Monitoring of the implementation of the recommendations of TARC-updation thereof on the website of Department of Revenue - Central Excise - F. No. 296/51/2016-CX.9

F. No. 296/51/2016-CX.9 Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi, Dated 8/3/2016 OFFICE MEMORAMDUM Sub : Monitoring of the implementation of the recommendations of TARC-updation thereof on the website of Department of Revenue - Reg. The Tax Administration Reform Commission (TARC) was constituted to recommend reform exclusively in tax administration and it was specifically mandated to review the application of tax policies and tax laws in the context of global best practices and to recommend measures for reforms required in tax administration to enhance its effectiveness and efficiency. The Commission has since submitted its report in 4 parts. The recommendation contained in Ist and IInd report, concerning CBEC, have been examined by the Board. 2. The status of the recommendations accepted implemented by CBEC is given in the following Table :- Chapter Chapter name No. of Recommen-dation Accepted Imple-mented Accepted but Under imple-mentation Under Examination II Customer focus 11 4 5 2 III Structure Governance 15 0 3 12 IV Peoples Function 26 7 11 8 V Dispute resolution 19 10 4 5 VI Key Internal Processes 41 13 10 18 VII Information and Commu-nication Technology 24 0 21 3 VIII Customs Capacity Building 45 3 37 5 IX Information Exchange 45 4 35 6 3. The major recommendations contained in Third Fourth Report are on Best Practices, such as impact assessment, compliance management, revenue forecasting, predictive analysis, research etc. for improving processes, structures and to enhance customer focus in decision making. The recommendations of these reports are accepted and are under implementation. 4. Webmaster, CBEC, is requested to upload on the website of CBEC, the attached statement containing the status of recommendation, contained in 1st and IInd report of TARC, concerning CBEC, which have been accepted and implemented. Enclosure CBEC s STATUS OF ACCEPTED IMPLEMENTED RECOMMENDATIONS OF TARC FIRST REPORT - CHAPTER II CUSTOMER FOCUS S. No. Para no. RECOMMENDATIONS STATUS 1. II.8.(i) There should be a dedicated organization for delivery of tax payer services with customer focus for each of the Boards. There should be an exclusive Member in each Board for the taxpayer services. (Section II.6.c) The Directorate General of Tax Payers Services in Central Board of Excise Customs has been created vide order no. 02/Ad.IV/2015, dated 27-8-2015 (F.NO. A-11013/20/2015-Ad.IV). Member (Service Tax) has also been given charge of taxpayer services. The Directorate is headed by the Chief Commissioner level officer. The Headquarters are at Delhi and its Regional offices at Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad. 2. II.8.(v) Sufficient funds must be allocated to conduct customer research including, in particular, on customer surveys. (Section II.6.b) The first survey on tax payer experience was undertaken by Central Board of Excise Customs in coordination with FICCI and KPMG. Sufficient funds for customer research including in particular customer service are earmarked. 3. II.8.(ix) There should be regular stakeholder consultations on the issues of tax disagreements and tax law charges. (Section II.6.b) A High Level Committee has already been constituted by the Government in this regard. CBEC holds regular stakeholder consultation through Regional Advisory Committees/Permanent Trade Facilitation Committee (PPFC). 4. II.8.(x) There should be a system for online tracking of dak/grievances/applications for refund etc. It should be made mandatory to receive all dak through a central system generating a unique ID. The ASK software implemented by CBDT provides such a mechanism in a limited manner. This needs to be extended to all offices. The functionality to enable the taxpayer to track the status of his application/grievance online should be added to the ASK system. Similar system for online receipt of application should be enabled on the indirect tax side. (Section II.6.c). CBEC is one of the 10 Central Government organizations (with large citizen interface) to implement quality management systems for high standard public services popularly called as SEVOTTAM. Under this, CBEC is committed to acknowledge all written communications including declarations, intimations, applications and returns immediately and in no case later than 7 working days of their receipt; convey decision on matters relating to declarations or assessments within 15 working days of their receipt; and dispose of a refund claim within 3 months of receipt of a complete claim. At present, 53 Commissionerates have been certified as Sevottam compliant and BIS 1515:700 certificate has been issued by the Bureau of Indian Standard (BIS). FIRST REPORT - CHAPTER IV PEOPLE FUNCTION S. No. Para no. RECOMMENDATIONS STATUS 1. IV.5.(i) Both the departments should shift all their key operations to the digital platform so that performance can be reliably measured. (Section IV.3.d) CBEC has already initiated the IT Based Service Delivery Mechanism by way of Automation of Central Excise and Service Tax (ACES), Indian Customs EDI System (ICES), (CAAP), Risk Management System (RMS) etc. Further in order to capture critical performance data electronically, CBEC has developed a Monthly Information System (MIS). 2. IV.5.(vi) A comprehensive performance management system needs to be set up for both tax administrations by revisiting and reconstructing the RFD. (Section IV.3.d) The Director General of Inspection is renamed as Director General of Performance Management for Comprehensive Performance Management. The RFD for the year 2015-16 is available on CBEC website. 3. IV.5.(xvi) A formal mentorship programme may be set up, with carefully selected mentors. (Section IV.3.d) Mentorship programme is already in place. 4. IV.5.(xvii) DGs (HRD) should assist the Boards in transfers and postings and they should be member secretaries of the placement committees. The administration section should have no role to play. (Section IV.3.e) DG (HRD) is already assisting the Board in transfer and posting of the officers. 5. IV.5.(xviii) Learning and development should occupy a central place in people advan-cement and all officers must undergo a minimum 10 days of training every year. (Section IV.3.f) E-learning modules and e-books have already been developed by NACEN and is available on NACEN website. 