TIOL-DDT 408 · the untouched capture
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<p > <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT
408</font><br>
18 07 2006<br>
Tuesday</b></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Delay
in finalization of demands - CAG hauls CBEC over the coals</strong></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
CAG found that Board does not monitor, Chief Commissioners do not bother to
send reports asked by the Board and the Board doesn’t get angry. Similar disobedience
from the Commissioners do not cause anxiety to the Chief Commissioners. High
value cases are routinely kept pending. Reports are manipulated and …</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ In spite of incorporation of time limit in the statute with effect from
11 May 2001, 15251 cases involving central excise duty of Rs 8625.87
crore were pending adjudication as on 31 March 2004. Increase was 13
per cent in terms of number and 51 per cent in terms of amount as compared
to position on 31 March 2001.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ Cases reported to be pending beyond one year were 38 per cent in terms
of number and 48 per cent in terms of amount.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ In six test checked cases alone, an amount of Rs.153.01 crore was pending
adjudication for want of administrative action.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ There was general tendency for adjudicating officers to finalise low revenue
cases at the expense of keeping high value ones pending. This was true even
for de novo cases.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ Cases numbering 829 involving central excise duty of Rs.1687.83 crore were
pending adjudication for want of clarifications by the Board.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ Seventy six per cent of adjudicating officers did not meet target of 100
cases fixed per annum.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ Due to ineffective internal controls, 31 cases with duty effect of Rs.6.61
crore were lost sight of while transferring cases on revision of monetary
limit for adjudication and 200 cases involving duty of Rs.145.48 crore not
reflected in the monthly technical report of ten divisions alone.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CAG
points out that in 1997 it had recommended that reasonable statutory time
limit for finalisation of SCNs be fixed for safeguarding interest of revenue.
And the time limit was fixed as one year fore suppression cases and six months
for other cases – of course with a clause - <b>where it is possible to do
so. </b>Audit finds it was not possible!</font></p>
</blockquote>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit
observed that</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ Even after fixation of time limit, pendency was higher by 13 per cent in
terms of number and 51 per cent in terms of duty involved</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ average disposal was approximately 54 cases per annum per adjudicating
officer during the year 2002-03 against target of 75 cases and was 72 cases
per annum during 2003-04 against revised target of 100 per annum per adjudicating
officer fixed by the Board in May 2003.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ Time limit prescribed for finalising adjudication not adhered to</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ The reported age-wise pendency was 38 per cent in terms of number and 48
per cent in terms of amount for cases pending adjudication beyond one year.
These did not seem accurate since audit scrutiny had revealed that several
cases transferred from one adjudicating officer to another consequent upon
revision of monetary powers in October 2003 were reflected as fresh cases
in MTR.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ Adjudicating officers tended to clear fresh cases at a faster rate than
old cases, thereby allowing old cases to linger.</font></p>
</blockquote>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Why
are cases not adjudicated? The CAG studied some specific cases.</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
1. PH was postponed eight times against the permitted three </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
2. 29.02 Crores held up for want of issue of a Show Cause Notice for Rs. 25,000.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
3. Clarification sought from Board; No reply.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
4. Order not issued even after one year of hearing.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
5. During PH assessee asked for documents which could not be given</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
6. Show Cause Notice issued in 1997. Board transfers the case to a Commissioner
in 2003, files transferred in 2004; adjudication yet to be done.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
7. PH notice issued to assessee without mentioning date and time of appearance.
Case delayed for 13 years.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Pace
of finalisation is inversely proportional to value.</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit
noticed that </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ percentage of clearances both in terms of number and amount varied from
63 per cent to 80 per cent in respect of cases involving revenue upto Rs.20
lakh each.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ Percentage of clearances of cases involving revenue of more than Rs.20
lakh in terms of number was similar whereas percentage in terms of revenue
involved was much lower</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ This wide gap was indicative of the<b> general tendency of adjudicating
officers to deal with low revenue cases at the cost of keeping high revenue
ones pending.</b></font></p>
</blockquote>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Officers
generally do not adjudicate de novo cases. No monitoring by Board.</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit
found a general tendency to avoid adjudication of de novo cases, especially
high revenue ones. CBEC member had written to all the Chief Commissioners in
2004 to pay attention to de novo cases and send a fortnightly report. Audit
found that no such reports were sent and a happy Board also did not insist.
Audit says, <b>Lack of proper attention and monitoring at Board’s level resulted
in remanded back cases involving high revenue remaining un-adjudicated for long.
