THE ABC OF ADJUDICATION.

[Sadanand Bulbule]

1. The GST is an indirect tax imposed on supply of goods and services or both and it has been in place since 01/07/2017. It has proved to be the tax regime changer with progressive tax collection on YoY basis. The point of levy of tax being, except in a case falling under the reverse tax mechanism, it is the supplier of the goods and services, who would remain liable to pay tax under Section 9[1]. The supplier is required to file the returns which include monthly returns under Section 39 and annual return under Section 44. In terms of Section 59, he is authorised to self-assess and pay due amount of tax in accordance with the provisions to avail the benefit of eligible Input Tax Credit [subject to the conditions prescribed in Section 16 & 17], being the nerve chord of the entire scheme. There are many more supplementary sections for provisional assessment of tax in cases falling in Section 60 to 64. In a way, adjudication is tougher than re-assessment of self-assessed monthly return under Section 59. It is the duty of the Adjudicating Authority to adjudicate and recover tax due under Section 73/74 by way of proper adjudication, in case of mismatch as regards to tax liability declared in the monthly return and that should have been actually declared based or wilful fraudulent evasion of tax respectively on tangible material facts as per law.

2. Under the reverse tax mechanism under Section 9 [3&4] in regard to the specified transactions and persons notified thereunder, it would be the recipient of goods and services or both, who would be liable to pay tax due on supply of goods or services or both to it. Having borne in mind the above brief bird’s eye view of present tax regime under the Act, I do not wish to narrate all the objects of the GST in greater detail, since much water has flown on them.

3. The word “adjudicate” is borrowed from Latin adiūdicō, adiūdicātus, from ad+iūdicō (“to judge”). According to the Oxford dictionary, the meaning of ‘adjudication’ is the process of making an official decision about what is right when two contentions are disagreeable; the decision that is made. Adjudication allows for a faster resolution of disputes, as the process is typically quicker than going to court. Adjudication means officially judging a case based on documented evidence or official determination of a case. Adjudication is much wider and deeper purely based on credible evidence than it is perceived. Since self- assessment is the core of the GST Act which might involve misrepresentation of facts or improper payment of tax knowingly or otherwise, adjudication plays a significant role to protect the revenue due to the Government. So it can never be equated to mundane assessments. Therefore there is need to drop one-sided expectation of adjudication. That’s what the GST law expects.

4. All activities under the GST Act lead to the focal platform called “adjudication” to determine the proper payment of tax due to the Government. So adjudication is the spine and the core object of the Act depending upon the situational requirements to ensure proper payment of tax. Adjudication is run by the statutory book called the GST Act. However, there is a saying, “Only what is pleasant is pleasurable” so also “what is legal is sustainable”. These days it is the trend to repackage enforcement reports as adjudication orders! The adjudicating authority is expected to act independently and it is its statutory responsibility. It is a herculean challenge to separate wheat from the chaff, but it is the need of the hour. This is the time tested truth and so it applies to the concept of adjudication under Section 73/74 of the GST Act. Adjudication is not fictional. It is real. According to the prevailing data base of disputes, two-thirds of taxpayers feel that their adjudication “rarely” or never concluded in the interest of facts/law. Rather it is concluded for foisting tax. This disillusionment is higher under the present regime than average in the subsumed Acts. It is an alarm bell one cannot ignore. But today it is making us aware of the depth of change required.

5. The law mandates that, the proper classification of goods and the appropriate rate of tax on supply of goods, the GST Act is depending upon the Customs Tariff Act and not vice versa. Thus the GST Act borrows functional energy from the Customs Tariff Act. So the former is the dependent Act and the latter is the base Act for proper classification of goods and the correct rate of tax thereon. One-sided interpretation of HSN might cover shadow over the truth. But shadow is always shadow and it continues to have darkness only. It is as futile as hammering a nail in the sky. Any hammer will fail. Therefore the essence of true adjudication is absolute sureness of facts wedded with HSN.

