of slackness of the Commercial Tax Department to allow the loss to happen. The practice observed by the State in the past in regard to such cases was to pass amnesty schemes and finally allow the defaulters to escape scot-free. According to the orders of the Division Bench of the State High Court, this is unjust to the ordinary people who pay indirect tax despite the fact that they make a hand to mouth living. On the other hand, those who are avoiding the direct sale tax are usually the affluent class yet they evade paying taxes.
The Division Bench has made it clear that the taxes realized by the Government are used by the State for the development projects and for the general welfare of the people. It is a system of how the economy of the State is run in a manner that the benefits of development reach each person and each family. The Government is not authorised to work out an arrangement in which a section of population becomes rich through underhand means while other sections live a hand to mouth life. This is not permissible in a welfare State. Taking very serious view of the matter, the Division Bench in its order has directed the Government not to pass any amnesty schemes as it has been used to do in the past, as long as the case was under the consideration of the court of law. “The State has to put in a proper mechanism to ensure the implementation of tax laws and recovery of taxes” observed the court. Obviously, the Division Bench is seized with the apprehension that there could be a nexus between those who are required to pay sales tax and the functionaries of the Commercial Tax Department. Without the connivance of the functionaries, avoidance of sale tax is not possible. For example it is known to everybody that the Commercial Tax Department has complete record of the persons who are running business and are required to pay sale taxes. The question of they becoming absconding persons is not tenable. Again there is a comprehensive record with the State Relief Commissioner about the migrants. There is no possibility of a false entry being made in the official records of the Relief Commissioner and label some defaulters as migrants. Such is the annoyance of the Division Bench that it refused to give extension of three months to the Government when the defence counsel made a request for it saying that a fresh status report would need time for compilation. The DB declined the request of the State to grant three months time for complying with the directions issued on June 15, 2012 and observed, “There has been failure to enforce and implement the tax laws with all seriousness and in right earnest. The statutory mechanism has not been exploited honestly and diligently so as to get the desired results. The authorities are duty bound to enforce the laws with vibrating and pulsating enthusiasm.”
As is indicated in the court directive, the Government will be required to bring the entire Commercial Sales Tax Department under scanner and find out the loopholes in the system that allow tax payers an escape route. There may be the need of bringing in some reforms or redrawing the corpus of rules so that heavy losses to the State exchequer are avoided. If in reality there is a nexus between the tax payers and the functionaries, this has to be broken. Court finding has to be read between the lines and its reformative and advisory part must be given due consideration.
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