Over to my Guest expert

By Vijay Kumar

I will now start from fundamentals as to what needs to be done to make the Excise Department productive, objective-oriented and most importantly customer concerned.

There can be no doubt in anybody's mind that the job of the revenue dept is to collect revenue for the Exchequer. But is it to collect by hook or crook? Or by fair and legal means as authorised by law that will stand judicial scrutiny? This is the question that should be uppermost in everyone's mind - the law makers, the implementers and the adjudicators. All of them should not forget at any point of time that it does not pay to kill the goose that lays the golden eggs ie the industry. If agriculture dies, nation starves. If the industry dies, progress/ development stops.

The first and foremost malaise in the department is that the police and the magistrate are one and the same. How can the same person issue SCN and also sit in Judgement? When the dispute is between the dept and the assessee how can the dept which is one of the two parties to the dispute itself be the judge? Will any official who has issued a SCN in his own wisdom (or lack of it) admit he has done a mistake? So almost all the SCNs get confirmed after wasting everybody's time and money, which is a mockery of the adjudication system. Apparently the efficiency of the officers seems to be judged statistically by the number of SCNs issued and confirmed - the more the No., the better the confidential reports. Hence, the plethora of SCNs. It should be the other way round. The most efficient field formation is one that needs to issue least No. of SCNs. It follows therefore the adjudicators should not be the same officials of the field formations. They have to be independent officers, (though can be drawn from the dept.) no longer under the dept. There is a good parallel in Railways where the Commissioners of Railway Safety who enquire and adjudge Railway accidents are drawn from the dept but placed under dept of transport and they can not revert back to the Railway dept.

They say "ignorance of law is no excuse for non-compliance". Who makes the laws? Are the law makers not equally ignorant, if not more? How is the law communicated to the public? Is it Gazette notification (none can get the Gazette easily)? There is not even a website worth talking about. Is it published in papers? No. Taking the case of the Excise Department which is priding in its voluminous laws, rules, notifications and circulars and being procedure oriented, can the dept. say they have means of accurate, effective communication to the assesses? No. They don't even send copies of their trade notices to the assessees and expect them to dance attendance at their doors to see them in their notice boards leaving all their manufacturing and commercial activities. How then the poor (responsible) law abiding citizens get to know these? Naturally they have to rush to consultants who will demand their own pound of flesh. Or some who think they can read and understand (often leads to misunderstanding thanks to the language of negativism and equivocation) has to rush to law book centres and buy RK Jains / Taxmans / Sarangis at an exorbitant cost and pages running into hundreds if not thousands. If the Citizen has no excuse for not knowing the laborious legislations, have the law makers any excuse for not communicating them free to the citizens, easily accessible and understandable? The laws themselves are for taxing the public. Ironically they have to pay for knowing the laws. What a fall my countrymen?

The Apex court while dealing with the famous case of Mafatlal industries has observed "It must be remembered that manufacturer as a class are knowledgeable persons and more often than not have the benefit of legal advice. And until about 1992, at any rate, Indian market was by and large a sellers' market." What the court said and assumed while may be true in respect of bigwigs, it is certainly not so in respect of SSIs.

It is, therefore, high time the Govt. brings out a small handbook of Dos & Don'ts for SSIs printing only those sections of law/rules, notifications, circulars that are pertinent to them with clear explanatory notes, sample invoices, reports etc. and supply them for a nominal price say Rs 10/- (to cover the cost of the book) if not free. Certainly this book should be accurate and authentic and there can be no disclaimer for Errors.

Though there are instructions to hold periodical meetings with SSIs, this is never done. Let them at least start with the hand book of Dos and Don'ts.

Continuing further, the present system of modvat requires a fresh look. The principle of VAT or value added tax is very simple but the administration system has become quite complex. The principle in its simple form is to avoid cascading effect of tax being repeatedly applied to the same item. Further taxation has to be only on the value added to the item in that process. In other words it is to avoid multi point taxation.

