CAG says Customs and Central Excise Welfare Fund is not necessary - Huge Mess in CBEC fund spending
THE CAG's latest Audit Report on Government Finances had some scathing remarks on how the CBEC spent money rather lavishly and carelessly.
Customs and Central Excise Welfare Fund
Creation of Funds :
As a part of liberalization of the policies and procedures relating to grant of rewards to the government servants, the government decided to create three funds, namely (i) Customs Welfare Fund, (ii) Performance Award Fund, and (iii) Customs Special Fund for acquisition of Anti Smuggling Equipment vide Ministry of Finance, Department of Revenue F.No.13011/3/85- Ad.V dated 30 March, 1985.
Objectives of the Funds : The objectives of the funds were promotion of staff welfare, setting up of recreation clubs/libraries; scholarships for children of employees; subsidized transport facility; payment of ex-gratia in cases of death or injuries resulting from accident, operation or action; different forms of financial medical assistances; removal of difficulties caused by natural calamities like floods, earthquake, drought; and procurement of anti-smuggling equipments of specialized nature etc.
Merger of Funds : Customs Welfare Fund and Performance Award Fund had been merged to make a single entity called Customs and Central Excise Welfare Fund vide Ministry's order No.712/1/2005-Cus-(AS), dated 12 October 2006.
A test check of expenditure financed from these two funds were conducted and the Audit found:
(I) Customs & Central Excise Welfare Fund
(i) In terms of Department of Pension & Pensioners Welfare O.M.No.38/37/08-P&PW(A), dated 2 September 2008 an ex-gratia lump sum compensation is payable to the families of Central Government civilian employees from Welfare Fund, who die during the performance of official duties, terrorist action, or natural calamity. It was noticed that out of Welfare Fund, the department made ex-gratia payment in 3 cases for Rs. 25 lakh in respect of death occurred due to accident/attributable to violence of terrorists or in the course of performance of duties, Rs. 381.50 lakh ex-gratia payment in respect of 350 cases of natural death and Rs. 20.02 lakh in respect of 7 cases to sports persons during 2008-09 to 2013-14. However, payment of Rs 381.50 lakh and Rs 20.02 lakh were not covered under the DOPT notification for payment from Welfare fund and thus resulted in irregular payment.
(ii) An expenditure of Rs. 715 lakh was incurred on setting up of a museum at Panaji, Goa to promote common man's awareness regarding history of the department out of the Welfare Fund, which could have been financed from normal budgetary process.
(iii) During the period 2008-09 to 2013-14, an expenditure of Rs 472.75 lakh was incurred in 919 cases of medical assistance/expenses on treatment from private hospitals out of the Welfare Fund. These employees were also covered under CGHS (MA)/CGHS Rules and the expenditure could have been financed from normal budgetary process.
(iv) As per Department's letter No.712/1/2005-Cus (AS), dated 12.10.2006, the Performance Award Fund was merged with the Customs & Central Excise Welfare Fund in October 2006. Despite merger of the two funds, Performance Award Fund was continued to be reflected in the Finance Accounts upto 2013-14. Share of Welfare fund was also being transferred to the Performance Award Fund instead of Customs & Central Excise Welfare Fund irregularly till 2012-13 against the above order.
(II) Customs Special Equipment Fund
(i) Ministry of Finance issued notification in December 1999 for “Procurement of anti-smuggling equipments of the specialized nature and vehicles for anti-smuggling/anti-evasion purpose within the shortest possible time.” The Governing Body, Directorate of Logistics, Customs and Central Excise issued sanctions of Rs. 15 crore for maintenance/ up-gradation of special equipment during the period 2008-09 to 2013-14 out of Special Equipment Fund placed for procurement of equipment.
The Financial Advisor (Finance) disagreed (March 2013) with the transaction stating that “Special Equipment Fund” was only meant for procurement of equipment. Maintenance expenditure should have been met from the Special Secret Fund (SSF), which would have required augmentation to the extent. The Department incurred expenditure of Rs. 13.49 crore for maintenance/ up-gradation of equipment which was irregular.
(ii) Video Conferencing System was not classified as special equipment for anti-smuggling as per approved list of the Department. Expenditure of Rs.0.32crore was incurred irregularly out of special equipment fund for procurement and installation of video conference system at New Delhi and Chennai.
(iii) As per Ministry of Finance, Department of Revenue instruction of 28 October, 2005 the balances lying in the saving bank/current account shall be transferred immediately to the Personal Deposit Account.
Directorate of Revenue Intelligence was allocated Rs. 15 crore out of Special Equipment Fund during the period 2008-09 to 2013-14. It was noticed that Directorate of Revenue Intelligence was still operating saving account instead of Personal Deposit Account. Thus, Directorate of Revenue Intelligence retained funds aggregating Rs.15crore outside the Government Accounts contrary to the above instructions issued in October 2005.
(iv) The Governing Body, Directorate of Logistics, Customs and Central Excise disbursed Rs. 43.018 crore for procurement of special anti smuggling equipment or maintenance thereof during the period 2008- 09 to 2013-14. The Department furnished utilization certificate of Rs.11.00crore only. The utilization certificates in respect of sanctions of Rs.32.01crore were not furnished till November 2014.
Above test checks revealed that the Department incurred irregular expenditures of Rs.15.89crore out of Rs.23.42crore from Customs & Central Excise Welfare Fund and Rs. 13.80 crore out of Rs.43.01crore from Special Equipment Fund. Thus, the irregular expenditure of Rs. 29.69 crore out of total expenditure of Rs. 66.43 crore was against the purpose/objectives for which the respective funds were created and also against the instructions of Ministry of Finance issued from time to time.
Further, the Department procured a number of other anti-smuggling special equipment like Patrolling Marine Vessels, Container Scanners etc. out of normal budget, rather than from Special Equipment Fund. Thus, there were two sources for procurement in the Department, which could have been financed commonly from normal budgetary process.
Audit concluded, that almost all the welfare activities financed from the Welfare fund of the CBEC are already being extended to the Government employees of other Departments through the normal budgetary process and under extant rules governing such expenditure, without creating any welfare fund in those Departments. As General Financial Rules do not allow expenditure from the public moneys for the benefit of a section of the people, the continuance of Customs and Central Excise Welfare Fund is not necessary. The welfare activities can be financed through the normal budgetary process of the Department .
If out of all this money rolling around some 50 crores is given to CESTAT, we can have new Benches and the Department's litigation can be taken to the next level!