The FTO secretariat has called for the establishment of an independent revenue judicial service to meet the requirement of the constitution which has mandated separation of judiciary from the executive.
The FTO's office has found that the present system of adjudication in tax matters hinged altogether on the principle that the department is the prosecutor and adjudicator at the same time. As such, the appellate bodies are under the control of the Revenue division.
The secretariat proposal refers to Finance Minister's 2000 Budget speech in which he had indicated that the adjudication system for taxpayers was being revamped on the principle of separation of judiciary from the executive:
It says: "The present system of adjudication in tax negates the principle of separation of judiciary and executive. Entrusting adjudication functions to executive officer, multiple appellate stages and absence of any time to pass an order have combined to create a slow adjudication process marred by inordinate delays.
"For providing speedy justice to the taxpayers the whole adjudication system is being revamped on the principle of separation of the judiciary from the executive."
Commenting on the system, the FTO secretariat pointed out that the present system is executive-oriented in which the department is the prosecutor and adjudicator as well.
Grievance against such system of adjudication has been raised by members of the Bar, the Chamber of Commerce & Industry, trade bodies and stakeholders. Experience has shown that the officers deciding appeal against the assessment order or similar proceedings are under the control of the Revenue Division. Their entire future career depends upon the whims, liking, disliking and practice of Revenue Division.
The FTO secretariat regards that such adjudication system can not deliver fair and unbiased justice and the entire exercise is merely a command performance. It further deplores that no effective measure has been taken on the principle enunciated by the Finance Minister to have an independent Revenue Justice Forum.
The FTO's proposal noted that it is imperative to have an independent Revenue Judicial service because the Income Tax, customs and sales tax appellate authorities are under the control of the executive.
In revenue justice system there is no concept of these authorities being an independent judicial entity. They are neither independent nor can apply independent mind. It is therefore necessary to establish Revenue Judicial Service completely separate and independent from the executive, the Revenue Division and the government.
Though significant changes have been brought about on the pattern of Income Tax law in the laws of Sales Tax and Customs and Central Excise but there has been a longstanding demand of taxpayers and tax bar for separating even the first forum of appeal from the executive branch and to stop horizontal movement of account members of Income Tax Appellate Tribunal between the Income Tax Department and the Tribunal.
Thus a lot more is being expected to be done to bring about an effective separation of the two Branches.
The FTO's secretariat has suggested that there should be a (i) Short term plan and (ii) Long term plan.
(i) The following short term plan should be implemented immediately:-
It is proposed that a Federal Cadre of the posts of Commissioners/ Collectors (of Revenue Appeals/ Adjudication) may be created. Induction to this cadre may be through Federal Public Service Commission. Selection may be made on the basis of results of a written examination and viva voce.
Eligibility Qualifications:
(a) Federal Revenue officers with service of 10 years who are not superseded at any stage of promotion and possess LLB degree.
(b) Advocates with ten years standing at the Revenue Bar.
(c) Advocates with ten years standing at the Bar possessing ICMA.
The officers of the Federal Judicial cadre may be placed under Law Division. They shall work under administrative control of respective Tribunals. They shall be eligible to elevation to highest court of Appeal on seniority-cum-fitness criteria.
(ii) Long Term Plan to be completed within four years:-
In this regard suggestions have been made from various quarters including the Vice President of FPCCI, Karachi. However, to achieve the object and fulfil the promise made by the Finance Minister it would be necessary to introduce a completely independent judicial system in revenue matters. A Revenue Judicial Service should be created independent of CBR and the ministries.
It should be organised in the nature of the subordinate judiciary which should be under the control and management of the respective High Courts. There should be no administrative and financial control or dependence on Revenue Division, Finance Ministry or the Law Ministry.
These appellate authorities should act independently under the control of respective High Courts. The Income Tax, Customs and Sales Tax Appellate Tribunals should be so constituted as to be under the control of respective High Courts.
For this purpose sufficiently onerous exercise should be carried out to frame a judicial structure for Revenue Judicial Service to ensure complete justice to the taxpayers. A proper scheme should be framed which should establish a separate Judicial Service specifying modalities for recruitment's, qualification, appointment and conditions of service.
If Revenue judiciary is established, as proposed, with the Tribunal or similar authority width a different nomenclature under the High Court, in times to come the senior, meritorious and experienced Revenue Service Judges of integrity may be elevated to the High Court Bench in the same manner as the District & Sessions Judges are inducted.
The success of this judicial system would lie not only in its establishing but also by manning it properly with persons of unmatched integrity, knowledge and reputation.
There should be sufficient personnel to cope with the volume of work so that cases may be disposed of in 3 to 6 months. Such adjudication system will create confidence in public, taxpayers and even local and foreign investors and is likely to create positive impact on voluntary revenue generation.