This has reference to the call made by one of the readers wherein he made a few observations & asked a few very simple questions as under:
A. Why the authorities pretend that they do not understand the basics of the law & the policymakers not able to set the things right?
B. Why the Comptroller & Auditor General (CAG) does not raise audit objections or take cognizance thereof even when it is absolutely clear that somebody has indulged into corrupt interpretation to ensure benefit in a very veiled manner. Can the corrupt interpretations be ignored & no action ever taken?
C. Why the Central Vigilance Commissioner (CVC) not able to take action in such cases of corrupt interpretations indulged by the policymakers?
D. Can the bureaucracy even treat Parliament as dirt & get away with it. If that is so then what is the sanctity of the written word of the law?
E. Lastly, why should the bureaucracy cheat & kill the assessee when they generate revenue for the nation as a whole & they are the cash cows for running the government.
I tried to explain to him for than 15 minutes that this country has been functioning in this manner for more than half a century & there is absolutely no responsibility & accountability in the system. However, then he came out with the last question that what is the change in the way of functioning of the GoI even with the new government & India moving up 40 ranks in the ease of doing business. I think the reader was very right in pointing out the abject failure of the bureaucracy & particularly the policymakers.
I thought about it & the dispassionate analysis tells me that the conduct of the bureaucracy tantamount to outright cheating & therefore highly deplorable & seriously speaking, it is contempt of the Parliament.
Please see the following:
A. The charging section of the C. Ex. Act, 1944 very specifically states that duty liability has to be discharged on Transaction Value. In case of exports, the goods were removed under ARE-1 on the basis of composite price in the foreign buyer’s order & the triplicate copy of the ARE-1 authenticated by the jurisdictional excise authorities thus completing the assessment. This ARE-1 triplicate copy authentication was not in place for “hafta vasooli” only.
B. The Transaction Value definition clearly states that outward handling is part of the transaction value. Here in this case, the goods are to be delivered at Ashdod Israel by multimodal transport & therefore form part of the transaction value. The contract clearly states that title transfer stands completed once the goods are received in good condition at the foreign buyer’s premises & accepted by them.
Since removal of every exciseable goods is subject to assessment, the Parliament thought it wise to put not only the definition of Transaction Value in the Act in itself but even gave an explanation in the S 4 i.e. the charging section in itself thus taking away any powers from the policymakers to fiddle with the implementation in the name of interpretation. No statute can be more clear & specific than this.
I am compelled to reiterate the facts of the case study for ready reference. The foreign buyer has placed order on CIF basis & the contract represents the composite price of the goods for the delivery of goods at the named destination in the contract i.e. Ashdod, Israel @ US 10/Kg for export of item A. The excise invoice was therefore prepared @ Rs. 645/Kg. (Exch. Rate us$1=Rs. 64.50). The estimated freight & insurance element is US$ 0.10 or Rs. 6.45/Kg.
Now, please see the explanation given in the S 4 itself, which reads as under:
Explanation. – For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.
From the explanation, it is absolutely clear that the exporter correctly showed the composite price in the Export Invoice & also correctly discharged the duty liability on the same. This flows from the plain wordings used in the Charging Section, Transaction Value definition & the explanation given in the Charging section. There is no devious interpretation possible because the Parliament has approved everything in a very plain & simple manner because it the assessment & discharge of duty liability is basic to each & every removal. Therefore, as pointed out earlier how can the CBEC indulge into devious interpretations & conclude that freight & insurance in case of a CIF contract are not part of the transaction value. Can anybody with a sane mind say that it is wrong to specify the composite value of Rs. 645/Kg. in the Export Invoice in the case study is wrong. Is Rs. 645/Kg. not the amount the exporter is receiving for parting with the goods for export? Therefore is this not the price paid by the buyer? If yes, then how is this not the transactional value in terms of the explanation? Where does the explanation say that even freight or insurance can be deducted from the composite price to arrive at the transaction value? Therefore the CBEC cannot have a whimsical approach from time to time in any case! Up to 2009, in case of exports, rebate was paid on the freight & insurance element & thereafter frivolous litigation has robbed the exporters of their legitimate entitlement.
Any person with little knowledge of the law will appreciate that you have to read the law, the way it is written. You can add, subtract or modify anything from what is written in the law but even this basic tenet of law is violated & nobody seems to be bothered. I believe that this is for the reason that we do not believe in application of mind but herd mentality i.e. if one takes an adverse call in the matter then nobody has any courage to set the decision right under the fear that he would be taken to task. The fact is that the system is so rotten that they will align to perpetuate a wrong & indulge into cheating to rob the assessee of the legitimate entitlement. I have been in discussion across the table with those responsible in administration & they are not able to challenge the provisions contained in the statute but then too the justice is missing. I talk about killing the assessee because of the triple whammy. Firstly, the assessee did not take the Cenvat credit of the disallowed credit as appeals are filed against the decision. Secondly, the exporter has already suffered on account of the fact that the Cenvat credit has not been utilized as the same was not recredited. Thirdly, the decision in respect of the appeal is delayed inordinately & the exporter is required to pay the disallowed amount with interest despite the fact that disallowed Cenvat credit is not availed. How can there be interest levied when the exporter has not claimed the Cenvat credit. The fact is that the Cenvat credit has not been used at all therefore how the interest can be collected in these cases. Everybody understands the problem at hand & the fact is that nobody is willing to bell the cat & say that under any circumstances, interest can never be levied under this situation.
Last but not the least important is the fact that why the CBEC should not examine the issue & settle it instead of the fact that hundreds of pending appeals are left to be decided individually. Why encourage frivolous litigation when the C. Ex. Act is crystal clear. There have been press reports that such issues can be referred to the Ministry of Law & settled. Lets us begin with this & see what the Ministry of Law has to say both in respect of the valuation & the payment of interest. My fervent appeal should not fall on deaf ears because this is the case of an Act of Parliament being implemented in the letter & spirit.
(Above are personal view of Author and he can be reached at email@example.com)