6. Six years’ experience of the GST regime indicates that, the right adjudications are less chosen due to lack of focus on purity of everything. The volume of disputes pending in the superior courts is the live evidence for this. The definition of “value of merits” is in the context of the valuator. So also is adjudication in the context of adjudicator. Here the adjudication is not to be blamed but the biased perception of adjudication. It is like building a castle without foundation and is, therefore, bound to collapse. So shady adjudication is the enemy of the taxpayers and more blood will be lost before they get justice. This is an alarming development.

7. There must be higher purpose for adjudication. Consciousness must rule the adjudication. Adjudication needs to investigate the facts manifest on records through the defogged lens of law. Frequently adjudication slips towards illusions. Facts can be apparently seen on records and the GST Act is to be followed honestly and practically to have deserving results/revenue. There needs to be some good sense prevailing at the adjudicator's end. It is time that the adjudicator acts prudently and does not use powers to annoy the honest taxpayers. Honest taxpayers deserve honest adjudication as real incentive and dividend to spin better compliance. Consequently things fall into place. This is not an exaggeration but very careful deliberation to ensure true adjudication. Real adjudication never allows to lose the truth and trust. So the intent of adjudication must be very clear. The process of adjudication is deeper than one thinks. It is a challenge to achieve it successfully.

8. Once the assessee discharges the onus cast upon it with regard to proper identity of the goods/services/rate of tax/exemption/HSN/SAC, their functionality and genuineness of transactions, there would not be any case for the adjudicator to reject it, unless it has enough solid/tangible evidence to disprove it. Adjudication is a statutory platform to collate documented/credible evidence and counter-evidence to take an organic and sustainable decision with almost pinpoint precision. The collation of documented/credible evidence aligns the adjudication endlessly the way the law desires or else it would rupture adjudication in the womb itself. No bald and dumb inference would defend either of the side. This is the universal principle under taxation. Adjudication is a serious matter and it cannot be taken lightly. So the adjudicator has to apply his own mind to the facts and circumstances of the case on evidence and reach at his own decision unfettered by anything else. Applying “alien mind” is likely to give birth to a dangerous decision. The role of adjudicator is to find legal measures on material aspects and to record a safe conclusion in favour of law/facts on testimony of concrete evidence beyond reasonable doubt.

9. The Hon’ble Supreme Court in its several judgements has reiterated that, the concept of “adjudication fairness” is not one-way street. It requires the adjudicating authority to furnish the copies of the documents upon which reliance has been placed….. the documents in the possession of adjudicating authority before forming an opinion. To this extent the principles of natural justice and concept of fairness are required to be the essential functions of  adjudicating authority.

10. Tax does not germinate from vacuum pot or from fictional or disinformed or polluted interpretation of facts. Rather it misleads. Synthetic interpretation of facts has dangerous implications. Tax Adjudication is not a game to hit the jackpot. Adjudication is an unalloyed process of sensible conversation on records with empirical evidence. Law demands the original orders passed by the adjudicator and not cloned orders. Legal adjudication is the right of the taxpayer. In the absence of basic three characteristics, transparency, the rule of law and honesty, cannot achieve the intended purpose of protection of revenue, rather it remains like bubble. Unfortunately, this problem is moving faster than the solution, despite the warning of the Hon’ble Apex Court. One needs to stop this ‘virus’ before it reaches the point of no return. The dangers of corroded adjudication ecosystem are, therefore, not easily curable. Since taxpayers exist in it, so it has an impact on all of them.

11. What can an enlightened adjudicator do to make things better than worse? In experts' view, the best use of one’s efforts and energies is to fortify the fragile system in small but meaningful ways, rather than getting lost in it. The adjudicator needs to understand, defend and then fight back for the merits & law, which alone generates highly sustainable revenue. A dead fish floats but it cannot swim against the current. So the adjudicator should change the hysteria of adjudication. Some adjudicators respond saying “so what?” What do you want me to do? Go to the appellate authorities--is the routine answer. Many of the taxpayers are facing similar situations.

