TIOL-DDT 430 · 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
430</font><br>
18 08 2006<br>
Friday</b></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Service
Tax – Commissioner, Mumbai appointed as adjudicating authority with
All <st1:country-region>India</st1:country-region> jurisdiction</font></strong>
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
exercise of the powers conferred by Section 83A of the Finance Act, 1994, the
Board has appointed the Commissioner of Service Tax, Mumbai for the purposes
of investigation and adjudication of cases being investigated by the Directorate
General of Central Excise Intelligence against M/s First Flight Courier Ltd,
Mumbai.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now
Section 83A reads as,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>SECTION
83A. Power of adjudication. — </b>Where under this Chapter or the rules made
thereunder any person is liable to a penalty, <b>such penalty may be adjudged</b>
by the Central Excise Officer conferred with such power as the Central Board
of Excise and Customs constituted under the Central Boards of Revenue Act, 1963
(54 of 1963), may, by notification in the Official Gazette, specify.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So
under this section, only <b>penalty</b> can be adjudicated by the designated
officer. Recovery of tax has to be under Section 73. Will there be another notification
for that? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This
notification was published by the Board on 28<sup>th</sup> July 2006, but we
could not bring this to you, as it was simply not available. We checked at 9
am today and it is still not available even in the CBEC’s web site! Why are
notifications not made available to the public? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2006/stnot06_026.htm">NOTIFICATION
NO. 26/2006-Service Tax, Dated: July 28, 2006</a></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">DG
(Audit) – Does the Board take it seriously?</font></strong></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Only
8 out of the 92 Commissionerates maintain proper records</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
July 2000, a separate Directorate General of Audit headed by a Director
General of Audit was created by the CBEC. To begin with, it was a small
set up consisting of the Director General and a handful of officers to assist
him in headquarters. The first DG was sitting in a small room in the Central
Excise Commissionerate along with three other officers. He had already been
promoted as a Board member, but while commissioners and even Additional
Commissioners in the building had lavish individual rooms for them, the
DG was sharing a room with his junior colleagues. The CBEC had sent a strong
message – The DG (Audit) does not find
an important place in the scheme of things. When an inconvenient Commissioner
in a premier investigating agency had to be removed from there, because
he was stepping on too many toes, they posted him as ADG(Audit). The organisation
was expanded in November 2002 with the implementation of cadre restructuring
when zonal units were created. At present, the Directorate has seven zonal
units across the country each of them headed by an Additional Director General
(of Commissioner rank). The Zonal units are functional at Delhi, Ahmedabad,
Mumbai, Bangalore, Chennai, Hyderabad and Kolkata.
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Role
of Zonal units:- There has been a charter of functions for the DG. Although
the role of Zonal units has not been separately defined in the Charter of functions,
their primary role is to maintain a close interface with the Commissionerates
from the point of view of </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Ensuring that the EA 2000 methodology is observed in conducting audits and
the provisions of the Central Excise Audit Manual as well as the Service Tax
Audit Manual are complied with;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Identifying problems, if any, in complying with these provisions and making
suggestions for suitable changes to headquarters;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Keeping track of audit performance of the Commissionerates and carrying out
Quality Assurance Reviews;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Analyzing Audit reports for identification of important audit objections and
modus-operandi for quick circulation among filed formations;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Building up a database regarding peculiarities (in accounting system, movements
of goods, procedures prone to evasion etc.) of particular industries/ services
that have a strong presence in the zone. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Coordinating <b>(not conducting)</b> the audit of multi-location units;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Keeping track of the performance of the Computer Assisted Audit Programme
centre- if there is one in the jurisdiction</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Identifying the training needs of auditors in the Zone and coordinating the
provision of adequate and wholesome courses by the Regional Training Institutes
as well as NACEN;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Ensuring that the Quarterly Audit Reports and other MIS reports are compiled
and sent to Headquarters in a timely manner.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Though
a posting in the DG(Audit) is considered anything but prestigious, some officers
posted there have been trying to make the organisation relevant, though not
with much success. There is a priority for all the officers posted in the directorate.
