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Procedural Improvements in Indirect Taxes
23rdJune, 2005, Mumbai
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Structure Current
Chief Commissioner
Commissioner
Division(4-5
Ranges) Preventive /Anti-evasion Audit PersonnelandVigilance
Technical Legal &Tribunal
Adjudication
Range (40-50 units)
Sector
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Structure Current
RACE - Revenue Audit Central Excise units under CAG
All India Level Organisations DGCEI Directorate General of Central Excise Intelligence
DGRI Directorate General of Revenue Intelligence
Narcotics Agencies
Directorate General of Audit Directorate General of Inspection
Directorate General of Vigilance
Directorate General of Service Tax
Directorate General of Valuation
Directorate General Systems
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Structure Recommendations
Preventive / Anti-evasion to be centralized at theCommissionerate Head Quarters level and done away with at
the Division level. Headquarters preventive unit can have
branches in case of Commissionerates with far-flung
jurisdictions.
Audit function to be continued at the Commissionerates
Headquarters.
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Structure Recommendations
Quality of manpower at the level of Ranges should be improved
and the Ranges should be strengthened in terms of
infrastructure, logistics and public delivery system -
Before posting officers at the Range, there should be a
refresher course for updating their skills.
Departmental manuals containing detailed procedures &other relevant aspects concerning the functioning of the
Ranges should be available in simple laymans language.
These items should be made available on the CBEC website
and maintained & updated regularly by the CBEC
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Structure Recommendations
Departmental circulars posted on the website should be
comprehensive, providing cross-reference and inter-linkages
(attach circulars) to all previous circulars/instructions.
Ranges should be Technology-driven & Officer-oriented.
Computer with Internet connection may be provided to all
Ranges. Computers may be upgraded periodically.
Software may be developed to generate reports and returns on
basis of records/data available in the Range.
E-filing must be encouraged.
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Structure Recommendations
With EDI connectivity in place in all the Divisions by March 2006,some of the aforesaid recommendations made in respect of
Ranges will become relevant for Divisions, which will take over
most of the technical work of the Ranges ( e.g Scrutiny of
Returns & other documents)
The role of Large Taxpayer Units(LTUs) and the Systems, will
have to be suitably factored into in the next cadre restructuring
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Structure Recommendations
Chambers and Trade Associations may ensure higher level of
participation from Trade and Industry in all interactive meetings.
In respect of Zonal PGCs and RACs, names of assessees
raising a particular issue would be kept confidential on request.
Intelligence & Vigilance set-ups may be strengthened with more
online connectivity, logistics and infrastructural support
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Structure Recommendations
For the sake of continuity & expertise, officers in departments
dealing with Intelligence, Audit and Systems should have aminimum of 5 years tenure.
An appraisal of the staff requirements in the Central Excise
Commissionerates should be carried out, and excess staff, if
any, may be deployed for service tax work.
The legal cell in the Commissionerates should be strengthened
both in terms of quality of personnel as well as infrastructure and
logistics support.
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Role of Range
Range will assist and counsel the assessee, and encourage
voluntary tax compliance. Help Centres at suitable locations
accessible to all stakeholders is recommended.
Guidelines / advice on procedural matters will be provided to
the assessee by the Range Officers.
Specific queries may be replied to in terms of the Citizens
Charter within one week. Range, with the associations involvement, will conduct
workshops around Oct/Nov every year for SSIs approaching
threshold levels of Rs 1 crore to educate SSIs on compliance
issues.
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Accountability
Current practice
There are no clear lines of responsibility within departments Large number of unsustainable show cause notices are bein
issued
Problems
Errant personnel are going unpunished and there are no suppo
structures for honest and hard working personnel
Assessees feel that they do not have a say in the system
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AccountabilityRecommendations:
A charter of duty manual for all officials to be in place and
updated at least once in two years. Duty manual copies shoulbe available to assessees and associations for a price.
The Range Superintendent / Inspector and other official
concerned should be held accountable in case of gros
irregularities time found to have been committed over time by th
assessees and in situations which were expected to be in the
knowledge.
Show Cause Notices Review
How many sustained
How many dropped This data to be kept online in the public domain
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A t bilit
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Accountability
Recommendations:
Before issuing Show Cause Notice on new issues, other thaevasion and suppression matters, the assessees should be givetime to take the matter to the next higher authority for resolvinthe dispute before issuing the Notice.
