CBEC-Withering bureaucracy turning India into a Banana Republic-12th story

The might of the bureaucracy to trample the written word of the law in the name of interpretation of the law is mind boggling & unfathomable. Even where there is no room for interpretation, the officials in position are able to resort to outright cheating & rest assured that nothing will ever happen to them though there is a provision in the law in IPC-specifically 166 & /or 167 where such offences of harassment by the bureaucracy are prosecutable & do not require any permission for prosecution from any authority. I say so because the police official in the department says that they do not understand the basics of the law under which the prosecution is to be carried out conveniently forgetting that they are not to deciding the prosecution but their only role is to lodge the FIR & take the case to logical conclusion. The second stumbling block, which is pointed out by them is that there are no prosecutions under IPC 166 &/or 167. Is it not strange or surprising that there are no prosecutions for abuse of authority & harassment though this is a common problem in this country & why a precedent is sought for launching a prosecution? I am aware of one FOR lodged against the Chief Commissioner of customs & this arguments being cited by the police department. The copy of the FIR was sent right up to the Prime Minister’s office but to no avail. This only highlights the disgusting & shameful state of affairs compelling this writer to condone this nation as banana republic.

As you know this is a series in relation to the rebate on exports. Please see how skewed can be the approach of the officials in position to harass the beneficiaries but dare say anything can happen to the officials because the law fully protects them even in respect of the illegalities.

In case of rebate claims, if you will analyze facts of the case then what the department is saying is that the duty was not payable in the first place i.e. excess amount was paid in the first instance than required under the law. Thus this excess amount lying with the department needs to be refunded to us or re-credited in the RG 23 Part II account. It cannot be the case of the department that if the manufacturer has paid the excess amount then this can be appropriated as duty illegally i.e. without the authority of law. In effect, what we are saying is that if there was excess duty payment then we were entitled to refund of it & the department cannot misappropriate the same. This is a settled law-case law 2006 (206) E.L.T. 90 (Kar.) in case of COMMISSIONER OF C. EX., BANGALORE-III Versus MOTOROLA INDIA PVT. LTD. It is decided beyond doubt that the excess amount cannot be pocketed as duty but the same is refundable to the assessee.

Not only the above, as per Article 265 of the constitution, the Government cannot collect taxes beyond the authority of law, which means that excess amounts collected without the authority of the law have to be refunded to the tax payer. This is the basic principle enshrined in the constitution itself & cannot be disregarded. However, merrily, the officials in position restrict the rebate in cash to the FOB value of exports & ignore the excess amount paid to the government. Thereafter, this amount is as good as lost. I was surprised to hear from the Commissioner (Appeals), Mumbai II during the personal hearing that if I make a prayer to refund the amount by way of re-credit then he will grant that favour. I fail to understand that where is the question of any favour & whether a judicial authority can dole out a favour. On the other hand this is the boundem duty in terms of the constitution of this country that excess amounts collected without the authority of the law have to be refunded to the tax payer but then the authorties do not like to honour the law but would like the appellants to plead/pray for the kindness to be bestowed on them even in respect of the legitimate rights. The salutation my lords is discarded but they remain the lords.

This is the twelfth part of the story. However, the story of the abuse of authority does not end here. Further lampooning of the system & abuse by the authorities will follow in the next write up. Till then Good bye.

rajiv.pec@gmail.com

CBEC-Withering bureaucracy turning India into a Banana Republic-11th story

Are the officials required to facilitate orderly conduct of trade as per the laid down rules or regulations or behave as overzealous revenue officials & become stumbling blocks. If this happens rampantly & brought to the notice of the CBEC but then no action is taken then what is the use of such a maim authority, who are not able to right the wrongs even. This is the series on rebate on exports & it shows that how the system is manipulated to get away with the wrongs. Some actions are that of outright cheating. Here in this case, we detail the case of export of physicians samples on which the rebate is being denied.

Please note that there are two substantive conditions for the rebate to be sanctioned. 1. Duty payment & 2. Export. Once these two conditions are satisfied, the rebate cannot be denied. Here in the case of the export of samples both the conditions are satisfied therefore there is no reason to withhold the rebate claim. It is preposterous to say that market value of the free samples is zero because the goods are supplied free of cost because if the market value of the goods is zero then no duty can be paid on the said goods. The authorities need to understand that you cannot pay duty on zero market/assessable/transaction value. Further it is pertinent to point out that that the Excise duty is a levy on manufacture or production of goods, payable on manufacture whether or not goods are sold/exported. If the duty paid goods are exported then the exporter is entitled to rebate of duty as per the law. The provisions of the law are unambiguous.

