Customs - Directorate General of Valuation - through Audit
THE Directorate of Valuation (DOV) was established in the year 1997 and upgraded as Directorate General of Valuation (DGOV) in December 2002. The main function of the DGOV is to assist the Central Board of Excise & Customs in Policy matters concerning valuation of Imported, exported and excisable items; developing valuation tools and best practices for the effective and uniform application of valuation law; monitoring valuation trends of sensitive commodities; carrying out valuation inspections at Customs stations; coordinating with relevant international organizations; providing data for Risk Management System(RMS); monitoring and examining quality of orders passed by Special Valuation Branches (SVBs) of the Customs Commissionerates, etc. DGOV in its website (www.dov.gov.in) hosts the National Import Database (NIDB), Central Excise Valuation Data Base (CEDB), Central Registry of Special Valuation cases (SVB), Export Commodity Database, alerts and monthly Valuation Bulletin "Customs Valuation Bulletin" as well as "Central Excise Valuation Bulletin" are published and disseminated. The website also shows the organizational structure of DGOV. From December 2012, the functional control of Special Valuation Branches at Mumbai, Delhi, Chennai, Kolkata and Bangalore were delegated to DGOV.
Recently, the CAG conducted an audit over the functioning of Directorate General of Valuation and the DGOV was far more cooperative than the DG DRI. (Please see yesterday's DDT)
National Import Data Base (NIDB) : An electronic data base of imported goods has been developed in June 2004 which involves compilation of import data on weekly basis from all Customs stations in the country and its analysis by specially developed software (Mulyaankan) to determine outliers; unit values, weighted average values of identical goods, percentage deviations and outliers, supplemented with international price information.
Export Commodity Data Base (ECDB): It is an export valuation data base, developed in the year 2005 with a view to check over/under valuation and misuse of export incentive schemes. This involves capturing of export data from the Customs Stations, consolidation and analysis of this data with the help of a specially designed software for providing results (viz. weighted averages, standard deviations, outliers), leading to detection of potential cases of valuation fraud.
Central Registry Database (CRD): CRD is maintained by DGOV on its website which contains details of Special Valuation Branch (SVB) cases pertaining to related party imports, payment of royalties, license fees, supply of materials and services by the importer, etc. registered in the five major Custom Houses at Mumbai, Chennai, Delhi, Kolkata and Bangalore. Each case registered under SVB has to be uploaded in the CRD by the respective Custom House. DGOV has been vested with functional control over the SVBs with effect from 1 January 2013.
Central Excise Valuation Database (CEDB): Central Excise Valuation database has been developed in respect of 9 sensitive commodities being received from the central excise zones with effect from July 2008 and being analyzed. A monthly report is generated containing the average, maximum and minimum assessable values for different commodities.
CAG noticed that DGOV:
1. does not have any IS Strategic Plan for Database Management System of DGOV.
2. has not conducted the audit of its software.
3. does not capture the number of hits in the system
4. does not have the exact number of outliers generated for the commodities at a point of time (at eight digit level).
CAG recommended:
i. Independent third party evaluation/assessment.
ii. An IS organization within DGOV with the right skilled persons.
iii. Audit of the database, operating system, networking, infrastructure, hardware configuration, IS security, change management etc.
Non integration of DGOV databases with Indian Customs EDI System (ICES) 1.5 : DGOV data base is not integrated with ICES 1.5. Assessing officer has to login to the DGOV website and separately search for the required information. CBEC had directed its field formations on 28th November 2009 to use of DGOV databases while assessing import bill of entries or shipping bills by integrating it with ICES 1.5.
How correct is DGOV Data ? Audit of the value of imports and exports of all commodities from DGOV, compared with the data reported by MOCI indicated that total value of imports in DGOV database was less to the extent of 35.58 percent, 39.06 percent and 33.53 percent for the year 2011-12, 2012-13 and 2013-14 respectively in comparison to value of imports as published by MOCI which also relies on the ICES 1.5 data. Similarly total value of export in DGOV database was less to the extent of 27.53 percent in the year 2012-13 and 34.06 percent in the year 2013-14.
The main reasons for the difference appear to be non-inclusion of data of imports/exports made by Special Economic Zones (SEZs/EOUs) in DGOV database and non-existence of any mechanism with DGOV to ensure that data receipt in DGOV is complete.
DGOV also informed that assessments of imports and exports in SEZs are handled by MOCI and their system was not connected with Customs EDI systems. It was observed that alerts issued by the DGOV are not being marked by DGOV to the Development Commissioners of SEZs which was confirmed by Development Commissioner, SEEPZ.
It is indeed surprising that in spite of all these deficiencies, the DGOV continues to be in the business!
Please also see TARC recommendations - 'Beginning of end' for SVB?