Unique identification number can be assigned to all employees tassess their performance through systems generated reports.
When a Show Cause Notice is clearly unsustainable andropped full refund of the deposit made before issuance oShow Cause Notice may be made with interest at bank rate.
(Note: Some of the Show Cause Notices are being issued as pethe CAG objections and Board (CBEC) directions. These notice
are beyond the control of the issuing authority. The matter needto be resolved with CAG.)
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Accountability Auditing
Current practice
As on date, while auditing, there are no mechanisms to examin
the nature and validity of queries raised by officials
Problem The assessees are being harassed on trivial or illogical and
clearly unsustainable queries while auditing
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Accountability Auditing
Recommendation
All supplementary queries should be raised with approval of nexhigher authority and queries should be specific.
There should be tracking system on refunds how many and i
what time-frame have they been disbursed
The officials should be held accountable in case of arbitrary an
unsustainable acts eg., raids and show cause notices (Provision
of Sections 22 and 40 of The Central Excise Act, 1944 may be
reiterated).
G l R d ti
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General Recommendations
Protection for whistle blowers with time limit for rewarddisbursal.
Ensuring Confidentiality (amendment of Preventive Manual).Only requirement should be identification of informer by theofficer recording the information, at the time of the rewarddisbursal. In order to take due care to protect the informer, onlytwo identification marks to be recorded at the time of recordinginformation. The sealed cover to be opened only by the
Disbursing Authority Where assessees make specific complaints of
harassment/extortion against officials, a credible and effectivemechanism must be put in place to ensure confidentiality andrigorous follow-up action. CVC may please examine and give
suitable guidelines.
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General Recommendations
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General Recommendations
A manual should be evolved for Central Excise and Customs
officials, benchmarking against the global norms and adopting
the best practices and updated at least every two years. This
manual should be available to the assessees, associations and
the public for a price.
Guidelines should be issued regarding acknowledgement of
complaints from the trade within a stipulated time frame.
Further, such complaints should be addressed within specified
time frame (time frame to be decided by CBEC)
G
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General Recommendations
Strengthening honest and efficient officials
Improve HRD policies in terms of placement & training policies,
expertise/professionalism, performance rewards, promotions
with due regard to the core competence and domain expertise
and facilities like housing, transport and such other perks as
motivational and aspirational policies.
Increase in facilities like housing, transport, and payment of
such perks should be linked to performance
General Recommendations
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General Recommendations
Uniform to be dispensed with except for customs and airport
officers, and inspection of vehicles on the road.
Feedback should be collected formally from assessees, in
terms of tangible parameters such as accessibility,
responsiveness, sensitivity and timeliness of service delivery.
Such a feedback will be a valuable input to assess the
performance of officials.
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Procedures Registration
For registrations of applications, acknowledgements or
deficiency notes should be given within two days positively.
Deficiency note should be formatted.
In case of non-delivery of registration certificate in seven
days, where proper acknowledgement has been given by
the department for application, the assessee will make his
own registration number (on the basis of PAN number). Thedepartment will notify/publicize on how to give own number
in such situations. The assessee will intimate the registration
number so generated to the jurisdictional Assistant/Deputy
Commissioner of the Central Excise Division.
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Registration
Online registration should be operationalized by March2006. The submission of application form, along with the
attendant documents, physically will be dispensed with, oncecomputerization is complete.
On the issue of filing returns/documents in person,Association can collect these returns on behalf of the
assessee and file with the department. This will preventindividual assessee and department interface. ProposedHelp Center in public-private partnership can be given thismandate.
Once computerization is complete, assessees should be
allowed to file all returns online.
Inspections
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Inspections
Right to enter premises shall be only with prior permission ofthe Asst./ Dy. Commissioner of Central Excise except in thefollowing cases :-
During audit or for carrying audit related function withprior intimation
When a documented information is received againstmanufacturer or importer/exporter
When any vehicle with goods is caught on the way withoutappropriate Central Excise invoice
To collect information for parliamentary queries with priorintimation
In any other case, the written permission of the Asst./ Dy.
Commissioner of Central Excise will be required
Inspections
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Inspections
A register should be maintained in all units where details of
their name, designation and purpose of their visit should beentered.
Officials must maintain their own dairy in which all these
details of visits shall be recorded, and the assessees
signatures obtained.