Please note that samples, which are removed from the factory are subject to the payment of duty on the assessable value. There is no dispute about that. This is a settled issue-case law 2011 (263) E.L.T. 641 (S.C.) in case of MEDLEY PHARMACEUTICALS LTD. Versus COMMR. OF C. EX., & CUS., DAMAN wherein it is settled by the Apex court that duty is payable in respect of the samples removed free of cost from the manufacturing facility. Once the duty is payable on the samples, the rebate thereof cannot be denied in respect of the exports as there is no provision in the law , which says that rebate is dependent on the export proceeds. If there is any such provision in the law then the same needs to be specifically pointed.

Please note that Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 specifically states that the market price of the excisable goods at the time of exportation is not less than the amount of rebate of duty claimed. This condition is satisfied because the duty is paid on the assessable value in terms of the law at the time of the removal of goods. We are seeking only the rebate of the duty element, which is a specific percent of the assessable value of the goods. Further, please note that market price of the goods is more than the rebate amount because market price not only represents the assessable value of the goods but includes the applicable taxes & duties. Therefore, under any circumstances, the rebate cannot be denied. Please note that the officials ought to be well aware of the procedures followed by the exporters at the time of the removal of the goods for exports. The exporter produces before the jurisdictional Excise authority the export contract, the invoice, ARE-1 etc. These documents are examined & then the triplicate is authenticated by the range officer concerned. This authentication is an assessment order in itself. The jurisdictional authority is validating the data given in the ARE-1 & the related documents made available by the exporter. It cannot be the case of the department that the authentication of the ARE-1 is simply a ritual of no value & that procedure is introduced by the CBEC to introduce rent seeking in the export shipments.

Please note that if the goods were removed under the bond procedure for the purpose of export then the duty would not be payable on the free samples. Thus the principle of export promotion i.e. taxes & duties cannot be exported is upheld. The same applies in the case of rebate i.e. the duty paid is rebated to the exporter to relieve the incidence of taxes & duties on exports. Therefore, the rebate is in order & needs to be paid in respect of the samples.

Please note the irony of the fate of the exporters at the hands of the Excise officials i.e. they would like to collect duty on the samples but not rebate the same even if the goods are exported. The law is not in their favour therefore the abuse of authority is resorted to. They remember to only collect the duty & misappropriate it.

This is the eleventh part of the story. However, the story of the abuse of authority does not end here. Further lampooning of the system & abuse by the authorities will follow in the next write up. Till then Good bye.

rajiv.pec@gmail.com

CBEC-Withering bureaucracy turning India into a Banana Republic-10th story

It is a very basic principle of the law that the law has to be read the way it is written. Once we accept this principle then can the officials in position resort to interpretation even if the language in the law is explicit & does not leave any room for interpretation. There is a separate issue of CENTRAL EXCISE VALUATION (DETERMINATION OF PRICE OF EXCISABLE GOODS) RULES, 2000 but even after this if it is not clear to the assessee & the authorities that how valuation is to be carried out then is it not a telling comment on the competence of the CBEC in itself. Why then CBEC is not able to address the issue & settle the same.

This is a series in relation to the rebate on export of goods. The Rebate sanctioning authorities are restricting the rebate in cash on the FOB value of exports rather than permitting the rebate on the assessable value stated in the ARE-1 duly authenticated by the jurisdictional excise authority. The authorities are resorting to the Valuation Rules, 2000 for doing so. However, the following appears very explicitly in the said rules.

Quote:

RULE 5.Where any excisable goods are sold in the circumstances specified in  clause (a) of sub-section (1) of section 4 of the Act except the circumstances in which the excisable goods are sold for delivery at a place other than the place of removal, then the value of such excisable goods shall be deemed to be the transaction value, excluding the cost of transportation from the place of removal upto the place of delivery of such excisable goods.

Explanation 1. - “Cost of transportation” includes -

(i)        the actual cost of transportation; and

(ii)       in case where freight is averaged, the cost of transportation calculated in accordance with generally accepted principles of costing.

Explanation 2. - For removal of doubts, it is clarified that the cost of transportation from the factory to the place of removal, where the factory is not the place of removal, shall not be excluded for the purposes of determining the value of the excisable goods.]

