DEPARTMENT CANNOT DICTATE HOW BUSINESS SHOULD RUN

Fundamental rights

The topic to be discussed in this article is as to whether the Department can dictate a person or a business entity as how the business should run. Article 16 of the Constitution of India that there shall be equality of opportunity for all matters relating to employment or appointment to any office under the State. This provision is also applicable to the citizens to run a business. No person shall be discriminated on the basis of religion, race, caste, sex, descent, place of birth in respect of any employment or office under the State.

Article 19 (1) of the Constitution of India provides right to-

1. freedom of speech and expression;
2. assemble peacefully and without arms;
3. form associations or unions or co-operative societies;
4. move freely throughout the territory of India;
5. reside and settle in any part of the territory of India; and
6. practice any profession or to carry on any occupation, trade or business.

Thus, Article 19(1) of the Constitution gives freedom to its citizens to do any trade or business. But the said freedom is not absolute. It is subjected to certain conditions.

A Department, representing the Government, cannot dictate how a business should run, but it can regulate business operations through laws, policies and licensing to ensure compliance and protect public interests. Definitely a business has a fundamental right to operate and make its own decisions, these rights are subject to government oversight and regulations that are not arbitrary or unjust. A business can challenge any restriction put forth by the Department that are unconstitutional or unreasonable by filing a writ petition before the High Court invoking Article 226 of the Constitution of India.

Role of Government in business

• The government can regulate business entry, operations, and results through policies like licensing and profit/dividend ceilings.
• The government can frame acts, rules and regulations for the compliance by the business.
• Departments can oversee business activities to ensure they operate within legal and ethical boundaries as detailed below-

• Public, health and safety;
• Fairness and impartiality;
• Compliant with laws applicable to the business.

Right of business

A business is having a fundamental right to practice trading or doing business. If the Government puts restrictions to its business by means of notifications, the business can challenge the same as arbitrary, unjust or unreasonable by filing a writ petition before the High Court. The Courts can review government actions to ensure they are not made in the transgression of a constitutional prohibition.

Grants and incentives

The Government grants incentives and grants for investors vary depending on the sector and geographical area and are commonly found in the form of tax concessions. For example - To encourage exports, the foreign trade policy of India uses various schemes which provide for exemptions from tax, import and export duties and restrictions on investments, including:

• Export-oriented units.
• Electronics hardware technology parks.
• Software technology parks.
• Bio-technology parks.
• Special economic zones.

Powers of Department

The Government created various departments for the benefit of the business community. At the same time it can oversee the business activities and put restrictions wherever and whenever required. Care shall be taken that the public interests will not be affected for their supervisory role on business. Departments can make decisions and set procedures within their own functional areas, as long as these are aligned with the company's overall goals. For example, a human resources department makes hiring decisions, but these are still subject to the company's overall strategy.  A single department cannot make decisions that impact the entire company or override policies set by higher management or other departments. Doing so can lead to a conflict of interest or inefficiency, as seen in the case of duplicated work or a narrow focus that hinders the company's overall growth. 

In today’s world, businesses must function within the restrictions of laws and government regulation. Business laws were not only developed to protect consumers but also to preserve competition. These laws are enforced by government agencies at different administrative levels. Any business firm that do not keep to these laws will face fines, penalties and in consequences fail to run. It is very important to know the business laws to operate a business successfully.

Role of Tax Departments on business

The tax departments put much of the restrictions on business. The business is to comply with the provisions of tax laws strictly and failure to do so will cause of the imposition of tax demand, penalty, interest. In respect of indirect taxes the confiscation of the goods is also possible. The authorities issue show cause notices to the business entities when there is a contravention of the law or fail to pay taxes. The show cause notice may direct the tax payer to give reply within the time fixed in the show cause notice. The tax payer is to give reply to the Department within the time specified in the notice along with the copies of documents relied on by him. The Adjudicating Authority will consider the reply filed the tax payer and give an opportunity of bearing heard to the tax payer. The tax payer shall put up his arguments before the Adjudicating Authority either in person or through his authorised representative. The Adjudicating Authority, after considering the submissions of the tax payer may drop the show cause notice or confirm the demand in the show cause notice and also impose interest and penalty.