The seniors have to get to an executive post and the juniors are there because
they want a particular place. But some officers in the directorate who want
to contribute for a change for the better believe that Audit can bring in better
results. They feel that:-</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
<b>Audit v/s Anti Evasion :</b> Audit a tool of choice in today’s time being
more democratic, participative and open as compared to Anti Evasion which
is coercive use of absolute power. But Anti Evasion is more glamorous!</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Audit is the last frontier for the department to check evasion.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
<strong>Audit performance compared with Anti Evasion performance :</strong>
figures of detections at par. Audit has added advantage of assessees agreeing
and paying willfully without long drawn legal battle.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Why should Zonal Units not be directed to do audit.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
DG(Audit) should have a web site</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++
Need to shift in Customs as well as excise from routine audit to strategic
audit say for sensitive commodities, area based notifications and other sensitive
notifications.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
DG had conducted a Quality Assurance Review for the year 2004-05 and has come
up with some startling findings.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.
<b>Staff strength and deployment of auditors:</b> The staff strength in the
Internal Audit Branch of the Commissionerates was generally not adequate. Only
33.7% of the total Commissionerates have adequate staff strength. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2.
<b>Training of officers posted in IAD:</b>'font-size:10.0pt; font-family:Verdana;color:windowtext;
'> EA 2000 audits, in order to be meaningful, presuppose the existence of financial
literacy skills among the auditors. Training of auditors in the skills of financial
literacy and EA 2000 methodology is the key to improving the performance of
EA 2000. The QAR findings revealed that approximately 60% of the officers posted
in IAD have undergone training in EA 2000 and financial literacy. In 11 Commissionerates
100% of the officers posted in IAD have been trained, whereas in 3 Commissionerates
none of the officers posted in IAD have been trained.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3.
<b>Maintenance of records and registers in the IAD:</b> The officers in the
Commissionerates do not give much attention to the maintenance of records and
registers. <b>Only 8 out of the 92 Commissionerates were found to maintain all
the prescribed records and registers in the IAD in the format laid down in the
Central Excise Audit Manual.</b> These are Vishakapatnam-I, Tirupati, Noida,
Jalandhar, Ahmedabad-II, Kolkata-VII, Kolkata-I and Panchkula. In terms of percentage,
therefore, 8.7% of the Commissionerates are maintaining and regularly updating
the records / registers. The registers are often not updated making regular
supervision and monitoring over the working of audit difficult.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4.
<b>Systematic Conduct of audit:</b> This included checking of some important
pre-audit steps like, re-audit planning, filling of Working Papers, Approval
of Audit Plan, regular conduct of Monitoring Committee Meetings, etc. The review
showed that in only 41.3% of the Commissionerates the audits were being conducted
in a systematic manner i.e. all the steps were being properly followed.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5.
<b>Exclusive charge to senior officers handling audit:</b>'font-size:10.0pt;font-family:Verdana;
'> As few as 3.26% of the total Commissionerates have senior officers who hold
exclusive charge of audit. This implies that the critical function of audit
is perhaps not receiving unpided attention at the senior management level.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6.
<b>Working of Monitoring Committees</b>: The institution of the Monitoring Committee,
headed by the Commissioner himself, has been built into the EA 2000 system to
ensure that the quality of objections raised by the auditors is of a high standard.
<b>It discourages the tendency to raise frivolous or legally unsustainable objections
since the auditors’ work is evaluated face-to-face with the Commissioner.</b>
Besides, this is the only opportunity available to the Commissioner to evaluate
the skill endowment and technical prowess of his auditors, first hand. The review
findings showed that the <b>Monitoring Committee was regularly meeting only
in 14 Commissionerates out of the 92 Commissionerates</b>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7.
<b>Infrastructure:</b> Providing facilities like, computers, space, furniture,
manuals, library facilities, fax / telephones is one of the basic requirements
having a direct bearing on the audit performance. About 52.17 % of the Commissionerates
have adequate infrastructure. Out of the 47.83% of Commissionerates that have
inadequate infrastructure, 9.78 % of Commissionerates have grossly inadequate
infrastructure.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8.<strong>Reward scheme for officers posted
in IAD of the Commissionerate:</strong> The issue of differential treatment
in the matter of rewards to Audit and anti-evasion was examined afresh particularly
in view of increasing reliance on audit for ensuring compliance. A detailed
proposal for extension of Reward Scheme to cover officers of audit containing
elaborate justification was submitted to the Board by DG (Audit) vide letter
F. No. 381/87/2004/404 dated 2.2.2005. This was followed up by another D. O.
letter dated 01.4.2005 reiterating the earlier proposal and also citing a live
example of extra ordinary detection and recovery by the audit officers of Thane-II
Commissionerate. But obviously the Board has better things to do than follow
Audit’s suggestions. </font>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until
Monday with more DDT </font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a nice week end. </font></p>
<p><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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