Thus it is crystal clear from the valuation rules itself that freight is not deductible from the assessable value if the factory is not the place of removal. There is absolutely no ambiguity & room for interpretation in the law. The Commissioner (Appeals), Mumbai-II held on the basis of facts that factory is not the place of removal. However, the department filed appeal with the Revisionary Authority, Government of India & the RA, GOI remanded the case to the original authority for the limited purpose of determination of the place of removal in spite of the facts being brought to the notice of the RA, GOI that whether it is FOB/CNF or CIF contract the factory is not the place of removal because goods have to be handed over after clearance by the customs authorities under the ships rail. Therefore in accordance with the valuation rules, the freight & insurance cannot be deducted from the assessable/transaction value.

If we see the definition of the transaction value then we have to resort to the CBEC circular issued from F. No. M.F. (D.R.) F. No. 354/81/2000-TRU, dated 30-6-2000 & the relevant extract reads as under:

Quote:

(d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods’.

Unquote:

From the above definition of transaction value it is once again clear that outward handling forms part of the transaction value. Once again there is no room for any devious interpretation.

All this has been brought to the notice of the jurisdictional Assistant/Deputy Commissioner, Maritime Commissioner, Commissioner (Appeals), Revision Authority, Government of India but not taken into consideration. However, all of them are acting in collusion & ignoring the explicit provisions of the law. This is outright cheating. The moot question is that if the freight & insurance is not shown separately in the goods removed for home sales & the assessee pays duty on the invoice amount less the freight & insurance then will the same be acceptable to the assessing authorities. Therefore how can they differentiate between home sales transaction & the export transaction!

Not only this, the officials in position are indulging into other whimsical interpretations to solve their motive of depriving the exporter of legitimate entitlement. The officials are assuming/presuming that the difference between ARE-1 & the FOB value is freight & insurance when the FOB value is lower. However, this is not the truth of the matter. The difference can be on account of exchange rate, testing at the port, storage at the port etc. therefore the presumption has no legal basis & cannot be used to the disadvantage of the exporter for prosecution.

It has been brought to the notice of all the authorities that there is difference in case of FOB contracts also & in this case there is no freight & insurance deduction therefore how can it be concluded that difference between FOB value of exports & ARE-1 is on account of freight & insurance.

Not only this, the adjudicating authorities are having a prejudiced mind to somehow restrict rebate to a lower than the entitlement. If the FOB value in the Shipping bill is higher than no action is taken to recover the duty & refund the same. How this one track mind approach be accepted in the law!

The department has no counter to the facts placed on record. However, when law does not come to the rescue, cheating & abuse of authority is resorted to & decisions are giving by ignoring the submissions placed on record. This can only happen in India because there is absolutely no fear of whatsoever nature because the authorities are sure that nobody will pay any heed to the complaints of such misdemeanour & ever take action against them. Thus there is binding legal precedent but no implementation of it, thus reducing India to a banana republic.

The department is citing the case law 2002 (146) E.L.T. 31 (S.C.) ESCORTS JCB LTD. Versus COMMISSIONER OF CENTRAL EXCISE, DELHI-II but the same is of no relevance because in the case of exports there is no dispute that the factory is not the place of removal & in accordance with valuation rules, 2000 & the definition of transaction value, the freight & insurance is part of the assessable/transaction value.

We agree that the terms of the contract are relevant. In case of C & F contract, the freight is the liability of the seller & in case of CIF contract, the freight & insurance is the liability of the seller. Therefore freight & insurance are payable by the seller & thus includible in the assessable/transaction value. Please note that the title to the goods does not pass to the buyer until & unless he retrieves the original documents from the bankers after effecting the payment or accepting the promissory note in case of shipments by sea or obtains delivery order from the bank. Therefore title to the goods remain with the seller until & unless the goods are paid for. The issue is already settled in case 2004 (178) E.L.T. 1034 (Tri. - Chennai) MV MARKETING & SUPPLIES Versus COMMR. OF CUS. (IMPORT), CHENNAI wherein it is held that importer having not made the payment to supplier, hence, title of goods not passed to importer. This decision is in converse applicable to exports.

