AG Audit doubts correctness of DG Audit Data

By Vijay Kumar

CAG in its latest report to Parliament on Central Excise observed:

- Central Excise revenue has shown 11.56 per cent growth in FY15compared to FY14.

- During FY15, increase in Central Excise duty on petrol and high speed diesel resulted not only in increase of Central Excise collection from petroleum sector but also lead to overall growth of Central Excise. Except Petroleum products and plastic, revenue growth in other sectors is either stagnant or negative.

- Huge amount of Central Excise revenue amounting to Rs. 81,538 crore is blocked in appeals. The amount is increasing every year. Despite a number of measures initiated by the Board, locking up of such a large revenue is a matter of concern.

- Less than 50 per cent of the assessees registered as SSI units in the selected ranges are actually availing the benefit of the SSI exemption.SSI manufacturer of intermediate goods is not benefited out of the scheme.

- Annual report published by DG (Audit) for the years 2011-12 and2012-13 had discrepancies in figures compared to Quality Assurance Review (QAR) reports, doubting the correctness of published data.

- During 2011-12 and 2012-13, 22 and 29 Commissionerates in respect of Central Excise and 18 and 21 Commissionerates in respect of Service Tax were downgraded vis-a-vis previous year grading, showing drop in performance of internal audit.

- In 41 Commissionerates (Central Excise), 39 Commissionerates(Service Tax) and nine Commissionerates (Customs), no reconciliation was being done and consequently revenue of Rs. 2,36,295 crore, Rs. 3,01,436 crore and Rs. 82,224 crore respectively, pertaining to these Commissionerate, remained unreconciled for the period 2011-12 to2013-14.

- SCN invoking extended period on incorrect grounds in contravention of statute resulted in SCNs being time barred in the adjudication in 20cases involving revenue of Rs. 4.40 crore.

- There were 34 instances of deficiencies in internal audit carried out by departmental officials and other issues involving revenue of Rs. 32.76 crore.

- In Ranchi Commissionerate a SCN was issued to M/s SAIL, Bokaro in May 2011 for contravention of provision of Section 4(1)(b) of Central Excise Act and Valuation Rule 2000 for evading payment of Rs. 5.32 lakh for the period 2006-07. In response to the SCN, M/s SAIL Bokaro had submitted its reply on 14 May 2012 with request to give personal hearing before the final decision. But no date was granted to the assessee by the department nor any other action has been taken in this case. The case has not been adjudicated even after a lapse of more than two years.The Ministry stated (November 2015) that the case will be adjudicated soon.

- On scrutiny of the SCNs and Adjudication files in five Commissionerates, it was noticed that the first Personal Hearing was fixed after inordinate delay in20 cases. It is observed that there was delay ranging between 371 days and4,641 days which resulted in adjudication process getting delayed. When pointed this out (June 2014), the Ministry accepted (November 2015) the facts in most of the cases and stated that reason for delay is due to change of adjudication authorities and time taken in verification of facts mentioned in the SCN for following the principles of natural justice.

- Scrutiny of records in 23 Commissionerates and Divisions revealed that the department failed to adjudicate in 342 cases within the prescribed timeframe of one month from the date of conclusion of personal hearing. The delay ranges between 2 days to 333 days (in excess of 30 days from the date of completion of last personal hearing granted to the parties.When we pointed this out (between June 2014 and November 2014), the Ministry while admitting the facts (November 2015) stated that in most of the cases the delay was due to seeking comments from division office in respect of reply filed by noticee, non- submission of additional documents timely by the assessees. Further, it was reiterated that the Adjudication authority always try to dispose of the cases within prescribed time limit inmost of cases but in certain cases where some difficult question of law cropsup and where the case law and defence require detailed examination vis-à-vis the allegations of SCN, strict adherence to time limit prescribed is not feasible.

- Conclusion: It was noticed during audit that the journey of SCN right from the first step of issue of SCN till its adjudication was fraught with delays and short comings. Administrative efficiency requires that the work is done in minimum possible time. The maximum time limits define the outer boundaries for completion of tasks. The time limit prescribed for issue of SCN was one year with provision to invoke extended period of five year for specific circumstances. But instead, it was seen that the extended period was used as a routine provision rather than a rare exception. Thus there is a need to reduce delays in various stages of issue and processing of SCN by systematic monitoring so that interests of both the government revenue and the assessee are protected.