CBEC's deterrent may lead to harassment

EXIM MATTERS

The Central Board of Excise and Customs (CBEC) has put up on its website a draft circular proposing deterrents to tax evaders and invited comments.

The deterrents appear a bit weak and the trade fears that the measures will be triggered immediately upon detection of cases of deliberate non-compliance and it is the revenue officials who will determine whether planned and deliberate tax evasion has, in fact, taken place.

The CBEC has identified six different offences that will invite deterrent action. These include removal of goods without documents and without duty payment, undervaluation of goods where portion of sale proceeds in excess of the invoice price is received separately and remains unaccounted, taking of Cenvat credit without receipt of goods specified in the document or on the basis of invoices that are not genuine, issue of excise invoices without delivery of goods (by a manufacturer or a dealer) and claiming of refund on the basis of invoices that are not genuine.

The CBEC proposes that in such cases, the manufacturers should lose the facility of monthly payment of duties and provisional disbursement of 80 per cent of refund/rebate claims within 15 days and non-utilisation of Cenvat credit for a specified period.

The dealers should lose their registration for a specified period and the merchant exporters should lose the facility of provisional release of refund/rebate claims and self-sealing facility, says the CBEC.

A second offence would invite physical control for the manufacturers. Some of the proposed measures will need legislative changes. The government will make the changes before January 1, 2007.

The decision to administer the deterrents will be taken by the member (excise) after recommendations from the chief commissioner, who will give due opportunity to the assessee. Only evasions above Rs. 10 lakh will invite deterrent action.

To justify its proposals, the CBEC says that its simplification and facilitation measures have not resulted in better compliance and that certain classes of assessees continue to evade duty.

There can be little doubt that all the above offences are serious enough to warrant severe action. The proposed deterrents are not serious enough to discourage the wilful evaders. Manufacturers who indulge in such offences should be placed under 'physical control' immediately and the merchant exporters should lose the facility to issue CT1.

The CBEC should, however, not take the law in its own hands. The deterrents should come into play after the allegations of offence are proved in an independent forum. The revenue officials are notorious for their revenue bias. The trade does not regard them, even CBEC members, as honest.

The CBEC should appreciate that with Cenvat credit of 4 per cent additional Customs duty, service tax and capital goods credit, it is no surprise that its excise revenue is not commensurate the growth in the manufacturing sector. It should appreciate that its field formations book a large number of cases that do not stand up in independent forums.

Mere booking of large number of cases is no justification to assume greater powers. The CBEC should direct its energies towards further simplification and rationalisation. Its system of exemption notifications, failure to consolidate its circulars periodically, coercive actions, absence of accountability for officers who harass the assessees unnecessarily and acquiescence of senior officers in illegal actions of junior officials undermine its moral authority to administer justice.