The government loses most indirect tax cases in the Supreme Court. I am not in possession of exact data but when I read the judgements I find that the predominant number of judgements are against the government. We have got competent lawyers in Additional Solicitor Generals and senior counsels. But then why do we lose? Truth be told, the reason is that the cases where the government files appeal to the Supreme Court are mostly without merit. In this treatise, I am discussing one of those cases where the legal position was so clearly and heavily against the government that it makes me wonder why this appeal was ever filed at all.
The issue here was about the date of determination of rate of duty of imported goods. In the case of goods which are cleared for home consumption, it is the date when the documents for clearance are filed. But in the case of warehoused goods under section 68 of the Customs Act, it is the date when clearance documents are filed for clearance from warehouse. There is another Section 49 which allows the goods to be kept in warehouse but it is clearly mentioned in this Section that they are not treated as warehoused goods. It is popularly known as warehousing without being warehoused. Goods kept under Section 49 can be before or after payment of duty. Therefore, once the goods have paid duty and have been kept under Section 49, the question of applying the rate of duty at the time of clearance from the warehouse under Section 68 does not arise. This is because it is written under Section 49 itself that warehousing provisions do not apply for goods kept under this Section.
Even then in this case the Commissioner Customs wanted the importer to pay higher rate of duty when the duty increased at the time when the goods were kept in a warehouse under Section 49. The Tribunal set aside the Collectors order. The Tribunal held that once full duty has been paid by the importer and the clearance for home consumption has been permitted by the Customs Officers, any subsequent enhancement of the rate of duty would not be leviable on the goods which remain stored in the warehouse under the provisions of Section 49 of the Act. This was an absolutely right order. However, an appeal was filed before the Supreme Court. This process needed permission from the Central Board of Excise and Customs and the Additional Solicitor General whose permission is necessary before filing such an appeal. It was surprising that such permission was given. Expectedly, the Supreme Court rejected the appeal and upheld the order of the Tribunal with the observation that nothing more remained to be paid by the importer.
Such cases where there is no merit at all should never go to the Supreme Court. The question to how to prevent them. I can suggest the following:
(a) There should be a regular monthly session of the full Board to consider why the Supreme Court has set aside the appeals by the department in the previous month.
(b) The Attorney General also, it is respectfully suggested, should have a monthly review of cases lost and of reasons why.
(c) A task force should be established to analyse the last hundred cases lost.
(d) Our lawyer finance minister may like to chip in his bit and he, I am sure, can find the solution better than others.