The principle of Modvat/Cenvat is to allow credit for the duties paid on inputs and allow payment of duties on the finished product made out of such inputs by debiting such duty amounts as set off against the credits in the books. The credits are allowed based on gate pass of the inputs where duty paid on them is indicated. So also in the case of inputs imported, from the Countervailing duties indicated on the import documents. We have known cases where big corporates have used the same gate pass 3 times and taken credit thrice on the same input. The computerisation of the department has not been able to check this yet and the department is still banking on manual verification of gate passes while admitting credit without means to check double or even treble credit. Likewise the dealers have also resorted to issuing 2/3 gate passes for the same component conveniently to different cities so that it can not be easily detected. Alas this is the state of computerisation in the dept.

While big corporates do all these hanky panky, the small units can not even get legitimate credit in many cases as they buy the components in small numbers, say, from the bazaar dealers. Even when they buy from 1st stage dealers in larger numbers of 10/20 there is always a price difference of Rs. 200/ to 300/ per unit if gate pass is required as they say that is the INCIDENTAL cost for getting the gate passes authenticated by the dept. ( I am sure you will know what the incidental cost means).

There is yet another cruel joke in Modvat system. The department takes undue credit of Revenue collection by inflating the same with Modvat duty payment (which must be 90% plus) even though in reality no amount is physically collected or paid to the Exchequer. The entire exercise is a book adjustment.

Instead of all these rigmarole, if the system is changed to fixing the value addition in case of different classifications as a percentage of the sale/clearance value, say 1 to 3% of the invoice value on which the tariff duty is to be computed and paid it will truly meet the principle of value added tax system and the Govt. will invariably get its due payment in cash for every manufactured item. All the elaborate labour, paper work, checks as well as the extensive frauds taking place in Modvat system will get eliminated at the root..

I strongly feel the attitude and approach of the dept officials need total reorientation. They give the impression that their only job is to sit like monarchs and do policing job. The attitude of customer friendly approach is conspicuous by its absence. While in Manila, as consultant to the Asian Development bank in the late 70s, I had the opportunity of closely interacting with Japanese friends and colleagues. I did put to them a searching question which elicited a revealing elucidation. The question was, how Japan being such a small country could so quickly reach the status of a highly developed rich nation after near total devastation in World War II. I admitted that as I know the Japanese they are of high IQ and very hard working. Still...?

My own country which is no less than them in these traits and vast natural resources was stagnant at a per capita income of USD 400 per annum. The revealing answer I got was - In Japan the whole nation - the rulers, industries and the working class all live and work as one in total unison. The Govt. will champion the cause of their industries through their diplomats in all countries -The industries will bear the cost of ministers' tours abroad - The workers will voluntarily give up part of their wages in the event of an industrial depression. They can work as long as they can without being forced to retire. All senior Citizens will be looked after by the state and industries in their old age so as to have their needs without privation. Truly a most desirable egalitarian society.

Coming down home, our constitution makers liberally borrowed from British. Indian laws were made by the masters (British) in utter distrust of their slaves (Indians). In result we have today a bureaucracy which continues the British distrust and unwarranted conceit and arrogance. It is high time our law makers and enforcers change their approach and attitude so that the hard earned political freedom transforms to real freedom in all walk of day to day life.

It is time the country is freed from the Shackles of Swadeshi strings of untenable laws and unconcerned (irresponsible) enforcement.

If you really trace the annual additions and alterations to the Excise laws they are just sequels to the cases the revenue have lost in courts & Tribunals, just to overcome the deficiencies. In result we have Kitchidis they pass as laws & Rules. No one thinks a while whether these tinkerings are really in the direction of fair, liberalised & deregulated economy they are boasting of.

Even when made with prospective application they are bad enough but when made retroactive it is atrocious.

I would like to share a personal experience on his suggestion to have a book on Dos and Don'ts for the SSIs. What is the guarantee that such a book is going to be accurate and correct? The Board did toy with the idea of bringing out such booklets on various subjects and even promised the departmental officers a neat sum of money for authoring these booklets. A few years ago, I had the honour of meeting a senior officer who had prepared one such booklet and at the time of his kindly consenting to grant me an interview, he was ready to send the book to the Board. He gave me the draft and asked me to quickly read it and offer suggestions if any. It was a book on Modvat. The very first DO in the book was - "file a declaration with the Superintendent". I told the boss that there was no such requirement now. He was surprised to know this and said, "even then, there is no problem, if he files a declaration, No?" Wisely the Board shelved the programme!