It is right that the Excise Act is applicable to the Indian Territory because excise is a tax on manufacture collected at the time of the removal of the goods. However, there is no case for limiting the sale to the geographical boundaries. If that is so then there will be no high seas sale. It is very intriguing that the authorities are not aware of the fact that there can be consignment sales i.e. goods are placed in warehouse abroad & sold from there or given to the consignment agent & invoice raised as & when the goods are sold. Not only this, the authorities should know that there are contractual terms such as DDP—Delivered Duty paid i.e. goods are custom cleared & duty is paid by the seller; DDU-- Delivered Duty Unpaid; DEQ—Delivery Ex Quay & DES-Delivery Ex Ship also exist. Therefore there cannot be any presumption that goods are sold, once they are shipped. The export is not complete until & unless the payment is realized under the Export Promotion policy. The exporter will have to refund the entitlement if the realization is not made. The authorities cannot ignore these provisions of the law. Therefore when the provisions are explicitly clear in respect of the freight & insurance in the Valuation rules regarding the deduction of the freight & in transaction value that outward handling is part of it & the export is not complete until the payment is realized then there is no way that any other view other than that freight & insurance is part of the transaction/assessable value can be taken.

This is the tenth part of the story. However, the story of the abuse of authority does not end here. Further lampooning of the system & abuse by the authorities will follow in the next write up. Till then Good bye.

rajiv.pec@gmail.com

CBEC-Withering bureaucracy turning India into a Banana Republic-9th story

Why the CBEC exists. In my opinion, CBEC exists for formulating the Law i.e. rules etc. in accordance with the law in transparent manner & administer them. However, why this most significant part of the responsibility should be ignored is very difficult to understand. This is the series on rebate on exports & it shows that how the system is manipulated to get away with the wrongs. Some actions are that of outright cheating.

The issue of difference between the FOB value of exports & the ARE-1 value has been precisely settled by the CBEC more than 15 years ago & the same has been respected by the department since then. The circular has not been modified or annulled. If the present set of officials has any grouse then they should take up the matter with the CBEC instead of harassing the exporters in respect of the claims already settled. Why the officials don’t do it or the CBEC does not take action suo motto. The CBEC can always consider the issue afresh in light of the changes in the law from time to time & issue fresh circular to be followed. This happens all the time when changes in the law are introduced out of experience & issues settled by the courts in this country. However, once the circular exists, the department is bound by it & needs to implement the same. This frivolous exercise of SCN contrary to the CBEC circular needs to be stopped, which serves no purpose. Why the CBEC permit frivolous litigation & merely act as a spectator. CBEC vide circular No. Circular No. 203/37/96-CX, dated 26-4-1996 had clarified that it is observed that the AR4 Value should be determined u/s 4 of the Central Excises & Salt Act and the same should be declared on the invoices issued under Rule 52A. FOB value which is contracted price in the course of international trade should normally correspond to Section 14 of the Customs Act, 1962 and this value may be more or even less than the AR4 value. Therefore, this is clarified that, it is not necessary that the AR4 Value and the FOB Value should be the same.

To keep the officers away from the customs & the Central Excise from trampling into each other’s domain, the assessment of the goods cleared for export is done by the two wings of the CBEC under two different sets of laws i.e. The Central Excise Act, 1944 & the Customs Act, 1962 under different provisions of the law. Even this broad scheme of operation is now under cloud & it is difficult to put a reason on it. If the assessable value has to be the same under the two acts then the acts of the Parliament would have explicitly stated that & not carved out separate provision like S 4 in the Central Excise Act or S 14 under the Customs Act? It is difficult to comprehend that why & how this can be overlooked? Therefore, there is no reason to say that the ARE-1 value will correspond with the FOB value in the S/B. The CBEC circular has therefore acknowledged the same. 

Thus the CBEC in itself has made it specifically clear that the FOB value of Exports & assessable value of exports are different & cannot be equated. However, the main objection in the present litigation is that the ARE-1 value needs to be discarded & the rebate should be paid on the FOB value of exports. However, this view has no legal basis in view of the provisions in the Act, clarifications issued by the CBEC & by way of judicial pronouncements. If there is any legal provision which states that the Excise duty has to be paid on the basis of FOB value of exports then the same may please be cited. It is pertinent to point out here that FOB value but this value is for statistical purpose & the true FOB value is arrived in the Bank Realization certificate.

If the CBEC sincerely believes that FOB value of exports is the assessable value of exports then they can very well put this as a specific clause in the Central Excise Act or the valuation rules so that there is no room for any controversy & the assesseees do not suffer at the hands of the field formations. The CBEC is free to do so & they can exercise this right right away to stop the frivolous litigation.

