Central Excise/ Service Tax - Scrutiny of Returns - CAG slams ACES
THE preliminary scrutiny of returns has been largely automated through the Automation in Central Excise and Service Tax (ACES) system and according to the Manual for Scrutiny of Service Tax Returns, 2009 (Para 1.2B), this would release manpower for detailed manual scrutiny which then would become the core function of the range.
CAG ascertained the degree of implementation of ACES in the Commissionerates so as to ascertain whether automated preliminary scrutiny through ACES would free up time for the ranges to attend to other important items of work, as envisaged.
What the Audit found were sad and startling facts. Of the 196 sample ranges checked, there were functional problems in 112 ranges such as:
1. Interruptions in connection
2. Lack of infrastructure including absence of power backup
3. Non-allotment of user-id and password
4. Frequent link failure
5. Slow system response time
6. Power supply of insufficient capacity
7. Non-installation of hardware
DDT checked up with some ranges to find out if the situation has improved after Audit and found that it has only worsened. There is a strong feeling in the field that ACES is a big scam and Crores of rupees have been wasted and not even the 14 paise of the rupee has reached the range offices. Thousands of returns are pending scrutiny because of the mess by ACES and blame game is going on merrily, but returns are not getting scrutinized. And costly equipments from generator to computers are going to be junk soon. Everyone is convinced that it is CBI, which should investigate, and not CAG, which should audit.
The CAG also noted that Assistant Commissioners/Deputy Commissioners/Joint Commissioners/Additional Commissioners who are also required to scrutinize high value returns are not normally doing their job. CAG found that only 7 out of the 71 Divisions audited had scrutinized returns. Audit also sadly notes that a Commissionerate in Hyderabad did not furnish any information on this issue. That is perhaps the best way to treat Audit.
CAG Recommends:
1. The following MIS reports may be generated by ACES and corrective action taken:
++ list of non-filers - which may be investigated to detect stop filers
++ returns submitted with delay - suitable penalty may be imposed
++ assessees who had delayed the payment of duty - prescribed interest may be imposed
++ details of returns marked by the system for review and correction but corrective action not taken.
2. The function of detailed scrutiny may be implemented in all the ranges. Till such time that ACES does not do the sample selections of returns, the samples may be selected manually, as prescribed in the scrutiny manuals. It may also be ensured that AC/DC/JC/ADC may conduct the detailed scrutiny of high monetary value returns as prescribed in the returns manual.
3. The challan details submitted online and manual returns may be reconciled with the challan details captured through EASIEST. Such a process would become fully automated when all returns are submitted through ACES.
From CAG's Report No. 25 of 2011-12 (Indirect Taxes - Central Excise and Service Tax)