CBEC's dream walk hand in hand with ADB – To implement mega projects for Scrutiny of Returns and streamlining Audit Wing
WHAT has Asian Development Bank got to do with CBEC? Well, it's all about tax administration! In this era of self assessment, assessees are provided with enormous liberty to assess the tax liabilities themselves, pay the taxes and furnish the returns periodically. With so much of freedom and liberty at their disposal, there is apprehension that there could be tax leakage.
We all know that tax collection forms the backbone of every Government's developmental programs and projects. If there is leakage in the tax collections, there is every possibility of these developmental projects getting derailed and Governments will have to resort to external borrowings to bridge the gap in funding for these projects. Therefore, to plug this leakage and minimize Government's dependence on external funding for internal development projects, Asian Development Bank has stepped in to aid the Indian tax administration.
As a part of this grand exercise, through its technical assistance project titled ‘Capacity Building in Tax Administration', ADB has come out with detailed guidelines for strengthening the tax administration's verification systems to plug the loop holes and shoring up assessees' tax compliance. As a first step in this direction, the three important wings of tax administration viz., ranges, audit and anti-evasion are proposed to be streamlined. To achieve this objective, CBEC prepared two elaborate manuals titled ‘Manual for Scrutiny of Central Excise Returns' and ‘Manual for Quality Assurance Review' for scrutiny of excise returns and streamlining audit wing respectively.
The Manual for the Scrutiny of Central Excise Returns is organized into four chapters. Chapter 1 outlines the rationale for returns' scrutiny and discusses the related legislative provisions. Chapter 2 discusses the Board's guidelines for preliminary scrutiny and contains the list of risk parameters which could be used for selecting returns for detailed scrutiny. It is visualized that with the implementation of the ACES (Automation of Central Excise and Service Tax Project), the preliminary scrutiny would be automated. In Chapter 3, the changeover from manual returns' scrutiny to automated returns' scrutiny is discussed while Chapter 4 contains the guidelines for carrying out detailed manual scrutiny of selected returns.
This manual provides detailed check lists for preliminary scrutiny of all ER1/ER3 returns, checklist for selection of assessees for detailed scrutiny of ER1/ER3 returns. It also provides for a register for scrutiny and assessment of ER1/ER3 returns and a report on scrutiny of ER1/ER3 returns. In addition to this, an elaborate checklist for scrutiny of ER1/ER2/ER3 returns is also provided. Unfortunately, there is not a word on the scrutiny of Annual Returns viz., ER4 and ER5 and the monthly ER6 filed by certain class of manufacturers for declaring principal inputs and finished goods. So much for capacity building.
One glance at the guidelines and checklists gives an impression that to put this project on track and successfully implement it in the long run, the starting point for CBEC would be to increase the staff strength in the Range offices across the country tenfold.
As for the ‘Manual for Quality Assurance Review' which provides for a complete face lift of the Audit Wing of CBEC, the less said the better, because on the face of it the standards set are simply sky high.
Given the history of CBEC's lacklustre approach in implementing automation projects (several projects have come and gone in the last decade or so with little or no success – the latest getting the axe was the SERMON), we can rest assured that these dream projects will be nothing but non-starters.
If at all they are implemented, the assessees can brace up for more questions from the tax authorities in the days to come
Incidentally these manuals have not been made available to the people who they were meant for – the Departmental officers. DDT contacted at least a hundred officers from various parts of the country at various levels – not one of them had heard about these manuals. We got them from ADB.