It is pertinent to point that the same procedures are followed when the goods are cleared under the Bond procedure that is without paying the duty & no questions have been ever raised about the difference shown in the assessable value given in the ARE-1 & the FOB value given in the S/B. Do the authorities in position want to say that just the use of the bond or the rebate procedure can result into the law being read in a different manner! In our opinion, such mockery of the law cannot be allowed to proceed.

This is the ninth part of the story. However, the story of the abuse of authority does not end here. Further lampooning of the system & abuse by the authorities will follow in the next write up. Till then Good bye.

rajiv.pec@gmail.com

CBEC-Withering bureaucracy turning India into a Banana Republic-8th story

If there is a crime the culprits should be punished. However, I have not come across any provision in the law that the culprit should be tried thrice under the same law for the same violation. I have not come across any provision in the law where without jurisdiction, the authority can proceed with adjudication & prosecute the beneficiary in the law. However, it can only happen in this great Indian Banana republic because of the abuse of the position.

As you know this series pertains to rebate being allowed in respect of exports effected. However, in this case we find that there is mess beyond redemption created but in spite of raising voice against the wrongs, nobody is bothered. Please see the state of affairs & you will yourself come to a conclusion.

The rebate sanctioning authority is not having jurisdiction to question the amount of rebate once the same is authenticated by the relevant C. Ex. official in the jurisdictional office. The CBEC Circular No. 510/06/2000-CX, dated 3-2-2000very specifically states:

Quote:

3. If the rebate sanctioning authority has reasons to believe that duty has been paid in excess than what should have been paid, he shall inform, after granting the rebate, the jurisdictional Assistant/Deputy Commissioner. The latter shall scrutinize the correctness of assessment and take necessary action, wherever necessary. In fact, the triplicate copy of AR-4 is meant for this purpose, which are to be scrutinized by the Range officers and then sent to rebate sanctioning authority with suitable endorsement.

Unquote:

This effectively means that powers of adjudication in respect of the rebate amount are restricted to the jurisdictional Excise authority & the Rebate sanctioning authority does not have any say in it. Therefore the whole proceeding in reducing the rebate is invalid ab initio because the CBEC circular is binding on the department. The rebate sanctioning authority viz. Astt. Commissioner (Rebate) lacks jurisdiction, therefore the Maritime Commissioner cannot find fault with the order of the Rebate sanctioning authority & direct him to file an appeal. All this was brought to the notice of the Commissioner (Appeals), Mumbai-II & the Revision Authority, GOI. Once again, the result was that the Commissioner (Appeals) simply ignored the submission that the appeal is not maintainable on the grounds of jurisdiction as the ab initio order is not legally valid in terms of the clear cut provisions contained in the CBEC circular. Why the Commissioner/Chief Commissioner/Commissioner (Appeals) ignore such explicit provisions of the CBEC circular. If this is permitted then what is the sanctity of the written word of the law & why it exists. The Commissioner/Chief Commissioner are high ranking officials then why they do not rectify the wrongs instead of permitting 100 s of appeals to be filed by the exporters!  Not only this, the issue was raised with the Revisionary Authority of the Government of India. However, like any other place, there is no justice but the case is remanded to the original authority without taking the aspect of jurisdiction into consideration. Reportedly, the Maritime Commissioner, Raigad’s office has taken up the matter with the CBEC to resolve this imbroglio but to no avail. When the CBEC could settle such the issue when it had arisen in 2000 then why the CBEC is reluctant to do it at this point of time. What stops the CBEC from stopping the misery & harassment! Thus right up to the highest authority a farce & joke is inflicted on the exporters of this country. Is it not disgusting & shameful. If the officials in field formation can go by their own interpretation & flout the explicit procedures, which are binding on them then where can the exporters go for relief? There are several 100 cases & therefore it results in waste of time, energy & effort of all concerned. Why the Commissioners or Chief Commissioners remain oblivious or keep their eyes & ears shut & do nothing about it or if they have done something then why the results are not there to see. The orders in such cases, which is simply a waste of time, energy & effort of all concerned, simply help the Commissioner (Appeals) to fulfil the quota of hearings & issue of orders.

