TDS in Central Excise?
Sounds ridiculous? This is not a funny idea, we got while hunting for stories. If the Board has its way, they would collect excise duty from the customer, not the manufacturer. If Service Tax can be collected from the service recipient, why not excise from the customer? But why this provocation?
Department has come across evasion of excise duty in respect of supplies made to Government organizations. A sample:-
(1) A manufacturer eligible for SSI exemption paid concessional rate of duty, but in the customer's copy indicated the full duty and realized the same from the Railways.
(2) A manufacturer did not account for supplies made to the Railways against some of the orders received by him and realized the full amount of duty from the Railways through forged duty paying documents.
(3) A manufacturer supplied materials to Coal India without payment of duty, but realized the duty amount by submitting forged duty paying documents to the customers, Eastern Coal Fields Ltd.
(4) A reputed manufacturers cleared excisable goods on payment of duty at a much under-valued price to his another unit and then sold to the Railways at a much higher price claiming / declaring and realizing a much higher amount of duty
And this according to the Department is only the tip of the proverbial iceberg. So what is the solution?
(1) To start with, focus on big purchases (say Rs. 10 lakhs and above) by big Government purchasers like the Railways, the Defence, P&T Department and DGS&D . ( Is there still a P&T Department?)
(2) provide by rule to have clearance of excisable goods from the factory for such supplies without payment of duty against the indent issued by the purchasing department, under Central Excise (Removal of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001 (analogous to the erstwhile Chapter-X procedure for supply of OE to industrial consumers).
(3) The purchasing department will work out the CE duty component from the purchase price and deduct the same at source in a way analogous to the system of deduction of Income Tax at Source.
(4) At quarterly interval, they will forward CE duty so deducted at source to the Department.
(5) Cenvat credit availed on the inputs used in the manufacture of such goods may be treated at par with manufactured goods under export, as provided under Rule 5 of Cenvat Credit Rules, 2004.
The Project sounds good, but is it workable? The Board assumes that big government organizations like railways and Defence are perfect in their accounts and tax payments. Central Excise officers routinely make cases of huge non-payment of taxes by large government organizations ( evasion may not be exactly the correct word)
And how will these organizations calculate the excise duty? How will they know about any exemptions available? And when will they pay the duty? Is it on receipt of the goods or after payment is made?
If you try to ape the Income Tax TDS , you are sure to fail in excise. In Income Tax, there is a PAN/TAN and deductions are fairly accounted – here in excise you will end up making all kinds of unworkable rules followed by irrational clarifications followed by relentless litigation.
Board's proposal dreams that the new procedure will prevent hundreds of Crores of rupees from being siphoned off from the exchequer. Good dream indeed!
Board has asked the Chief Commissioners to give their comments/views on the legislative proposal.
CBEC's F.No.201 /25/2007- CX -6 dated September 26, 2007