The Finance Minister, Shri Pranab Mukherjee has asked the Central Board of Direct Taxes (CBDT) and Central Board of Customs and Excise (CBEC) to constitute Standing Committee at the level of Chief Commissioners to have a systematic bottom to top approach for litigation management. Shri Mukherjee was speaking at a review meeting with the Chief Commissioners and Commissioners of Income Tax, Customs and Central Excise in Mumbai today. Asking both the Boards to improve human resource management, he said that a model time frame for conducting the Departmental Promotion Committee (DPCs) must be developed and followed strictly. The Minister also urged the Department to ensure that all the annual general transfers are carried out by both the Boards by the month of April. Expressing concern over Central Excise and Customs duty arrears in the zone, Shri Mukherjee asked the officers to give special emphasis in taking some serious steps for collection of arrears of revenue. The Finance Minister urged the revenue department to create a formal Risk Management institution to improve the voluntary tax compliance in India.
Following is the text of Finance Minister’s speech delivered on the occasion:
“This is the second occasion I am meeting with Chief Commissioners and Commissioners of both CBEC and CBDT in a combined meeting. Last time we met at Kolkata. This type of interaction with CCs and Commissioners provides an opportunity to understand the ground realities and creates a common platform for both the departments to come together. I would like to continue with this tradition.
Mumbai is the financial capital of India and contributes, significantly to both direct and indirect taxes. A financial capital integrated with the Global economy has to offer its own challenges to Tax Administration. The complexity and diversity of the business in this city offer a challenging assignment to Tax Officers. The challenges are further compounded by the innovative tax planning and use of tax shelter products offered by the tax consultants to business. The ongoing litigation in one of the biggest tax liability case from this city indicates that Indian Tax Authorities are professionally well prepared to protect the tax base of our country. Mumbai is also a gate-way to foreign investors. Therefore, a stable and efficient tax administration in Mumbai is essential to create conducive environment for foreign investors.
Both the Departments have progressed well in creating infrastructure for providing quality tax payer services. The setting up of Ayakar Sampark Kendra (ASK), Automation of Central Excise and Service Tax (ACES), Centralized Processing Centres (CPC) and Large Tax Payer Units has laid down a solid foundation to provide the services to the tax payers, which are technologically intensive. I am sure both the Departments will continue to innovate and re-engineer the existing business processes and administrations to further improve the delivery of services.
I have been asking both the boards to improve the human resource management to meet the rising expectations of the officers and the staff. Though there is some improvement pertaining to Departmental Promotion Committee (DPCs) for the staff and officers, but still it is not satisfactory. It should be ensured that DPCs are held well in advance to keep the employees motivated and eager to perform their responsibility in the service of the Nation. I would like to see that a model time frame for conducting the DPC is developed and followed strictly. Both the Departments should aim to become a model employer, which provides equal opportunities and equity in true sense. I have noticed that transfer orders of the officers are issued in mid of the year, which affects not only the officer, but also the Department. The officer has to shift his family and children in the mid of the academic session, which causes avoidable mental stress. Similarly, by shifting of the officers in the mid of the year from one charge to the other charge, the continuity and time available is reduced considerably. This adversely affects achieving the targeted revenue. This can be avoided by ensuring that all the annual general transfers are carried out by both the Boards by the 2nd week of April. The regional orders by the respective Chief Commissioners should be completed by the end of April of every financial year. This will reinforce the confidence of the employees in our system and we can demonstrate by action that we actually care for our employees. I am confident that both the Board can calibrate their long term human resource policies to achieve the above objectives.
There is an area of concern which both Departments need to look into to create an atmosphere of trust and mutually beneficial relationship with tax payers as well as our own employees. Departments are filing appeals in a routine manner without careful thought and examination. I have noticed that some of the appeals filed have been dismissed by the courts on account of gross delays. For this I have constituted a Standing Committee in both the Boards. This Committee will identify systematic causes for service litigation and litigation with tax payers and will prepare a road map for reducing the existing litigation and to avoid litigation in future. This Committee has been constituted at the Board level. I will encourage both the Boards to constitute a similar Standing Committee at the level of Chief Commissioners to have a systematic bottom to top approach for litigation management. This would lead to manageable number of cases before the Courts, which can be defended efficiently and will enhance the success rate in litigation.
I am pleased to note that the revenue realization in this Zone has been quite satisfactory for Customs and Central Excise, in particular. I find that for the period of four months i.e. from April to July in this financial year, the Customs revenue collection in three Mumbai Zones has registered an average growth of 79.5 percent compared to the collection during the corresponding period of last financial year. In Central Excise also there has been buoyancy, though the growth has been slightly less as compared to Customs. I find that the two Central Excise Zones in Mumbai have an average growth of 55.65 percent compared to the collections during the corresponding period of last financial year. This trend of revenue realization would not only need to be maintained but also to be improved during the coming months so that if there is any shortfall in other area, collections from this Zone can help us in filling the gap.