Please note that in several cases it is noticed that the rebate is sanctioned in full by the Asstt. Dy. Commissioner of the Maritime Commissioner’s office but the order is reviewed by the Commissioner & the Asstt./Dy. Commissioner is directed to file appeal against his own order. The moot point of law is that just because Commissioner has reviewed the order, it cannot confer rights on that office to file appeal without jurisdiction.

2. The second SCN in respect of the same ARE-1 is issued by the Additional Commissioner in the office of the Maritime Commissioner. The said SCN is issued on the basis of audit objection. Now, the fact of the matter is that audit is of the department therefore just issuing a SCN for the inefficiency of the departmental official & let the exporter bear the brunt of that is highly deplorable. Therefore there is a second SCN issued by the Maritime Commissioner’s office in itself. Once again, it is pertinent to point out that the audit may be right in raising the issue but in respect of the audit objection, the Maritime Commissioner’s office is duty bound to bring the objection to the notice of the jurisdiction Excise authority for appropriate action instead of issuing the SCN. The Maritime Commissioner’s office cannot gain jurisdiction just because audit has taken objection.

We have already visited the story of 2 SCNs issued, one by the rebate sanctioning authority & the one issued on the basis of the audit objection. However, since the issue of jurisdiction was brought to the notice of the Maritime Commissioner’s office, the Maritime Commissioner’s office was compelled to bring the issue of difference in the FOB value of exports in the S/B & the assessable value in the ARE-1 to the notice of the range officials. Therefore, the third SCN is issued by the jurisdictional excise authority in respect of the same ARE-1. In this SCN, the most intriguing point I have come across is the fact that the SCN is normally issued after 1 year from the date of issue of the ARE-1 i.e. beyond the limitation period therefore the SCN alleges overvaluation which could not be determined at the time of the removal of goods to overcome the limitation period thus mis-declaration is surreptitiously spoken about. Please note that the jurisdictional excise authority acknowledges that overvaluation could not be determined at the time of authentication of ARE-1 but then the moot point is that under these circumstances, how could the assessee be aware of it & how can they be punished. In respect of collusion, suppression of fact, mis-declaration, the law & the judicial pronouncements are clear that the assessee needs to be put to notice to the exact nature of the default so as to enable the assessee to address the issue appropriately. However, everything goes for a toss.

The story is not about 3 SCN s but the SCN s being in respect of the same ARE-1 containing different allegations & proposing different punishment. In some SCN, I have come across cash rebate to the extent of the FOB value & the rest being rebated through re-credit in Cenvat credit account. In other cases, the rebate is restricted to the FOB value & nothing done about the excess lying with the government i.e. same is being treated as good as loss in the way the system functions. In some cases, refund of the excess paid is demanded with interest. In some cases, not only the refund with interest is demanded but even penalty is proposed as penalty does not require mens rea. Thus the jungle rule prevails & not the written word of the law. There are 100s of cases & there is no stoppage of the idiocy. Just think of the plight of the exporter, for Rs. 2000 there are 3 notices to be replied. If this is the case, then even God cannot save this country from the disasters as pronounced by the Supreme court judges.

The CBEC/Chief Commissioner/Commissioners cannot say that they do not understand the implications of the circular issued by CBEC debarring the rebate sanctioning authority from scrutinizing the correctness of assessment but still the wrongs are rampantly committed & adjudicated right up to the Revisionary Authority, GOI. There is something seriously wrong with what’s going on & the exporter has to bear the brunt of the idiocy & inefficiency of the department. Why that is no action is ever taken against the wrong doers! Why the commissioner/Chef Commissioner be held responsible & appropriate action taken. Why the exporters should be harassed & saddled with multiple SCNs.

This is the eighth part of the story. However, the story of the abuse of authority does not end here. Further lampooning of the system & abuse by the authorities will follow in the next write up. Till then Good bye.

rajiv.pec@gmail.com

CBEC-Withering bureaucracy turning India into a Banana Republic-7th story

Why should you do things in a manner which is not commensurate with the quantum of workload & which is bound to create room for cheating, leakages etc. The only reason to my mind is that the vested interests wish to perpetuate rent seeking. Then, is the CBEC blind enough not to see the things in the right perspective! The duty drawback claims are settled in less than 15 days as per the claims made by the officials of the Customs house in the Chief Commissioner’s open House at Mumbai. I believe them because the computers do not cheat & they leave a foot print of the doings.

