C.EX, LIES AND AUDIT REPORTS
Para 1.1 of the CAG report on Central Excise for the year 2009-10 (Compliance Audit) contains revenue analysis with the help of colourful charts and histograms. Graph 4 contains the comparison of payments made through PLA and CENVAT.
The Auditors felt that there has been a consistent increase in payment through CENVAT compared to PLA. For example, the payment from CENVAT account was 109% in 2006-07 and 123% in 2007-08 of the duty paid in PLA. The reasons for such sharp increase as concluded by the Audit were explained in Chapter III of the report. Before going to the contents of Chapter III, let us pause for a moment and examine the growth aspect first.
If you read the report on the Service Tax, Graph 1 says that the actual receipts from Service Tax were Rs 38,000 crores in 2006-07 and Rs 51,000 crores in 2007-08. From where did this service tax come from? How much amount from this service tax was availed as credit by the manufacturers? Since the CENVAT Credit of service tax would be availed by the manufacturers for payment of excise duty, without taking into consideration of the receipts of service tax in cash or eliminating the service tax credit from the CENVAT Credit, how can one analyse the PLA : CENVAT ratio and come to the conclusion that the increase in CENVAT payment is due to mis-use of CENVAT credit? If you submit such faulty report in any MNC, you are sure to be fired the next morning. But it is ok with Parliament and CAG.
And now, have a look at the contents of Chapter III. The Audit attributes the growth in CENVAT is inter alia due to:
++ Non-payment of 10% amount on exempted goods, though proportionate credit on inputs used in exempted goods was reversed.
++ Non-payment of 10% amount on Electricity due to availing CENVAT items like lubricants, paints etc ( which would be a minuscule amount compared to 10% amount)
++ Taking of 100% Credit on capital goods in the same financial year ( the assessee did not use the credit for payment of excise duty / service tax)
++ Delay in submitting the statement of duty paid in PLA for refund claims in respect of area based exemption (39/2001), which the department views as only procedural lapse.
Even assuming there is increase in availment of CENVAT Credit, can any of the above cases be held as reason for such increase?