The manufacturing sector in the country is looking up and this has contributed in not only increased Central Excise duty but also increase in the imports of capital goods, machinery and other raw-materials which has in turn resulted in increase in Customs revenue collection. In Service Tax, however, I find that the growth is much less. It is only about 8 percent. I, however, fail to understand why the growth of Service Tax should be so small. It is an acknowledged fact that the service sector in the country is also growing substantially. I would like those of you concerned with the Service Tax collection to ponder over this, and find ways and means to increase the Service Tax collections.
In this context I would also like to tell you to give equal importance in collection of arrears of revenue. I find that in this Zone an amount of around 3,088 crores is locked up in respect of Central Excise arrears, and an amount of around 1,740 crores in respect of Customs duty arrears. We are now in the beginning of 6th month of the Financial Year. It is high time that we give special emphasis in taking some serious steps for collection of arrears of revenue.
Another area where the situation is rather alarming is pendency of adjudication. I need not remind you that delay in adjudication ultimately results in delay in collection of revenue due to the Government. I find, in this Zone an amount of around 2,192 crores of Central Excise duty, an amount of around 1,931 crores of Customs duty, and an amount around 3,800 crores of Service Tax are locked up in the pending adjudication cases.
As for the GST, you may be aware, I had tried my best to introduce the Constitutional Amendment Bill for GST in the last Monsoon Session of Parliament itself. But for certain reasons beyond my control it could not be tabled in the last session. As you know, the process of Constitutional Amendment has a certain gestation period involving placement of the Bill in the Parliament, referring the Bill to the Standing Committee and then tabling the Bill for passing in both the Houses of Parliament. Since we could not place the Bill in the last session, it may not be possible to introduce GST from 1.4.2011; because, GST legislation, both at the Centre and the States can be undertaken only after the Constitutional amendment. However, I must make it clear that there should not be any let up in your ongoing work relating to GST. While the officers in the Ministry are working on the various aspects of policy and administration matters on GST, your feedback would also be needed in a big way – first on matters relating to policy and then on matters relating to administering the GST. After all, you the Central Excise and Service Tax officers in the field will have to administer GST in close coordination with the State Government officers. In this context, I would suggest, meanwhile you start dialogue with the State Government authorities as a way of familiarization, since ultimately when the Central GST and State GST come into effect, you will have to work in tandem.
On the direct tax side, the net corporate tax has shown a growth 20.9% and personal income tax a growth 8.51% with overall growth for direct taxes at 15.75% as on 31st July 2010. The overall direct taxes growth is satisfactory. But the collection of direct taxes from Mumbai is below the national average. The achievement of direct tax collection largely depends upon collection from Mumbai. Therefore, revenue collection should be monitored effectively and special efforts should be made to achieve not only the budgeted target but also to exceed it.
The major area of concern on the direct tax side is the revenue locked up in appeal. `28,046 crores is blocked in appeal before CIT (Appeal) and `10,010 crores before ITAT. Department should take concrete steps to realise the revenue locked up before the appellate authorities.
I have noted that for Mumbai, there is an increase in advance tax, for the financial year 2010-11 by 22% in comparison to the same period of the previous year. The tax deducted at source for the current financial year has shown a decline by almost 2% in comparison to the corresponding period of the previous year. The trend in TDS collection, which is a major source of revenue to the government exchequer should be analysed to ensure that taxes due from TDS are collected.
The growth rate of Indian economy for the year 2009-10 was 7.4%. We expect the Indian economy to grow over 8.5% during the year 2010-11, though IMF and CMIE are predicting it close to 9.5%. The sectors performing well in the Indian economy need to be monitored to ensure the due taxes to government. The voluntary tax compliance depends upon risk perception by the taxpayers. We have increased the risk perception by using technology intensive tools. There is a need to create a formal Risk Management institution to handle this critical component of tax governance on a real-time basis. Both the departments can collaborate on the issue of risk management to further improve the voluntary tax compliance in India.
As promised to stakeholders, I have introduced DTC in Parliament. This is the first step towards implementation of DTC. It will come into effect from 1st April, 2012. The time available after passing the DTC by Parliament and till it comes into effect is to be used for developing the required systemic support and for education and training to employees and taxpayers. The available time window should be used effectively for a smooth transition to DTC taxation regime. I am confident that Department will show adoptability for this change and will rise to the occasion.
I am told that the Cadre Restructuring for CBDT was done in the year 2001 and for the CBEC in the year 2002, which is to be reviewed after every five years and is overdue. This needs to be expedited and completed in a time bound manner. There is also a need to develop a system to make it as a continuous process and not as an event to meet the legitimate expectations of the Officers and staff.
I wish you all the best to achieve all your targets for the Financial Year 2010-11.”