As you know this is the story about the rebate in exports. Here we describe that how leeway is created by the corrupt policymakers to facilitate & perpetuate corruption.

Please refer to the Notification No. 40/2001-C.E. (N.T.), dated 26-6-2001. The said notification speaks about electronic declaration being put into use for the purpose of rebate. Thus more than a decade ago, it was envisaged that electronic declaration is the way out of the mess. The computerization started more than a decade ago. However, in terms of implementation, nothing is done by the CBEC. Is it not because, the refunds are very good source of rent seeking & the exporter is easy prey. Why in more than a decade this important area operations could not be computerized. Is the Chairman, CBEC not accountable to the citizens of this country for such wrongs in the system! Is the CBEC not accountable to anyone & in any manner for such blemishes.

The biggest source of corruption is the fact that the CBEC allows 90 days for settlement of rebate claims. This in itself tells you that rent seeking can be the only objective for allowing such a long period for the settlement of claims. The opportunity cost of money in this country is in excess of 18%. Therefore normally the exporters are forced to pay upwards of 1% of the rebate claim to get the payment earlier/in time. It will be illogical that why this rent amount will not be paid by the exporter if he gets the payment in 30-40 days therefore there is a genuine case for fuelling corruption through the legislation. I do not whether this can be termed as legalization of corruption by the policy makers & the government. What right the government /CBEC has to withhold my money by just in place a procedure, which curtails efficiency & encourages rent seeking. In the first place, the exporter is required to file the rebate claim along with the copy of the export promotion copy of the shipping bll. The first stumbling block is thus introduced for delay because the EP copies are not released by the customs field formations normally for more than 30 days. Not only this, the print of the EP copies is a serious problem i.e. at times you are not able to take out a photocopy out of the EP copy. Thereafter, you file the rebate claim. Here again the winding procedures ensure that delay is bound to take place. The rebate sanctioning authority needs to get confirmation of exports having taken place from the port authorities. The point here is that if the exports have not taken place then from where the EP copy of the S/B has emerged. Therefore, why the second check is deemed necessary? Even if it is deemed necessary than it should not result in withholding of the rebate because in any case the department is entitled to recovery of erroneous refund with interest. Therefore the interest of the department is well protected. The second point is the check regarding the duty payment. Once again, the game is that the rebate sanctioning authority will say that Duty verification letter has been sent whereas the recipient jurisdictional authority will say that the same is not received. The receipt are only acknowledged & appropriate action taken if the palms are greased. Thus once again a fertile ground is created for corruption. Thus the exporters are required to deploy agents for getting their own money back. In contrast to this please note that in case of drawback claims, the time period for settlement was reduced to 60 days & then to 30 days. When in case of Drawback, the CBEC thinks that time limit of 30 days should apply then why there should be 90 days period allowed in the case of Rebate claims. It tells you only one thing that cheating & corruption is the order of the day. The rebate still remains a cash cow for the department & even the CBEC does not let the opportunity slip from the hands of the department.

 The story does not end here. If you just point out the loopholes, the department has a very easy passage to slip out of the wrongs taking place therefore informing the solution is a must. The thankless officials of the department would then utilize the same to their advantage one day claiming laurels for what is implemented. This writer has made suggestion several times & nobody ever said that it is not workable or in the best interest of all concerned but then you require a will to get things done & none exists in CBEC. The solution is very simple. The ARE-1 details are filled in the S/B. The rebate amount should also be filled in the S/B. The said amount should be then credited directly to the account of the exporter through EFT. The intimation of the rebate should be given to the jurisdictional Excise office & they should counter check whether the rebate is correctly sanctioned or not. If the rebate is not correctly sanctioned then the jurisdictional Excise authority should immediately initiate action for the recovery of rebate with interest. Anyhow, the law permits full one year to the department to take action. This will unburden the system & free up the resources for better use but if that would be the way, this country would move 100 years ahead in no time & beat the best in the world hollow but then is the CBEC listening & the corrupt Board wake up & do something.

This will free up officers in the maritime Commissioners office. These officials can then be utilized for C. Ex. audit 2000. Wherever the rebate claims of the units are in excess of Rs. 50 Lakhs then those units should be compulsorily audited every year by the department. This second check will then ensure that there is no case of leakage or cheating possible until & unless there is collusion to commit fraud.

Please note that there have been frauds on regular basis reported in relation to the rebate claims. If the suggested procedure is adopted then it plugs the loopholes for the frauds thus this is an added advantage.