All inspecting officials should present their identity cards at
the time of visit of factory.
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Summons
In case of requirement of documents initially, a letter
requesting for copies of documents should be issued.
Summons should be issued only when all other modes of
obtaining information have failed.
Summons should be issued only after approval is obtained
from appropriate authority (Asst. / Dy. Commissioner).
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Adjudication
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Adjudication The adjudication procedures should be expedited if the
assessees file the replies within one month. The order
should be issued by the adjudicating authority within 30 daysof completing the personal hearing. There must be special
efforts to ensure that adjudication is completed within 6
months.
All the communications from the assessees should be
acknowledged immediately upon receipt. Failure to
acknowledge should be reviewed by the immediate senior
officer. For this purpose, a register must be maintained.
Adjudication
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Adjudication
The representatives from trade felt interest should be paid
after 30 days from filing of refund claims, as opposed to 90
days now. However, the representatives from the
department felt that any reduction in the present time limit is
possible only with the change in the present system of
internal verifications, along with infrastructural upgradations,including computerization. Once computerization is
complete, from March 2006, interests should be paid for
delays beyond 30 days from refund claim.
Adjudication
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Adjudication
There appears little justification for difference in rates of
interest for delayed payments (13% by assessee) and
delayed refund (9% by department). The department is
reluctant to concede this. However, CVC may discuss with
CBEC and reconcile the issue fairly and equitably.
Pre-deposit provisions to be simplified by accepting cashand/or bank guarantee or other securities. The assessee
should have the option to pay the deposit in cash or through
bank guarantee. In case bank guarantees are not renewed
in time, the same may be encashed.
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Separation of Adjudication from Revenue Wing
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Separation of Adjudication from Revenue Wing
Separation of adjudication from Revenue Wing not agreedto. Reasons for not accepting this suggestion are:
It is not possible to create a separate staff cadre foradjudication within a common stream of senior officers.
The officers are periodically interchangeable from onewing to another wing of the same department.
Adequate training on judicial and quasi-judicial proceduresto be given to department officers.
Other effective measures should be introduced to ensurethat adjudication and revenue are truly separate. Otherwise,the prosecutor will become the judge. CVC may pleasediscuss with CBEC and help evolve procedures.
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Penalties
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Penalties
Release of seized goods should be made mandatory in all
cases. In cases release of goods is refused, it should be
accompanied with a written rationale for non-release of
goods
Penalties
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Arrests should be given up as a weapon to collect taxes.There are ample powers available to the department to collect
revenues and enforce compliance. In the meanwhile, only in blatant evasion cases (duty limit of
Rs 1 crore or above), the officers should resort to arrest of theassessee where sufficient documentary evidence is available.This will not apply to habitual offenders and cases involving
forgery or fraud where an arrest can be made even if the dutyevasion is less than Rs. 1 crore.
Circumstances warranting arrest should be publicized widelyso that in non-deserving cases, there is no threat or fear ofarrest to the assessee. This will go a long way in preventing
the misuse of these provisions.
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Cenvat
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The proposed section 11DDA of the Central Excise Act,
should be restricted in application and should be applicable to
only situations where there is a reasonable and well-foundeddoubt of alienation of property by the assessee. Detailed
instructions should be issued to prevent misuse of these
provisions, when these provisions are made effective.
In the case of removal of capital goods after use, the benefitof depreciation in value of capital goods should be given to
the assessee. For the purpose, reversal of credit
proportionate to depreciated value or transaction value,
whichever is higher, can be resorted to.
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Customs
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In case of valuation of second hand machines, normally a
certificate from approved chartered engineer should be
accepted, if it gives full details as prescribed. In case ofdiscrepancies on intelligence information, machines should be
allowed on second-check basis. Customs instructions on this
should be reiterated.
Regarding retention of samples on importer/exporters goods, thepresent system of sample retaining requires improvement.
Sealed samples should be given to importer/exporters, which
can be referred to in case of disputes. If there are instructions in
this regard, they should be reiterated and circulated.
Customs
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The provisions of section 27 Customs Act for refund are not
available in case of assessment of Bill of Entry, and provisions
of appeal under section 128 have to be followed. In case ofdemands, the department can raise demand under section 28
within six months and without challenging assessment of Bill of
Entry. Considering the principles of equity and natural justice,
the provisions needed to be aligned so that refunds can be
sanctioned without challenging the assessment in the Bill of
Entry. When the assessment claimed by importer is accepted,
this provision of filing appeal is valid. However, if an assessment
order has been issued, then appeal has to be filed and
consequent refund claimed.
