Customs Adjudication – CAG raps – cases pending for 46 years!
The CAG report No. 7 of 2007 to Parliament indicted the Customs department for its callous adjudication mechanism.
Can you believe that?
The data provided/maintained by the department regarding adjudication cases and revenue involved therein was incomplete, inconsistent, inaccurate, un-reconciled and hence unreliable. In the absence of accurate data regarding the numbers and revenue involved, the assurance that the Board is monitoring these cases effectively is minimal.
Cases pending adjudication increased by 89 per cent as on 31 March 2005 compared to 1 April 2002, when a time limit of six months/one year for completing adjudication was brought in. During 2002-03 to 2004-05, only 24 to 57 per cent cases were finalised within six months or one year.
Revenue of Rs.448.67crore was locked up in 1,173 pending adjudication cases for period ranging between one to 46 years. Of these, 17 cases each having revenue implication of Rupees one crore and above were awaiting adjudication from two to eight years.
Files in 165 cases involving demand of duty of Rs.26.48crore apart from interest and penalty of Rs.89.81lakh were reported missing in four commissionerates.
An amount of Rs.962.32crore was confirmed in adjudication after a delay of one to nine years in 152 cases. However, recovery details could be ascertained only for Rs.3.69crore.
Fourteen cases remanded back for denovo adjudication (revenue implication of Rs.16.25crore) were pending adjudication with a delay of 13 to 66 months. In 22 other cases, denovo adjudication was completed after a delay of 12 to 151 months.
The Board had issued a circular in December 1999 in consultation with Ministry of Law stating that corrigendum to order in original tantamounts to review of the decision and is not legally sustainable. Corrigendum was issued to orders in original in eight cases which had caused risk to revenue realisation of Rs.30.98crore.
Appeals filed by the department in 33 cases were either dismissed on grounds of delay or the department could not stake its claim owing to belated action/non submission of proper evidence, leading to non realisation/loss of revenue of Rs.160.38crore.
Failure of the department to consolidate all cases to take a unified action to effect recovery by getting the stay orders vacated according to orders of the Board, resulted in non realisation of revenue of Rs.33.32crore in 65 cases.
The CAG had some interesting findings and recommendations
1. Inconsistent/unreliable macro data
Revenue involved in adjudication cases was not furnished by Delhi (I & G), Tughlakhabad (ICD), Chennai (Sea), Trichy, Chennai (Air) and Tuticorin commissionerates in 2002-03 and Tuticorin in 2003-04 and 2004-05.
These are the wise commissioners. The best way to deal with Audit is – Don’t furnish information
Arithmetical inaccuracies were noticed even in the number of cases during 2003-04 in, Bhubaneshwar (CE & Cus), Mumbai (Imports) and during 2004-05 in Mumbai (Imports) and Pune commissionerates.
A comparison of the data provided by the commissionerates could not be made with those collected in audit since CC Appeals, Cochin, Commissionerate of Central Excise and Customs, Cochin, CC Appeal I and II, Delhi did not provide the requisite data. Some other commissionerates did not provide complete data for the period under study.
Additionally, absence of revenue involved in SCNs issued in few commissionerates, indicates weak monitoring mechanism.
CAG has concluded that in the absence of accurate data regarding the numbers and revenue involved, the assurance that the Board is monitoring these cases effectively is minimal.
Recommendation No.1 – Reconcile your balance sheet
The Board should verify and reconcile the number and amount involved in pending SCNs as a first step to effectively monitor the disposal of these cases.
Age wise analysis of pendency in 31 commissionerates.
It was noticed in audit that data of seven out of 31 commissionerates was arithmetically inaccurate either with regard to number or money value involved and the pendency over five years includes the pendency upto 46 years.
Recommendation No.2 – fix a time frame
Government may consider
(i) reviewing the time limit of six months/one year of disposing SCNs with ‘wherever possible to do so’ rider and fix a realistic time frame without exceptions and
(ii) make provisions for recording and/or justifying reasons for going beyond prescribed time limit and obtaining orders from superior authorities to do so. This would also help in monitoring the adjudication process more easily at the top management level.
Non-adjudication
Audit scrutiny revealed that adjudication process has not been completed in 1,142 cases in 18 commissionerates, even after delay ranging between one to 46 years.
Test check of records in two commissionerates viz West Bengal (Preventive) and Kolkata (Air), revealed that 43 seizure cases effected between 1972 and 2003, involving goods of perishable and hazardous nature (photographic films, cell and batteries, patent and proprietary medicines, liquors etc.) and valued at Rs.34.30lakh, remained un-adjudicated for two to 33 years. Further scrutiny of records of seizure shed, currency shed and appraising disposal (sale shed) in these commissionerates revealed that 346 seizure cases involving goods valued at Rs.2.43crore seized between 1960 and 2003 (electronic goods, cellular phones, ball bearings, zip fasteners, textiles etc. that are prone to rapid depreciation in value due to rapid changes in technology and design) were awaiting adjudication for a period of two to 45 years. Non adjudication of these cases resulted in non disposal of goods that are already in a state of deterioration and depreciation in quality and value.
Recommendation No.3 – fix a time limit for adjudication
Government may consider prescribing an appropriate time limit in the Customs Act for adjudication of cases relating to search/seizures.
Recommendation No.4 – priority adjudication
Board should issue instructions to its field formations to take old cases involving substantial revenue for priority adjudication.
Loss of revenue due to missing files
Scrutiny of records revealed that in four commissionerates, 165 case files of demands involving duty of Rs.26.48crore, apart from interest and penalty of Rs.89.81, lakh were missing. Improper maintenance of records had led to risk of non realisation of revenue, as adjudication in these cases are pending.
Recommendation No.5- find those missing files and their officers
Board should investigate the reasons for which these files went missing and based on the result of probe, fix responsibility and initiate appropriate action.
Recommendation No.7 – look at those remand cases
Board should strengthen its internal control mechanism for monitoring denovo adjudication cases so that these cases are adjudicated within six months/one year, having been adjudicated/examined/extensively earlier by consuming much time/human resources.
While DDT is not exactly a fan of the CAG, and believes that CAG is responsible for half the ills of the department, it is appalling that there is such callous neglect of an important activity of the department. We will bring you more from the CAG in these columns in the coming days.