This is the Seventh part of the story. However, the story of the abuse of authority does not end here. Further lampooning of the system & abuse by the authorities will follow in the next write up. Till then Good bye.

rajiv.pec@gmail.com

CBEC-Withering bureaucracy turning India into a Banana Republic-6th story

The law is not a rational code but this does not mean that legitimate expectations & morality need not be considered while framing the law. The government has every right to collect interest if the payment are delayed by the assessees but at the same time, there is obligation to effect payment of interest in case the refunds are delayed. However, there is no sense of legitimacy. This points to big brother bullying the small fries.

This series pertains to rebate of goods exported. The government is required to collect & pay interest but just see the disparity & you will become aware of the illegitimacy, which prevails.

Under the DOR Notification No. 19/2002-C.E. (N.T.), dated 13-5-2002, the applicable rate of interest for delayed payment by the assessee is fixed @ 15% per annum. However, vide DOR Notification No. 66/2003-C.E. (N.T.), dated 12-9-2003, the department revised the rate to read as @ 13% per annum. This rate of interest continued up to 31.3.2011. However, by way of DOR Notification No. 6/2011-C.E. (N.T.), dated 1-3-2011, the said rate of interest has been changed to 18% per annum. Thus you will see that the policymakers are simply bothered to raise the revenue of the government through hiking the interest rate. There is a hefty hike of 5% in interest rate between 2003 through 3011.

In contrast to this, please see the notifications pertaining to the payment of interest by the department.  Under the DOR Notification No. 24/2001-C.E. (N.T.), dated 11-5-2001, the applicable rate of interest for delayed payment by the department is fixed @ 9% per annum. However, vide DOR Notification No. 17/2002-C.E. (N.T.), dated 13-5-2002, the department revised the rate to read as @ 8% per annum. Further, vide DOR Notification No. 67/2003-C.E. (N.T.), dated 12-9-2003, the department revised the rate to read as @ 6% per annum. Therefore the department is required to pay interest @6% per annum. Please see the inflation rate prevailing in this country. As on date some of the banks pay more than 6% interest in the money lying in the savings bank account. The government is well aware that it is permitting borrowing at rates in excess of 8% per annum in case of tax free bonds. The prime lending rates of most of the banks are in excess of 13%. Therefore, why the government should withhold the money of the beneficiaries beyond liberal period of refund allowed to themselves & pay only 6% rate of interest on that amount. Is the government & the CBEC is not ashamed of such a blatant abuse of authority. Why the government should indulge into such cheating! Is the Chairman, CBEC obligated to explain that why such state affairs prevails? Why there is no legitimacy & rationale exercised in respect of delays in refunds whereas on the other hand the rate of recoveries are increased when the assessee is in fault. The rate of interest for the beneficiaries default has gone up but the rate of interest has not been touched & the rate of interest for the benefit of the government is 18% & whereas for the assessee is 6% per annum i.e. the ratio is 3:1 in the favour of the government. Why the government should indulge into such cheating! Is the Chairman, CBEC obligated to explain that why such state affairs prevails? Why there is no legitimacy & rationale exercised in respect of delays in refunds whereas on the other hand the rate of recoveries are increased when the assessee is in fault. There are other departments such as Income tax, which pay interest in excess of 6% therefore why the interest rate should show disparity. Can the government not have a proper way to determine rate of interest for all central legislations both for refund & recoveries.

Please note that the assessee is not only paying the penal rate of interest but in most of the cases, they are subjected to penalties & fines also. Thus the magnitude of injustice is more glaring.

Not only the above, the biggest irony is that even this measly interest is not paid by the department as already stated in the earlier story. Therefore might is right & India is a banana republic.

There is one more glaring error, which needs to be collected. It is only in respect of the duty that the interest is required to be paid. There are several other deposits made by the assessees. If the assessee wins the case for the faulty & mischievous interpretation of the official concerned then why the interest should not be payable to the assessee & recovered from the official in fault. If this provision is implemented then frivolous litigation & corruption would reduce to a very large extent. The government & the department will become clean in one shot. It is difficult to understand that why this cannot be implemented if we are sincere about tackling corruption.  

This is the sixth part of the story. However, the story of the abuse of authority does not end here. Further lampooning of the system & abuse by the authorities will follow in the next write up. Till then Good bye.

rajiv.pec@gmail.com