Sufferers the common man and State Revenue: Madras High Court orders clamp down on corruption, dereliction of duty in Commercial Tax Department

The Madras High Court recently called for strict action to be taken against officials in the Commercial Tax Department who have indulged in corrupt activities, received freebies or failed in their duty to recover tax in a timely manner (GE Govindaraj v. The Assistant Commissioner (CT) and ors). .State revenue is to be protected and if there is a loss of such revenue due to the lapses, negligence and dereliction on the part of the authorities, the government is duty-bound to act against the erring officials, Justice SM Subramaniam said. .The lost revenue should be recovered from the errant officials after instituting appropriate action, he opined.."Such a course of action is inevitable. It is in the public domain that large scale and wider allegation of corrupt activities, more specifically, in Department like Commercial Tax Department, are prevailing and, people are lamenting about the corrupt activities in collusion with the traders at large in the State. However, no measures are taken to minimise such corrupt activities of the Commercial Tax Department officials with the traders," the Court went on to add. .The State revenue, being the backbone of the State's economy, there cannot be any compromise in the implementation of tax laws, the Court emphasized. .In the event of any dilution or tolerance towards the inaction and corrupt activities, the government would be failing in its duty to uphold Constitutional principles, Justice Subramaniam added. .The Judge further observed that the ultimate sufferers of such corrupt activities would be the common man and State revenue. "At the cost of the common man and the State revenue, these traders and the officials are not only inactive but not initiating action properly and indulging in corrupt activities. Thus a conjoint and serious actions are required to be taken and in the event of allowing such corrupt activities to continue for a longer period, then the State revenue would suffer, which would impact the implementation of the constitutional principles of equality in economic status and social justice as well as the implementation of various welfare schemes for the benefit of the public," the order further stated..In this regard, the Court also remarked that the public has been lamenting about Commercial Tax Department officials indulging in the demand and acceptance of freebies openly from the business community. "Much more freebies and corrupt activities are openly witnessed by the people in general during the festival seasons. It is akin to that of getting mamul by the Police Department official", the Court observed..Justice Subramaniam proceeded to emphasise that appropriate action must be taken against such corrupt activities as well. ."The evil menace of demand and acceptance of freebies in large scale in a routine manner are causing loss to the State revenue, as these corrupt officials are failing in their duties, to initiate appropriate actions against the illegalities prevailing amongst the traders, businessmen etc. Thus, the higher officials are bound to monitor these aspects effectively and efficiently, so as to control the menace and deal with such officials in a hard manner without showing any misplaced sympathy," the Court said..Case background.The case before the Court concerned a man who was issued a notice for tax recovery with respect to certain property he had purchased in 2006. The purchaser, however, was unaware of any encumbrance attached to the property when he bought the same. .The tax authority informed the Court that the defaulter was the seller who had failed to pay the applicable tax for the years 2000-2001 and 2001-2002. Despite several communications on the issue from the tax authority concerned, the seller did not properly respond, the Court was told. .The challenged notice for recovery of tax arrears, however, was sent to the purchaser in the year 2012. .This notice was challenged before the High Court by the purchaser (petitioner), who urged the Court to protect him since he was a bonafide purchaser. .He also pointed out that the notice was issued after a lapse of about eleven years from when the sales tax arrears were due and about six years after the purchase of the property by the petitioner..The Court granted the petitioner relief after noting that there was a "blatant lapse on the part of the Competent Authorities of the Commercial Tax Department in pursuing the matter for recovery of arrears of sales tax.".Further, it was observed that under Section 24-A of the Tamil Nadu General Sales Tax Act (TNGST Act), 1959, a property sale carried out for adequate consideration and without notice of pending proceedings under the TNGST Act would not be void.."In the present case, undoubtedly, the second respondent (seller) was aware of the proceedings, which were pending before the first respondent. However, he sold the property in the year 2006 probably on the impression that no action was taken by the first respondent for more than six years regarding the sales tax arrears due for the years 2000-2001 and 2001- 2002. Ultimately, the delay caused at the instance of the first respondent- Department is the reason for loss of revenue to the State", the Court observed. .The challenged notice issued to the petitioner in 2012 was quashed. .Erring officials must be dealt with mercilessly: Court.The Court went on to observe that it has been frequently witnessing "cases of this nature, where actions are either not initiated or initiated belatedly allowing the illegality to lapse and allowing the traders to escape from the clutches of law.".The Court highlighted that since such lapses lead to Revenue loss for the State and, consequently, a loss for the public at large, "adequate care is to be taken, so as to ensure that the taxes, as applicable, are collected promptly and the officials, who all are not prudent in execution of law, are dealt with mercilessly.".A decent salary is being paid to government officials, who hold a certain status in society as well, the Court remarked. "Therefore, they are bound to act in the interest of people at large and any failure or illegality must be dealt with strictly in accordance with law", the Court said..Justice Subramaniam ultimately impleaded the Secretary to Government, Commercial Taxes and Registration Department and the Principal Secretary/Commissioner of Commercial Taxes as additional respondents in the case before issuing a series of directions to act against officials who are negligent, corrupt or who fail in their duties. .The directions issued include.Suitable orders should be issued to all the subordinate authorities across the State of Tamil Nadu to identify cases where no actions are taken or actions are taken belatedly after an efflux of time for the collection of tax or arrears of tax. Appropriate action should be initiated against officials who are responsible and accountable for such lapses, negligence or dereliction of duty. If the misconduct or otherwise is proved, further action is to be initiated to recover the loss of State revenue from those officials. The additionally impleaded respondent-authorities are to coordinate with the Department of Vigilance and Anti-Corruption "by conducting frequent surprise raids to control the evil menace of corrupt activities of demand and acceptance of bribe or receipt of freebies from the business community across the State of Tamil Nadu. If any such offenses are identified, then all actions, including criminal action, are to be initiated under the relevant laws." Suitable orders are to be issued to all the Authorities competent to verify the service records of the officials of the Commercial Tax Department and make a comparison with the actual assets of the family members as well as the declared assets in the service records. It there is any disproportionality of wealth identified, suitable action is to be initiated under the Service Rules in force. Long pending cases concerning State revenue are to be reviewed periodically on war footing. Reports are to be collected and steps are to be taken speedily to protect the interest of State revenue..[Read Order].Corrigendum: The article had earlier erroneously mentioned another judge as having passed the order. The error has been corrected and is regretted.