Ignited minds – CAG sets fire to oil companies – Reliance, to start with
Yesterday DDT had mentioned about the Rs 9500 Crores Show Cause Notice to Reliance. The issue was non payment of AED by Reliance for export of petroleum products. Though Show Cause Notice has been issued to Reliance, it may be interesting to recall that Board had in Circular No. 807/4/2005-CX., dated 10-2-2005 clarified that AED or SAED levied on Motor Spirit and High Speed Diesel under respective sections of Finance Acts are not required to be paid for goods exported under bond. Some extracts from the Board Circular are worth a look.
• Board’s attention has been drawn to objections raised by C & AG over non-payment/non-collection of such duties on the Motor Spirit and High Speed Diesel exported under Bond
• Board has also observed that there is non-uniformity of practice in so far as levy and collection of said duties is concerned.
• In some cases, show cause notices have been raised demanding these duties for a period ranging from 1998 till date
• Board has also observed that it is the policy of the Government to grant relief from element of domestic taxes on goods which are exported. Therefore, the notification governing conditions and procedures for export of excisable goods without payment of duty issued under rule 19 shall include the aforementioned duties, namely AED and SAED levied as duty of excise.
• it is clarified that AED or SAED levied on Motor Spirit and High Speed Diesel under respective sections of Finance Acts are not required to be paid for goods exported under bond.
• The reply to objections raised by C & AG on the issue may be given in the light of the legal position given above
• Pending show cause notices except, in cases where they were issued on receipt of objections raised by C & AG, may be finalized accordingly
• Protective demands raised consequent to objections raised by C & AG may be transferred to Call Book as per the existing instructions
The Board is very clear that no duty is payable on exports. Then why the Show Cause Notice to Reliance? There is another Board circular which stipulates issue of Show Cause Notice whenever Audit chooses to set fire. And so the Show Cause Notice to Reliance is one such smoke bomb. The press, including the respected pink ones, has gone to town with the news of the Show Cause Notice to Reliance. The fact is that other Oil companies must have also got similar Show Cause Notices or will get soon. The Rajkot Commissioner is said to have told reporters that he is aware of the Board Circular. “Then why the Show Cause Notice?”, they asked him. “Ask the Chief Commissioner” , was reportedly the answer of the Commissioner. Why can’t the Board tell the CAG that it is the policy of the Government not to export taxes?
It is time the CAG should be asked to undertake a study on the costs to the nation caused by silly objections raised by his auditors.
For a detailed analysis of the issue, please see our top story, “AAG OF THE CAG” today.