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Delay in finalization of demands - CAG hauls CBEC over the coals

18 07 2006

The CAG found that Board does not monitor, Chief Commissioners do not bother to send reports asked by the Board and the Board doesnít get angry. Similar disobedience from the Commissioners do not cause anxiety to the Chief Commissioners. High value cases are routinely kept pending. Reports are manipulated and Ö

++ In spite of incorporation of time limit in the statute with effect from 11 May 2001, 15251 cases involving central excise duty of Rs.8625.87 crore were pending adjudication as on 31 March 2004. Increase was 13 per cent in terms of number and 51 per cent in terms of amount as compared to position on 31 March 2001.

++ Cases reported to be pending beyond one year were 38 per cent in terms of number and 48 per cent in terms of amount.

++ In six test checked cases alone, an amount of Rs.153.01 crore was pending adjudication for want of administrative action.

++ There was general tendency for adjudicating officers to finalise low revenue cases at the expense of keeping high value ones pending. This was true even for de novo cases.

++ Cases numbering 829 involving central excise duty of Rs.1687.83 crore were pending adjudication for want of clarifications by the Board.

++ Seventy six per cent of adjudicating officers did not meet target of 100 cases fixed per annum.

++ Due to ineffective internal controls, 31 cases with duty effect of Rs.6.61 crore were lost sight of while transferring cases on revision of monetary limit for adjudication and 200 cases involving duty of Rs.145.48 crore not reflected in the monthly technical report of ten divisions alone.

CAG points out that in 1997 it had recommended that reasonable statutory time limit for finalisation of SCNs be fixed for safeguarding interest of revenue. And the time limit was fixed as one year fore suppression cases and six months for other cases Ė of course with a clause - where it is possible to do so. Audit finds it was not possible!

Audit observed that

++ Even after fixation of time limit, pendency was higher by 13 per cent in terms of number and 51 per cent in terms of duty involved

++ average disposal was approximately 54 cases per annum per adjudicating officer during the year 2002-03 against target of 75 cases and was 72 cases per annum during 2003-04 against revised target of 100 per annum per adjudicating officer fixed by the Board in May 2003.

++ Time limit prescribed for finalising adjudication not adhered to

++ The reported age-wise pendency was 38 per cent in terms of number and 48 per cent in terms of amount for cases pending adjudication beyond one year. These did not seem accurate since audit scrutiny had revealed that several cases transferred from one adjudicating officer to another consequent upon revision of monetary powers in October 2003 were reflected as fresh cases in MTR.

++ Adjudicating officers tended to clear fresh cases at a faster rate than old cases, thereby allowing old cases to linger.

Why are cases not adjudicated? The CAG studied some specific cases.

1. PH was postponed eight times against the permitted three

2. 29.02 Crores held up for want of issue of a Show Cause Notice for Rs. 25,000.

3. Clarification sought from Board; No reply.

4. Order not issued even after one year of hearing.

5. During PH assessee asked for documents which could not be given

6. Show Cause Notice issued in 1997. Board transfers the case to a Commissioner in 2003, files transferred in 2004; adjudication yet to be done.

7. PH notice issued to assessee without mentioning date and time of appearance. Case delayed for 13 years.

Pace of finalisation is inversely proportional to value.

Audit noticed that

++ percentage of clearances both in terms of number and amount varied from 63 per cent to 80 per cent in respect of cases involving revenue upto Rs.20 lakh each.

++ Percentage of clearances of cases involving revenue of more than Rs.20 lakh in terms of number was similar whereas percentage in terms of revenue involved was much lower

++ This wide gap was indicative of the general tendency of adjudicating officers to deal with low revenue cases at the cost of keeping high revenue ones pending.

Officers generally do not adjudicate de novo cases. No monitoring by Board.

Audit found a general tendency to avoid adjudication of de novo cases, especially high revenue ones. CBEC member had written to all the Chief Commissioners in 2004 to pay attention to de novo cases and send a fortnightly report. Audit found that no such reports were sent and a happy Board also did not insist. Audit says, Lack of proper attention and monitoring at Boardís level resulted in remanded back cases involving high revenue remaining un-adjudicated for long. If field was responsible, Board could have punished them; who will punish the Board?

Why are such cases pending? Audit made some specific case study:

1. Administrative delays in transferring required records had resulted in non-finalisation of the case and blockage of government revenue

2. Tribunal ordered re adjudication within six months. Three years and two commissioners later the case is still pending. Administrative problems.

PH over but who will write the Adjudication Order?

Board, long ago in 1980 wanted orders to be issued within 5 days of hearing; if that is not possible within 15 days and in any case within a month.

On a test check, Audit found that in 37 per cent of the cases, adjudication orders were issued after one month from date of conclusion of personal hearing with delays ranging from a month to more than a year. In four divisions of Thane I, Aurangabad, Delhi III and Delhi IV commissionerates, all adjudication orders were issued after one month

Audit found that there was no effective mechanism to check if orders are issued immediately after hearing. Chief Commissioner, Vadodara had directed commissioners to submit monthly report in the prescribed proforma in respect of such delays. Audit found that no such report was sent.

