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Sectors such as coal, iron, steel and non-ferrous metals were found to be foremost in duty evasion and its detection may help the government recover dues in excise duty, the major area of weakness in revenue collections for many years.
The Directorate General of Central Excise Intelligence (DGCEI) has also detected service tax evasion of Rs 4,152 crore involving 851 cases in 2012-13, against Rs 4,019 crore detected from 452 cases in the previous year. It has already recovered Rs 857 crore from service tax evaded last year. This is almost double the amount (Rs 433 crore) recovered in 2011-12. Though service tax collections generally overshoot the target, the evasion is more rampant here since the errant service provider collects duty, but does not pay to the exchequer.
The authorities recovered Rs 1,016 crore of the excise duty evasion detected last year, against a recovery of barely Rs 255 crore in 2011-12 — an increase of about 300 per cent. This is merely 36 per cent less than the total central excise duty recovery of about Rs 1,600 crore in the past 10 years. Officials said the modus operandi in all these cases mainly involved undervaluation of excisable goods, clandestine removal without payment of excise duty, and misuse of Cenvat Credit Scheme by manufacturers and registered dealers by indulging in paper transactions without movement of goods.
“On service tax front, the evasion seems to be more rampant. In a large number of cases, the evaders collected service tax but did not deposit it with the government or provided taxable services without filing return. In many cases, service receivers took Cenvat credit of the service tax which was not even paid by the service provider, thereby adversely affecting revenue collection,” said an official.
Overall, the government recovered about Rs 1,883 crore as excise duty and service tax in 2012-13, against Rs 689 crore in the previous year — an increase of three times, the highest ever.
The government has been targeting evaders and taking stringent action as it has adopted a policy of zero tolerance against tax evasion.
Last week, DGCEI had said it detected service tax evasion of about Rs 200 crore by sub-contractors of Oil and Natural Gas Corporation (ONGC) and Oil India and evasion of Rs 100 crore by sub-contractors of Larsen & Toubro.
During the last financial year, the government had sent letters to taxpayers asking them why they paid less service tax compared to the previous year. This resulted in many taxpayers clearing their dues.
Excise duty collections were down 11 per cent to Rs 1.71 lakh crore in the Revised Estimate (RE) for 2012-13 against Rs 1.94 lakh crore in the Budget Estimate (BE).
The shortage cannot be entirely blamed on evasion as there was a marked slow down in industrial and overall economic growth. The target has been kept only modestly higher at Rs 1.97 lakh crore for 2013-14 compared to BE of 2012-13.
Service tax collections were, however, up seven per cent at Rs 1.33 lakh crore in the RE of 2012-13 against Rs 1.24 lakh crore in BE. The target for the current financial year is quite higher compared to even RE. It is Rs 1.80 lakh crore, which is 35 per cent more than RE for 2012-13.
