The Economic Survey today recommended setting up of separate benches at high courts to handle tax cases to help prune the pendency and bring about consistency in resolving litigation.
"The (Supreme) Court's recent experiment with constituting an exclusive bench for taxation produced impressive results, which may be replicated for other subject matters, and emulated by other High Courts that do not have special rosters for daily hearings," said the 2017-18 Survey. Authored by a team led by Chief Economic Advisor Arvind Subramanian, the Survey said since the constitution of the tax bench in 2014, the Supreme Court has been able to reverse the trend of burgeoning pendency of tax cases.
"It is noteworthy that during this period, the SC reduced its reliance on staying claims of the Department, and focused on hearing and disposing cases," the Survey said.
Stating that there are other "profound benefits" of dedicated subject-matter benches, it said such benches ensure that the Supreme Court speaks in one voice, and there is continuity and consistency of legal jurisprudence.
"Further, they create efficiencies by allowing the judge to focus on the specialised branch of law placed before her. The model may be replicated for other commercial and economic areas of law as and when necessary at the Supreme Court, and should be replicated by every High Court of the country," the Survey said.
It said delays and pendency are caused due to the increase in overall workload of the judiciary. In the case of tax litigation, this stems from government persisting with litigation despite high rates of failure at every stage of the appellate process, the Survey said.
It said tax departments in India have gone in for contesting against in several tax disputes but with a low success rate which is below 30 percent. About 66 percent of pending cases accounted for only 1.8 percent of value at stake.
The Survey noted that tax collection by Indian states and other local governments is significantly lower than their counterparts in other federal countries.
The Survey said that as of March 2017, there were over 1.37 lakh direct tax cases under consideration at the level of ITAT, High Courts and Supreme Court. Just 0.2 percent of these cases constituted nearly 56 percent of the total demand value. Besides, 66 percent of pending cases, each less than Rs 10 lakh in claim amount, added up to a mere 1.8 percent of the total locked-up value of pending cases.
In direct taxes, 92,338 cases worth Rs 2.01 lakh crore were locked up in disputes at Income Tax Appellate Tribunal (ITAT), while 38,481 cases valuing Rs 2.87 lakh crore were pending at various High Courts. However, 6,357 cases valued Rs 0.08 lakh crore were pending in the Supreme Court.
In indirect tax disputes, 83,338 cases with dispute of Rs 1.92 lakh crore were pending in appellate tribunal CESTAT and 14,141 cases valuing Rs 0.37 lakh crore were pending in High Courts. In Supreme Court, disputes were pending in 2,946 cases with a value of Rs 0.2 lakh crore.
Together, the claims for indirect and direct tax stuck in litigation (Appellate Tribunal and upwards) by the quarter ending March, 2017 amounted to nearly 7.58 lakh crores, over 4.7 percent of GDP.
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