The tax payer is having right to file appeal against the said order before the Appellate Authority and the case may reach up to Supreme Court. Thus, it is clear that there are many restrictions in tax matters if the provisions of the respective law are not complied with by the tax payers. All that can be done by the Department but it has not power to dictate the business entity as how to conduct the business. The Department cannot decide the methodology of the business of a business entity.

A business entity is to register itself under GST Act if the aggregate transaction exceeds the prescribed limit. After getting registration the business entity is to levy tax, pay the same to the exchequer of the Government and file periodical returns as required under the provisions of the Act and the Rules made there under. If the registered person failed to pay tax or file the return within the time prescribed the department, through its Proper Officer can initiate proceedings against the tax payer. The tax payer may be liable to pay tax as demanded in the Adjudication order, if the adjudication is decided against the tax payer. The tax payer may file appeal before the appellate forum and got quashing of the impugned order or the order may be confirmed.

In Jones Diraviam Versus Deputy Commissioner (GST Appeal), Tirunelveli District and Commercial Tax Officer, Tirunelveli - 2024 (3) TMI 1548 - MADRAS HIGH COURT . In this case, the petitioner is a sub-contractor. He failed to pay the tax as well as failed to file the returns. The Department issued show cause notice to the petitioner but the petitioner did not aware of the notice and failed to file reply for the same. The Adjudicating Authority cancelled the registration certificate.

The petitioner filed an appeal before the First Appellate Authority with a delay of 260 days. The delay was not condoned. Therefore, the petitioner filed the present writ petition before Madras High Court. Before the High Court, the petitioner contended that in view of the cancellation of registration his business was affected and also his livelihood.  The Department contended that the petitioner did not file reply to the show cause notice issued to him and also did not file the required returns. Further the petitioner did not file the appeal in time. Therefore, it prayed for the dismissal of the writ petition.

The High Court considered the submissions of the both the parties. The High Court relied on the judgment of Rohit Enterprises Versus The Commissioner State GST Aurangabad. The Dy. Commissioner State Tax (Appeal) Aurangabad. The State Tax Officer, Aurangabad - 2023 (2) TMI 759 - BOMBAY HIGH COURT  in which the Bombay High Court held that the provisions of GST enactment cannot be interpreted so as to deny right to carry on Trade and Commerce to any citizen and subjects. The constitutional guarantee is unconditional and unequivocal and must be enforced regardless of shortcomings in the scheme of GST enactment. The right to carry on trade or profession cannot be curtailed contrary to the constitutional guarantee under Article 19(1)(g)and Article 21 of the Constitution of India. If the person like petitioner is not allowed to revive the registration, the state would suffer loss of revenue and the ultimate goal under GST regime will stand defeated.

The High Court held that the petitioner, who is sufferer of unique circumstances resulting from pandemic and his health barriers, would be put to great hardship for want of GST registration. The petitioner who is small scale entrepreneur cannot carry on production activities in absence of GST registration. Resultantly, his right to livelihood would be affected. Since his statutory appeal suffered dismissal on technical ground, the High Court could not allow the situation to continue. The High Court found that, in the facts and circumstances of this case it would be appropriate to exercise our jurisdiction under Art. 226 of the Constitution of India. 14 Even looking to the object of the provisions under GST Act, it is not in the interest of the government to curtail the right of the entrepreneur like petitioner. The petitioner must be allowed to continue business and to contribute to the state’s revenue. The petitioner is ready and willing to pay all the dues along with penalty and interest as applicable. 

The High Court allowed the writ petition. The High Court observed that the petitioner is a contract supplier. Most of the small scale entrepreneurs like carpenters, electricians, fabricators etc... are almost uneducated and they are not accustomed with handling of e-mails and other advance technologies. The object of any Government is to promote the trade and not to curtail the same. The cancellation of registration certainly amounts to a capital punishment to the traders, like the petitioner.