In response to criticism on the official proposal for allowing it to arrest those with service tax dues above Rs 50 lakh, the revenue department today said some assessees were taking advantage of its leniency.
"On the service tax side, we have handled it with kid gloves since 1994. But, if you see the kind of cases we detected in the recent past, they (assessees) have blatantly misused the service tax provisions, particularly in cases where they have recovered the money from people and not given it to the government," said the head of the Central Board of Excise and Customs (CBEC), Parveen Mahajan.
In a post-Budget interaction at the Federation of Indian Chambers of Commerce and Industry (Ficci) here, she said the amounts not deposited by assessees were huge in some cases -"Rs 200 crore, Rs 400 crore -" and they'd admitted to the liabilities.
Revenue secretary Sumit Bose said if a government servant keeps even Rs 10 of the government money with himself, he will be prosecuted. "In service tax, we are talking of over Rs 50 lakh of tax collected by the assessee and not paid to the government."
In his Budget speech, Finance Minister P Chidambaram had said of 1.7 million assessees under service tax, only about 700,000 file returns. To motivate them, he announced a Voluntary Compliance Encouragement Scheme. Those filing a truthful declaration on dues not passed on since October 1, 2007, and making the payment in one or two instalments, will not have to pay either interest or a penalty.
Mahajan said arrest provisions had always existed with the Customs and central excise. In the previous Finance Act, section 13 of the Excise Act and section 104 of the Customs Act were amended to make over Rs 30 lakh of duty evasion cognizable, to undo a Supreme Court ruling of September 2011 which said all offences on excise and customs should be non-cognizable and bailable. In next year's finance bill, duty evasion of customs or excise of over Rs 50 lakh are proposed to be made non-bailable as well.
"There is nothing new which we have done today. All we have said is we have made these non-bailable," said Mahajan. And, the threshold of duty evasion was also raised from over Rs 30 lakh to Rs 50 lakh for an arrest provision.
Allaying fear over arbitrariness of tax authorities, she gave statistics to make the opposite case. She said in 2011-12, as many as 527 cases of commercial fraud were detected in the case of customs duty and less than one per cent or 26 persons were arrested. In 2010-11, 581 cases of commercial fraud were detected by the department of revenue intelligence and only 64 people were arrested.
She also disclosed that about 60,000 properties were registered in a big city of Maharashtra in a given year. On scrutiny, the assessing officer found that in 60 per cent of these, either the Permanent Account Number was not given or the wrong number was quoted. "In the list, the who's who of the city were there," she said.
Mahajan assured the Ficci members the tax authorities were not adversarial to the assessees. "It is not a kind of SHO approach. The provisions will be reviewed from time to time," she said.
To a query over a judgment by the Supreme Court in the Fiat India case, Mahajan said the court had interpreted the law that existed. A committee would be set up in April to see how the judgment and concerns of the industry were aligned, she said. The court had held that in case a company sells its products below the cost of production (at a loss) for a long period of time, then excise duty is applicable on a manufacturing cost-plus basis.
On the proposal for ordering a special audit on income tax if the volume of accounts were high, Central Board of Direct Taxes' head, Poonam Kishore Saxena, said sometimes an assessing officer asked for pointed information and the assessee would bring a truckload of information. "It is very difficult to go through such loads of information. You must also remember that the assessing officer does not go for a special audit without permission from the chief commissioner. It is not that anything would be done arbitrarily," she said.