</b>If field was responsible, Board could have punished them; who will punish
the Board?</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Why
are such cases pending? Audit made some specific case study:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
1. Administrative delays in transferring required records had resulted in non-finalisation
of the case and blockage of government revenue</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
2. Tribunal ordered re adjudication within six months. Three years and two commissioners
later the case is still pending. Administrative problems.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>PH
over but who will write the Adjudication Order?</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board,
long ago in 1980 wanted orders to be issued within 5 days of hearing; if that
is not possible within 15 days and in any case within a month.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On
a test check, Audit found that in 37 per cent of the cases, adjudication orders
were issued after one month from date of conclusion of personal hearing with
delays ranging from a month to more than a year. <b>In four divisions of Thane
I, Aurangabad, Delhi III and Delhi IV commissionerates, all adjudication orders
were issued after one month</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit
found that there was no effective mechanism to check if orders are issued immediately
after hearing. Chief Commissioner, Vadodara had directed commissioners to submit
monthly report in the prescribed proforma in respect of such delays. Audit found
that no such report was sent.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Call
book cases not recalled for want of Board clarifications.</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Demand
cases pending adjudication can be transferred and kept in the call book, on
specific instructions of the Board. These cases could be adjudicated only after
necessary clarifications were issued by it. Audit observes that Board was responsible
for overall monitoring of expeditious disposal of pending cases within prescribed
time limit. It should, therefore, have reviewed the position and issued clarifications
from time to time to finalise cases pending at its own instance in a fixed time
frame. Inaction in the matter resulted in postponement of adjudication for a
long period to the detriment of revenue.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Irresponsive
Board?</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Some
cases pending for want of clarification from the Board:</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
1. Board vide circular dated 28 August 2003 decided to further examine the matter
relating to recovery of eight per cent of the price of exempted goods, when
common inputs are used for both dutiable and exempted goods. Even after three
years, no clarification from Board and cases are pending in the call book.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
2. Board wanted to examine the issue of availment of exemption under notification
No.2/2001, dated 27 January 2001 for Gujarat relief work. The Board have not
yet taken a decision even though more than two years have lapsed since the orders
withholding finalisation proceedings were issued.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Disobedient
Commissioners (Appeals) - Audit seems to be ignorant of case law. </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit
observes that Power to remand back a case was thus done away with by amendment
of section 35A with effect from 11 May 2001. In course of review of 154 divisions/adjudication
cell of commissionerates it was revealed that cases continued to be remanded
back by the commissioner (appeals) even after amendment in section 35A with
effect from 11 May 2001. The fact that commissioner (appeals) continued to remand
back cases even after amendment of 11 May 2001 indicated that Act was being
violated. <b>But is not Audit aware of the plethora of case law available on
the subject? Judicial opinion is that even after amendment, Commissioner (Appeals)
can remand. </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Mostly
Tinkered Report (MTR) - Mis-reporting of pendency – Expertise unparalleled.</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On
PAC expressing serious concern over discrepancies in data relating to pending
cases, the Board vide letter dated 23 May 2003 issued instructions for taking
utmost care in compiling data while sending MTRs. Audit on test check found
that despite such instructions there were differences in the figures reflected
in divisions with those in MTRs. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MTR
is the Monthly Technical Report sent by the Commissioners and no other compilation
in the world can have more lies than the MTR. Orders which the officer hopes
to issue are also shown as disposed. There is no logic or facts involved in
these reports. If you look at the way this report is prepared, you will be
surprised that the worst evader will not cook up this kind of accounts. An inspector
prepares the report with the actual pendency as available in his cooked up register.
When it goes to the Joint Commissioner, he sees that 346 cases are shown as
pending with the Joint Commissioner. He will correct it as 326. Then it goes
to the Commissioner and the draft says that Commissioner has a pendency of 56.
He will correct it as 16. The manipulation has to be reconciled and fresh cooking
done. There was one smart Commissioner who immediately after taking over called
for a factual position and then reported to the Board that the figures shown
by his predecessor was only 10% of the actual pendency!</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Lack
of co-ordination between Board and field offices/within the wings of the department</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit
found that some cases were pending adjudication due to lack of proper co-ordination
between Board and field offices as also within the various wings of the department
in furnishing necessary clarifications/documents to each other.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These
are some of the excuses:-</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
1. Documents from anti evasion wing awaited.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
2. Documents from DGCEI awaited</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
3. Clarification from the Board awaited</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Audit’s
recommendations:-</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
1. Government may consider laying down guidelines specifying circumstances under
which it was not possible to finalise demand within the statutory period and
make it incumbent upon each adjudication authority to justify each such case
to the Board.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
2. Board may also fix appropriate time limit for issuing clarifications on the
cases kept in the call book at its behest.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
3. In view of large scale transfer of cases due to revision of monetary powers,
there is an urgent need for recasting of MTRs by all the commissionerates to
reflect correct picture of age-wise pendency.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
4. In addition to fixing a numerical target for disposal of cases, Board may
stipulate financial target as well to take care of the tendency of adjudicating
low value cases.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
5. Time bound programme of concerted efforts to bring down older pendencies
to manageable levels.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Physician
heal thyself! What is Audit’s role in pendency?</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
CAG has not studied the Audit’s role in the proliferation of Show Cause Notices
and their non-adjudication. Whenever Audit raises (an often silly objection),
Show Cause Notices are routinely issued and they are not adjudicated till Audit
clears the objection, which they normally do not do for fifteen years. Later
they come and raise an objection that Show Cause Notices are pending involving
huge revnue.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Twist
in the tale.</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
poor lambasted DGST, had withdrawn his controversial letter on abatement with
regard to Service Tax on GTA. But now it is Audit’s favourite objection. They
say his original letter was correct and withdrawal wrong! </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Life
goes on merrily thanks to the DGSTs and CAGs of this world! </font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until
Tomorrow with more DDT </font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a nice day. </font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail
your comments to</font> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p>
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