Anti profiteering in GST– Is litigation an option? : 18-02-2019

‘To be or not to be’, is the famous quote from Hamlet that has been used as a metaphor to find a solution, when in dilemma. To put this in the context of anti-profiteering, the question can be ‘to litigate or not’?

In India, litigation has always been a tool and solution for tax payers to seek redressal from the actions of the tax administration. Litigation is now almost second nature when dealing with tax matters. Routine tax matters have to follow a defined redressal path provided within tax statutes. It is only after exhausting the redressal options that a tax matter can reach a High Court.

However, in the case of orders issued by the National Anti-Profiteering Authority – an institutional mechanism under the GST law – the accepted view is that the first redressal is with the High Court. We are aware now that tax payers have approached the High Court against the orders of the Anti-Profiteering Authority.

Routine tax matters arise between the tax payer and tax administration and are mainly around interpretation of tax laws. However, in case of anti-profiteering, the tax payer could be implicated by a disgruntled consumer or by even a motivated competitor. A recent order provides multiple definitions of profiteering, one of which says,”Profiteering is a pejorative term for the act of making a profit by methods considered unethical”. Any action under the anti-profiteering legislation carries a negative perception unlike issues on routine tax matters. Therefore an allegation of profiteering not only has a fiscal implication, but could also impact the reputation of the tax payer. Profits are understandable, but profiteering implies gains made at the expense of the consumer, which is not acceptable.

In the not too distant past we were aware of media attention and public scrutiny on consumer businesses caught up in tax and non-tax controversies. Such attention and scrutiny can have a big adverse impact on the reputation of the tax payer and at times, on its revenue as well.

The premise of anti-profiteering is that if the government has given up its revenue, this benefit has to be passed on and enjoyed by the consumer. If this is not done, it will be held that the tax payer has profiteered. There is no standard methodology prescribed for assessing profiteering and at times it may not be feasible to immediately implement the requirements. Based on orders passed, what is tested is whether the law has been followed, in letter and spirit. This premise should become  the guiding principle when dealing with anti-profiteering requirements.

High Court matters are public hearings unlike the other redressal options provided in tax statutes, which are conducted in private. Hence once a matter reaches the High Court, it is open to public scrutiny and subject to interpretation even when it is sub-judice. Anti-profiteering orders have been making headline news these days and High Court hearings will provide more information on the matter in public domain. These matters are likely to take at least a couple of years to resolve and hence the public scrutiny will continue for a long time. Though free publicity in most cases is welcome, but in such matters it may not be desirable. From the orders passed, it is apparent that a lot of financial and business related data has to be submitted for anti-profiteering matters. More information may be required by the courts when dealing with this issue.

Though the anti-profiteering provisions are a part of the GST law, they are for consumer protection. There is no tax revenue bias that would be guiding the actions of the Anti – Profiteering Authority. An early and quick settlement of any complaint would be in the interest of the consumer and this should be the basis on which the anti-profiteering investigation and adjudication is conducted. Protracted litigation on anti-profiteering matters will only delay the relief to the consumer and defeat the entire purpose of this provision.

Hence, is litigation really an option? Or could it be a case of Hobson’s choice – there are alternatives, but realistically there is only one to choose. Litigation will only lead to more uncertainty on the benefits of GST to the consumer. The need of the hour is towards a constructive dialogue to ensure that the consumer gets the relief. There may be certain principles on which there can be no compromise. Hence, in such cases litigation may be the only choice. Even then it may be prudent  for the tax payer to not only look at the legal issues, but to also take a long and hard view at the reputation risk associated with litigation and then decide the way forward.

Source : Times Of India

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