12. The adjudicator is like a versatile actor who plays multiple roles under the Act. So it is expected to distribute equality in an adequate way both to the taxpayer and the Government. The advantage of the real adjudication is, it maintains cordial relationships with the taxpayer and at the same time, never sacrifices the revenue. If the adjudicator remains far away from the truth of facts and law, justice cannot be provided to either of the side. So let it not happen for the sake of benign object of the GST Act.

13. “Nest” is not only essential but it is also intricately/beautifully woven by relentless hard work by mother birds. For example, the tailor birds. So also the ‘strongest nest’ for revenue is the essence of the Government. So the adjudication and the adjudicator are the internal and integral vital elements of the GST Act. They are supposed to function practically and harmoniously in accordance with the law of the land to avoid adverse effects.

There is excellent history of hallmarked assessment/reassessment orders passed by incredible authorities who have opened the inner eyes of the law makers and the Apex court. Such was the brilliance of the several authorities. But these days, such orders are seldom seen like comets. So one needs to come out of illusions as they are never the facts. Mind needs to be configured to see the facts the way they are actually. There exists the reality and not in fantasy. So adjudication doesn’t exist the way the adjudicator sees. What he sees need not be the real one. The subjective adjudication deceives the adjudicator because of illusory interpretation and failure to see the reality of deep pot-holes in the path of adjudication. The essence of true adjudication is to liberate the taxpayers from litigation and to generate leak-proof revenue as safe as in the safe vault. Adjudication should not be the product of imagination. Otherwise fallible orders are bound to create the bondage of litigation and the survival of revenue is at higher risk. Thereby the precious time and efforts invested to produce fallible orders could be lost. The need for revenue is not at all a problem per say. But the greed for unfair revenue is the real and serious problem. This needs to be addressed consciously with self-introspection by the adjudicators.

14. All adjudication proceedings are happening at the cost of taxpayers’ money. It should not go on the wrong path. Adjudication is not a forum to voice frustration and helplessness. There should be tsunami of justice in every decision taken by the adjudicators. I am not afraid to say that, in many cases the principles of natural justice are knowingly sidelined, rather ignored. This truth cannot be hidden for a long time like pregnancy. Honest tax payers need justice within cycling distance, if not in hearing distance. Adjudicator should not travel in the night in deep dark forest without a live torch. Otherwise it is like getting lost in the forest in search of wood. So the adjudicator has to choose, either forest or a piece of dead wood. Which is the real worth? The choice is in its hands to take it or leave it.

15. The GST regime once a fantasy is now a reality. However this reality is not free from some self-acclaimed tax avatars that are fond of throwing spanners in the wheel. For instance, the legally insane adjudicator is much obsessed for weak orders and the weakness of orders is lording over the strength of facts. That’s the why facts suffer. The rejection of truth of facts is simply the ignorance of truth and closing the possibility of immensely honest adjudication. Ignorance of the facts that already exists is the biggest threat for the taxpayers and evil side of  adjudication. Unfortunately this is the new coincidental or parallel development. No one admires the lawless and unethical adjudication, much the less the superior courts. The dignity of honest adjudication should never be compromised. Adjudication is an ethic of responsibility or duty rather an ethic of rights. That is the real non-violent adjudication and it creates decisive revenue. So it should be handled with extreme care and caution. It is the wish of all stakeholders. The proponents of revenue are requested to take appropriate action in this regard.

“To see the truth, one has to have special eyes, the way Arjun saw the eye of that bird in the task of shooting it--as narrated in the great epic Mahabharata”. The right action in that moment is the gateway for ultimate success.

What one does not learn after grand victory, he learns it after miserable defeat. The instinctive human behaviour.

Bottom-line:

[These are my personal thoughts. The purpose of this article is to explore, expand the sustainable and ethical boundaries of adjudication. May be I have opined a little extra on the subject of adjudication, but, at least to me, it appeared to be seriously significant that any adjudicator if it does not do what it has do, lot of trust reposed on the adjudicator is “lost”. And it should not be.]