LIBERALIZATION, NOT AHA!

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    This has reference to the article "Liberalization – AHA" by Mr.Anil Mody – 1998 (102) E.L.T. A169 where he wants laws to be made simple, meaningful, concise, precise and in colloquial language. All very nice words but is it possible and will our hair splitting advocates and consultants allow it/ Every attempt of the Government to simplify the laws have almost always resulted in many unintended benefits being enjoyed – thanks to our clever lawyers who look for loopholes to defeat the system. Nobody is prepared to accept the spirit of the law if the letter of the law ils more suitable to him. In such a situation, the laws are bound to be complicated and every law maker has to work overtime in thinking the various possibilities in which the law he is going to make is going to be misused.

 

    I am reminded of a saying

        "If there is a will, there is a way

        If there is a way, there is a law,

        If there is a law, there is a loophole

        And (the lawyer) will find it for you!"

 

    Shri M.C.Chagla as Chief Justice of Bombay High Court said in a meeting that every moment of our life is spent in either breaking or complying with a law. Shri Morarjee Desai who was Chief Minister of Bombay wrote to him that as the Chief Justice, he was expected to obey all the laws and not break some of them. But Chagla knew it was impossible.

    

    Turn the case law section of any Excise Law Times, you will find any number of cases where words and commas are interpreted and law laid down. Writing of the laws in simple language is not difficult if laws are going to be accepted in simple language. In fact hiding the spirit of the law inside a lot of legal jargons is a very difficult job and our law drafters are really doing a thankless ob. When something goes wrong they are mercilessly criticized but nobody praised them for the hard work they do, the extra hours of mental and physical drudgery they undergo to make the laws meaningful, loophole free and achieving its objects. I would cite a very insignificant looking example. The provisional Collection of Taxes act provides that any increase or imposition of Customs or Excise duties proposed in a Finance Bill will have immediate effect. This is an act made more than sixty years ago. At that time perhaps nobody thought of reduction in taxes or may be reduction was not meant to have immediate effect. Come, Dr.Manmohan Singh and tax rates come down. Are they applicable immediately? Finance Minister wants it effective immediately, but provisional Collection of Taxes Act says only increase or imposition will have immediate effect and not decrease. Our wise babus came up with a beautiful piece of delegated legislation. In the Budget when the tariff rates are reduced, they come into effect only after the Finance Bill becomes Finance Act. Until then the old rates continue, but to give effect to the new rates, the Government issued exemption notifications are then withdrawn after the Budget is passed. This has now become an annual feature.

 

    Making the laws simple is not a simple thing, especially for the modern law makers. In the olden days laws were understood to be un-understandable and ina particular linguistic style. But today everybody wants simple language in laws. So the law drafter has to keep his language simple, but ensure that there are no flaws and in this situation even the simplest person would draft the most complicated laws, because he has to play a game of chess and foresee all the possible moves of the best legal brains of the country.

 

    Recent amendments to the Customs & Excise Acts, Rules and Notifications are example sof simple language but the problems have not come down. A small illustration will drive this point better.

 

    The Government wanted to deny Modvat on HSD. In the notification issued under Rule 57A, HSD was specifically excluded. Even though Modvat is meant for inputs used in or in relation to the manufacture of final products, Government wanted to give Modvat benefit to "goods" used in generation of electricity or goods used as fuel and Rule 57B was made which provided for allowing credit on these goods notwithstanding anything said in Rule 57A. However, credit was intended to be given only on inputs and inputs were defined in the notification under Rule 57A. But our wise lawyers said "NO". Government amended Rule 57B to use the word inputs instead of goods. But CEGAT said even then the words "notwithstanding" means that Rule 57A is not applicable. So finally Government had to bring in another amendment to Rule 57B to say that inputs under rule 57B means the inputs as defined under Rule 57A. This has laid to rest the controversial issue…. Hopefully, but only after sustained litigation. You can say the Government could have simply excluded HSAD from the purview of Rule 57B also. In retrospect it is simple, but while drafting the law who could have thought of all these possibilities ?

 

    Section 11D says that any amount collected in the name of Excise Duty has to be paid to the Government (these are not the exact words of the section …. I am trying to be simple!). But Madras High Court says there is no method to collect it under the law. So it is an amount which the litigant was liable to pay, but the poor Government cannot collect it because the law did not mention the lengthy process of collection. Will any one voluntarily pay this money because it is due to the Government ?

 

    Examples of this kind are many. However simple you make the law there will be litigation and interpretation. The Departmental officer at the field level cannot act according to the spirit of the law because he has an audit phobia and the assesses will talk of the spirit of the law when the letter of the law is not to their advantage. But if the latter is true, they will say "to hell with your spirit, give me the benefit as the letter of the law says". The process of simplification of laws are going on for centuries with hardly any positive results especially in fiscal laws, because the stakes are high and the capacity of the affected parties to hire best brains. As can be seen from any number of examples the Government is not gaining anything by having complicated laws. Any flaw in law simple or complicated has always been exploited and will always be. The courts are also very liberal in granting relief for substantial compliance relief for substantial compliance ignoring procedural irregularities. But the same facility is not extended to the State. The Department loses many cases because the appeal is not signed or the review order was not written by the Commissioner or some such procedural lapse.

 

    I am totally with Mr.Mody that laws must be plain, simple, unambiguous and in the required few words. But the big question is how to do it? People criticize our laws and their complicated nature but has any one ever told the Government that these are the most suitable words for a particular law and can any one assure a trouble free and litigation free simple law ?

 

    And we Indians are not alone in this unfortunate situation. Many of us believe that the American laws are simple, because they have a simple constitution. I had occasion to read the provisions relating to Collection of Excise in the Unite States and they are as complicated and un-understandable an our laws are if not worse. Section 70.11 of the code of Federal Regulations (CFR) give the definition of meanings. It says "When used in this part and in froms in this part where not otherwise distinctly expressed or manifestly incompatible with the intent thereof, terms shall have meaning ascribed in this section…. The terms 'includes' or 'including' do not exclude things not-enumerated which are in the same general class" Section 70.52 says "An individual's name signed to a return, statement or other document shall be prima facie evidence for all purposes that the return, statement or other document was actually signed by that individual" And would you like to know how simple their refund rules are ? Section 70.123 (a) (1) says "Credits or refunds of overpayments may not be allowed or made after the expiration of the statutory period of limitation properly applicable unless, before the expiration of such period, a claim therefore has been filed by the tax payer…." Don't our laws look a little more relaxing ?

 

    However, one need not be very pessimistic. Though it is a fact that too much simplification is not possible, a lot of effort is being made and lots more have to be done. And litigation is not all the bad. It is through litigation that we learn, change and adapt. In addition if laws were to simple, what would happen to all the Lawyers and Courts ? And what would be the need for E.L.T. and how will Mr.Mody and I write articles ?

 

    Before parting, I cannot resist the temptation of another quote "This agglomeration of statutes and regulations dealing with similar matters is neither convenient for the public nor conducive to well organized administration. Moreover, under this disjunctive arrangement, we have not and cannot readily construct a comprehensive code of standing instructions for th governance of the excise staff….. The Act…. Will then form a complete Central Excise Code, which will simplify the administration of this branch of the revenue system…" Can you guess from where the quote is extracted? This is from the Gazette of India dated 10.1.1943, statement of objects and reasons for the Central Excise Act, 1944. Fifty-five years have passed and simplification continues…..

EXCISE LAW TIMES – 15.11. 1998 – A 40