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Customs
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In case of unjust enrichment, the government should come up
with a list of situations detailing where unjust enrichment will not
apply. In other cases, where unjust enrichment applies, it shouldclearly be specified what proof is required to establish that duty
has not been passed on to customers.
The interest on refund should be paid if it is sanctioned after
three months from date of filing applications. Even if the refundbecomes subject matter of appeal and same is allowed by
appellate authority, the interest should be paid on expiry of three
months of the original refund application.
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Exports Software Sector Debonding
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The destruction of unserviceable/unusable systems may be
similarly made under a 15-day intimation to the RO concerned.
Need to amend the 52/2003 Notification on donation of
computers, to make it more general/broad to permit donation to
a wider group of institutions/offices.
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Exports
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At present, the Bill-of-Entry is only provisional and could be
changed within six months. As customs duty is capitalized at the
time of manufacturing/delivery of service, the initial assessment
should be full and final
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Customs
Current
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Current
A Letter of Undertaking (LUT) has to be executed at the end of
every financial year The Bill of Entry is appraised before the clearance of goods
even for 100% EOU and SEZ Units
Problems Except in a few ports, where computerization is being
implemented in a phased manner, the Bill of Entry involves a lot
of documentation
CustomsRecommendations
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The system of executing Letter of Undertaking (LUT) after every
financial year should be dispensed with. The validity of the LUT
shall be as long as the validity of license. The LUT can bedispensed with if bond is already executed with the Customs.
The system of appraising the Bill of Entry before clearance of
goods should be done away with for all export houses and
manufacture-importers with over one-year track record. (TheCircular 30/2003 provides for self-assessment/appraisal by
status holders/PSUs and those with a 2-year track record. Here
the system appraises and the goods can be cleared after
payment of applicable duties).
Customs
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Recommendations
The importer or the Custom House Agent (CHA) will pay the
duty based on their own assessment shown in the Bill of Entry.
Customs
Current practice
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Currentpractice
The cash section shall sign the intimation for receipt of the duty;
but delays in examination of goods and clearance.
Whenever there is provisional assessment, valuation is often
delayed
Presently, the import audit is being done online at the port where
the importer is registered
Duty drawback is resulting in delays
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CustomsRecommendations Augmentation of staff, by way of redeployment and filling of
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vacant posts is required in the valuation branch to preventdelays
The exporters with ISO 9001:2000 and Export Houses and100% EOU and SEZ Units may be exempted from routineinspection of trade samples. This will minimize delays. (Bonafide trade samples do not need permission/inspection as RBIhas waived GR formality up to US $ 25,000).
Trade requested that online export audit should beimplemented to minimize the documentation problems faced bythe exporter. However, there is currently no export auditrequirement in place. This position may be widely publicized toprevent undue harassment of exporters.
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Customs
General Recommendations
Organize workshops all over the country on application and use
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Organize workshops all over the country on application and use
of ICEGATE
Status-holders, manufacturer-exporters and exporters with clean
track record of one year should be given duty drawback
immediately and for others duty drawback should be given after
inward remittance of foreign exchange.
Wherever the associations project and justify the traffic, Air
Cargo Customs should work on more shifts.
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Customs
General Recommendations
Training of officials should be mandatory On taking up new
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Training of officials should be mandatory. On taking up new
promotion/assignment with which the officer in charge is not
familiar, training should be mandatory.
A motivational workshop / session by professional speakers,
professional bodies to enthuse the departmental officers in
doing their work.
More informative interaction should take place between
department and industry. And open houses should include
lecture training on the department procedures for the benefit of
industry covering specific subjects
Customs
General Recommendations The possibility of giving sabbatical to officers can be explored.
The departmental officers can join the private sector and
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The departmental officers can join the private sector and
members from private sector should be allowed to work in the
department. Lateral employment opportunities can be explored.
Eight or ten agencies are working at the ports (such as health
and explosives). There should be single window clearance
under Customs. Officials of all other departments will be on
deputation with Customs. If the government has sanctioned certain number of posts after
full examination, then sanctioned strength should be available at
all times. This is necessary for effective delivery system to
operate.