SEPTEMBER 11, 2015

By Veer Vikram Dev Kumar

I have always been interested in Indian Made Goods long before it became fashionable to talk about the subject. And the reason is simple. Before clearance, all the goods manufactured in India pay the prescribed Excise Duty before Goods cross the threshold. In this case the factory gate.

In the good old days, duty was paid in cash before goods were cleared from the factory. To make doubly sure that duty was in fact paid, a Central Excise Officer was required to countersign the documents before clearance. So the Officer's convenience was one more factor, one more variable that had to be taken into account while planning clearance. This, in some cases, gave rise to delays and complaints due to overworked and sometimes overdemanding Officers.

In early seventies, Physical Control gave way to Self Removal Procedure whereby Central Excise Officers' countersignature was no longer required for clearance of goods. Now the manufacturer was free to clear goods whenever it was convenient to him at all hours of day or night. As the duty due was discharged before clearance the Department's workload would have come down.

But this SRP was accompanied by detailed documentation which was voluminous to say the least. In succeeding years this detailed documentation was whittled away in bits and pieces.

Finance minister Dr. Manmohan Singh in his historic 1994 budget did away with lot of Central Excise documents starting with Gate Pass. Henceforth, the accounts maintained by the manufacturer and the documents issued by him in the course of trade would be accepted as Central Excise documents too.

Today, two decades later the scene has undergone a sea change. Returns are filed Online and unless the Licensee, sorry the Registrant wants physical sealing for his exports, the Central Excise Officer hardly gets to meet them in person. Rebates, Duty Drawback etc., are disposed off within strict time limits failing which interest has to be paid by the Government to the exporter. Now, the knife cuts both ways.

One area of concern where the Department can really harass the licensee is in the field of Show Cause Notices. If Audit Party- internal or external- calls apples oranges, it becomes an orange. And no amount of pleading will do. Even a High Court Judgement is not enough. Only Supreme Court's will do.

It is indeed ironical that in the World's largest democracy, the Government is the largest litigant in its own Courts. More often than not the Department doesn't accept the decision of its own senior officers if any amount of Revenue is involved.

Every order is appealed against if it is not in favour of Revenue.

An easy way to remedy this would be to award costs. The losing party should pay the winner cost incurred in that forum and at least two forums below. This will put an end to frivolous litigation to a large extent.

And to clear the massive backlog the Courts and Government can work imaginatively.

For instance, in California the rich and the famous can hire a judge who will hear their case out of turn. Similarly Government of India can hire a dozen High Court Judges across India. Let us say this extra strength along with the regular complement of existing judges will bring down pendency to a considerable extent. Further the Courts could specialize in a particular subject. Let's say a High Court in South while disposing of the Departmental cases as per roster can utilize the extra judges to fast track the Service Tax Cases. Another High Court in West can fast track the Customs cases and so on.

Similarly there could be half a dozen extra Judges in Supreme Court and their Lordships would devote sixty percent of their judicial time in disposing of CBEC cases.

Once the Supreme Court has pronounced the law of the land, the lower formations can dispose off their pendency without much ado. And the ease of doing business in India will take a big jump.

Now let's take a look at the actual manufacture. In late seventies Oil Companies would import steel sheets and lot of small units would fabricate cylinders for bottling LPG. Similarly the paint companies would import pigments, solvents and what not. The only job they would do was to mix them to make the final product -decorative paint. Only thing that was procured locally was empty cans and cartons.

Wiring harness for automobiles - the manufacturers or rather the assemblers would import everything, the wires, brass fittings and any other thing that was needed. And they would just clamp them together. Of course, the end product would carry "Made in India" tag.

But over the years Indian manufacturing has acquired depth and sophistication. In June 2013, I had to attend to export of an oversized distillation column to Ghana. That country had struck oil a couple of years before. They were putting up refining capacity to coincide with their oil that was scheduled to start flowing soon. What struck me as significant was the fact that the Singapore based consultant, who had the wide world to choose from, had chosen a unit in our State. Our man had won this order in a stiff international competition.

While sending monthly reports and returns for the range I noticed that the Revenue foregone was twice the revenue collected. Clearance without payment of duty is for goods meant for 100% EOUs, SEZs and of course,physical exports. Whenever I went for export sealing I couldn't help noticing the craters through which the vehicles had to trundle through. At the factory itself export loading was often delayed because of power failure.

If these two problems, roads and power are addressed, Make in India programme will get a big boost. We don't need to go, hat in hand, begging the foreigners to please come and Make in India. Indian ingenuity knows no bounds. In a small Range with no big names in it there were many units catering exclusively or rather mostly to sophisticated western markets.

A small ice cream manufacturer whose annual turnover is about five crores was of the opinion that his turnover could easily cross twenty five in two years time without any further investment in men or machinery if there was no power cut in Hyderabad and surrounding areas. The logic being that if there were to be no power cuts, all the kirana shops would be his stockists and he would not have to kowtow the Mall owners. Good roads would shorten the time taken to reach ports from the hinterland.

Make in India campaign to succeed does not need a magic wand. All that is needed is up-gradation of infrastructure and helpful bureaucracy. And ingenuity of our Manufacturers will take care of the rest!

(The author retired as an Assistant Commissioner of Central Excise, Customs & Service Tax.)