Call book cases not recalled for want of Board clarifications.

Demand cases pending adjudication can be transferred and kept in the call book, on specific instructions of the Board. These cases could be adjudicated only after necessary clarifications were issued by it. Audit observes that Board was responsible for overall monitoring of expeditious disposal of pending cases within prescribed time limit. It should, therefore, have reviewed the position and issued clarifications from time to time to finalise cases pending at its own instance in a fixed time frame. Inaction in the matter resulted in postponement of adjudication for a long period to the detriment of revenue.

Irresponsive Board?

Some cases pending for want of clarification from the Board:

1. Board vide circular dated 28 August 2003 decided to further examine the matter relating to recovery of eight per cent of the price of exempted goods, when common inputs are used for both dutiable and exempted goods. Even after three years, no clarification from Board and cases are pending in the call book.

2. Board wanted to examine the issue of availment of exemption under notification No.2/2001, dated 27 January 2001 for Gujarat relief work. The Board have not yet taken a decision even though more than two years have lapsed since the orders withholding finalisation proceedings were issued.

Disobedient Commissioners (Appeals) - Audit seems to be ignorant of case law.  

Audit observes that Power to remand back a case was thus done away with by amendment of section 35A with effect from 11 May 2001. In course of review of 154 divisions/adjudication cell of commissionerates it was revealed that cases continued to be remanded back by the commissioner (appeals) even after amendment in section 35A with effect from 11 May 2001. The fact that commissioner (appeals) continued to remand back cases even after amendment of 11 May 2001 indicated that Act was being violated. But is not Audit aware of the plethora of case law available on the subject? Judicial opinion is that even after amendment, Commissioner (Appeals) can remand.

Mostly Tinkered Report (MTR) - Mis-reporting of pendency Ė Expertise unparalleled.

On PAC expressing serious concern over discrepancies in data relating to pending cases, the Board vide letter dated 23 May 2003 issued instructions for taking utmost care in compiling data while sending MTRs. Audit on test check found that despite such instructions there were differences in the figures reflected in divisions with those in MTRs.

MTR is the Monthly Technical Report sent by the Commissioners and no other compilation in the world can have more lies than the MTR. Orders which the officer hopes to issue are also shown as disposed. There is no logic or facts involved in these reports.  If you look at the way this report is prepared, you will be surprised that the worst evader will not cook up this kind of accounts. An inspector prepares the report with the actual pendency as available in his cooked up register. When it goes to the Joint Commissioner, he sees that 346 cases are shown as pending with the Joint Commissioner. He will correct it as 326. Then it goes to the Commissioner and the draft says that Commissioner has a pendency of 56. He will correct it as 16. The manipulation has to be reconciled and fresh cooking done. There was one smart Commissioner who immediately after taking over called for a factual position and then reported to the Board that the figures shown by his predecessor was only 10% of the actual pendency!

Lack of co-ordination between Board and field offices/within the wings of the department

Audit found that some cases were pending adjudication due to lack of proper co-ordination between Board and field offices as also within the various wings of the department in furnishing necessary clarifications/documents to each other.

These are some of the excuses:-

1. Documents from anti evasion wing awaited.

2. Documents from DGCEI awaited

3. Clarification from the Board awaited

Auditís recommendations:-

1. Government may consider laying down guidelines specifying circumstances under which it was not possible to finalise demand within the statutory period and make it incumbent upon each adjudication authority to justify each such case to the Board.

2. Board may also fix appropriate time limit for issuing clarifications on the cases kept in the call book at its behest.

3. In view of large scale transfer of cases due to revision of monetary powers, there is an urgent need for recasting of MTRs by all the commissionerates to reflect correct picture of age-wise pendency.

4. In addition to fixing a numerical target for disposal of cases, Board may stipulate financial target as well to take care of the tendency of adjudicating low value cases.

5. Time bound programme of concerted efforts to bring down older pendencies to manageable levels.

Physician heal thyself! What is Auditís role in pendency?

The CAG has not studied the Auditís role in the proliferation of Show Cause Notices and their non-adjudication. Whenever Audit raises (an often silly objection), Show Cause Notices are routinely issued and they are not adjudicated till Audit clears the objection, which they normally do not do for fifteen years. Later they come and raise an objection that Show Cause Notices are pending involving huge revnue.

Twist in the tale.

The poor lambasted DGST, had withdrawn his controversial letter on abatement with regard to Service Tax on GTA. But now it is Auditís favourite objection. They say his original letter was correct and withdrawal wrong!  

Life goes on merrily thanks to the DGSTs and CAGs of this world!

Until Tomorrow with more DDT

Have a nice day.

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