Impact of Audit
DO you remember the havoc created by audit para by C & AG on 75% abatement on GTA service? The Audit wrote that the 75% abatement is not admissible to the consignors / consignees who pay service tax as recipients of service. (Para 18.1 of report No 7 of 2007 (Indirect Taxes).
According to C & AG, there was revenue loss to the tune of Rs.223.56 crore during the period from January 2005 to April 2006. After this objection, a number of show cause notices were issued denying 75% abatement. Finally the Board had to intervene and issue 37 B Order dated March 12, 2007 to allow the exemption to the consignors / consignees also after taking the opinion of the law ministry, notwithstanding the C & AG objection. That was how Para 18.1 met its gory end without yielding a single rupee out of 223 crores.
Surprisingly, this Para 18.1 has again become a subject matter of discussion in Audit Report for 2010 [Report No. 13 of 2009-10 - Union Government (Indirect Taxes - Service Tax)]. Under the head “Impact of audit reports”, it claims that because of para 18.1, the Government has issued to the notification No. dated 5 January 2009 with retrospective effect from 1 January 2005.
What is this Notification ? It exempts services like clearing and forwarding agent services, manpower recruitment services, cargo handling services warehousing services, business auxiliary services, packaging services, etc., provided to the goods transport agency.
Do you see any connection between denying 75% abatement to the consignors / consignees and exemption Notification ? We, the lesser mortals can never see any. All that we know about the impact of para 18.1 was issue of 37B order dated 12.3.2007.
And this is not the first time C & AG trumpeted their impact story on Para 18.1 of AR No. 7 of 2007. Even in Report No. CA 20 of 2009-10 – Union Government (Indirect Taxes), C & AG boasted that because of their audit para Government provided unconditional exemption through Notification No. dated March 1, 2008 from levy of service tax upto 75% of gross amount charged as freight by GTA. Of course they conveniently ignored to acknowledge Board's Section 37B Order issued in March 2007 which sounded death knell to their audit para.
Not to forget the huge impact this Para also had on the environment when tonnes of paper was laid waste by issuing show cause notices and then scrapping those notices by issuing orders-in-original.