TIOL-DDT 57 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b><font color="#0000FF">TIOL-DDT
57</font><br>
18 2 2005<br>
Friday</b></font></p>
<p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif">
<b>Outburst of a senior citizen</b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> A senior citizen,
who retired from Government service long ago from a very senior position,
had in the course of his social service, been forced to face the power of
Central Excise and to advise his friends who could not afford high cost consultants,
took to learning the tricky laws and procedures of Central Excise and today
is an authority on the subject. Even he is totally confused and appalled at
the frequent and illogical changes. This great scholar of Central Excise who
modestly wishes to remain anonymous has been writing to me on several issues
concerning the department. He had been sending me his comments in instalments
as his two finger typing technology does not allow him the luxury of long
mails. Today's DDT is dedicated to this great anonymous scholar and
soldier, who started his rendezvous with Central Excise after retirement and
whose knowledge, is by any standards the best. Just have a look at some of
the thoughts he shared with me and which without his permission I am sharing
with you. What worries me is, if somebody who retired from some other department
can acquire so much knowledge on Central Excise, why can't people who
work in the department for a lifetime do it? <br>
<br>
<font color="#006633"><b>Over to my Guest expert</b></font><br>
<br>
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. <br>
<br>
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.<br>
<br>
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.<br>
<br>
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?<br>
<br>
The Apex court while dealing with the famous case of Mafatlal industries has
observed <b>"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.</b><br>
<br>
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.<br>
<br>
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.<br>
<br>
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.</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">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. <b>Alas
this is the state of computerisation in the dept.</b><br>
<br>
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 <b>INCIDENTAL
cost for getting the gate passes authenticated by the dept. ( I am sure you
will know what the incidental cost means).</b><br>
<br>
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. <b>The entire exercise is a book adjustment.</b><br>
<br>
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..<br>
<br>
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 <b>Manila, as consultant to the Asian
Development bank in the late 70s, I had the opportunity of closely interacting
with Japanese friends and colleagues.</b> 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...?
<br>
<br>
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. <b>Truly a most desirable
egalitarian society. </b><br>
<br>
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). <b>In result we have today a bureaucracy which continues
the British distrust and unwarranted conceit and arrogance.</b> 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. <br>
<br>
It is time the country is freed from the Shackles of Swadeshi strings of untenable
laws and unconcerned (irresponsible) enforcement. <br>
<br>
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.<br>
<br>
<b>Even when made with prospective application they are bad enough but when
made retroactive it is atrocious.</b><br>
<br>
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! <br>
<br>
<font color="#FF0000"><b>Until Monday with more of DDT<br>
<br>
Have a Nice weekend<br>
<br>
Mail your comments to</b></font> <b>vijaywrite@taxindiaonline.com </b><br>
</font> </p>
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