6. IV.5.(xxii) There should be more proactive approach to preventive vigilance. (Section IV.4.b). In order to have a pro-active approach to Vigilance, instructions have been issued to Field Formations. 7. IV.5.(xxv) No cognizance should be taken of anonymous complaint as laid down in the existing DoPT instruction. (Section IV.4.d) Instructions issued by DoPT are followed. FIRST REPORT - CHAPTER V DISPUTE RESOLUTION SL Para No. RECOMMENDATIONS STATUS 1. V.7.(a) For clarity in law and procedures, a process based on best practices viz., Consultative Policy making should be followed. Need to do away with the impression that the taxpayers views are not taken into cognizance while framing the statute and the attendant rules (Section V.4.b). i. Consultative meetings with trade associations are regularly held at the time of preparation of budget. ii. Draft circulars etc., are put on CBEC website for comments by the trade. iii. Only in respect of tariff related changes public consultation is neither desirable or feasible 2. V.7.(b) Retrospective amendment should be avoided as a principle. (Section V.3.e) i. Retrospective amendments are made only to iron out the deficiencies in the law. ii. No additional liabilities are created by the retrospective amendments. 3. V.7.(c) Fundamental approach should be collaborative and solution oriented. (Section V.3.d) CBEC has a institutionalize mechanism to consult all stakeholders to while framing its policy. It has been the effort over the years to simplify the tax laws, reduce the compliance cost for taxpayer and minimize interface with the revenue authorities. 4. V.7.(g) To minimize the potential for disputes, clear and lucid interpretative statements on contentious issues should be issued regularly. These would be binding on the tax department. (Section V.4.b) i. On contentious issues, Board already issues clarifications from time to time. ii. After every Budget, Joint Secretary (TRU) issues a detailed letter to the field formations clearly explaining the scheme of amendments made in the legislations and also the notifications. iii. On the basis of the references received from the field formations of the trade and industry association, Board issues the required clarifications. 5. V.7.(i) The process of pre-dispute consultation before issuing a tax demand notice should be put into practice. (Section V.4.b) Instructions have been issued on 21-12-2015 to hold pre-Show Cause Notice consultation with the Principal Commissioner and Commissioners in case the demand of duty is above ₹ 50 Lakh (other than offence cases). 6. V.7.(j) Disputes must get resolved in the times lines as mentioned in the respective enactments. The law should also prescribe the consequences of not adhering to the time lines, which would be that the case in question would lapse in favour of the taxpayer. (Section V.5). i. Timelines are already provided in the respective Acts for adjudications. However, these are only indicative. ii. The failure to adhere can be on account of various reasons beyond the control of adjudicating authorities. iii. The suggestion that cases should lapse for delay in adjudication cannot be accepted because in that case the party s will get the matters delayed in the course of adjudication to get benefit of this provision. iv. Senior Officers in the rank of Chief Commissioners/ Commissioners are responsible for monitoring the adjudication and ensure that most of the cases are decided in the prescribed time limits. 7. V.7.(k) Ordinarily appeal should not be filed against appeals of Commissioner (Appeals), except where the orders are ex facie perverse. (Section V.5). Appeals are filed on merit upon review by the Committee of Commissioners 8. V.7.(o) The jurisdiction of AAR should be made available for domestic cases also. More benches of AAR should be established at Mumbai, Bangalore, Chennai and Kolkata, (Section V.4.c). i. The jurisdiction of AAR has already been made available for domestic cases. ii. Present work load of AAR does not justify creation of additional benches. 9. V.7.(r) Authorized representatives from the departments should be carefully selected and given sufficient incentives, necessary infrastructural support and specialized training. CDR function should also be in the dispute management vertical. (Section V.5). i. Authorized representatives are provided incentives in the form of special pay and also infrastructure support. However, increase of the special pay could be considered. ii. System of in-house training of the AR s is being evolved by the Chief Commissioner (AR) 10. V.7.(s) On disposal of a case by Supreme Court/High Court and if the judgment is accepted by the Department, an instruction should be issued to all authorities to withdraw appeal in any pending case involving the same issue. (Section V.6) Departmental instructions has been issued vide DO letter date 28-1-2016 to review the appeals filed in view of the judgment of the Supreme Court in a similar case. FIRST REPORT - CHAPTER VI Key Internal Process SL Para no. RECOMMENDATIONS STATUS (1) (2) (4) (a) Registration 1. VI.18.(a) (iii) It is necessary to provide for de-registration, cancellation or surrender of registration numbers and PAN. The Notification No. 35/2001-C.E. (N.T.), dated 26-6-2001 as amended issued under Rule 9 of Central Excise Rules already provides for deregistration/surrender of registration, revocation and suspension of registration. Similarly, in Service Tax, the Rule 4(7) of the Service Tax Rules provides for surrender of the registration, if the assessee ceases to provide the service for which it is registered. (b) Tax payment E-payment of taxes in Central Excise and Service Tax and in Customs for ACP clients and for all imports above ₹ 1 lakh, has been made mandatory. Other recommendations relate to Principal Controller General of Accounts. 2. VI.18.(b) (i) Banks should be left to authorize their branches to collect taxes, and the present process of selection of banks needs to be purely standards-based and transparent 3. VI.18.(b) (ii) Payment gateways should be increased for better customer convenience. (c) Filing of Tax Returns Scrutiny in Direct Taxes and Audit in Indirect taxes 4. VI.18.(c) (iii) Audit Commissionerates in the CBEC should undertake integrated audit covering central excise and service tax together and the onsite customs post clearance audit (OSPCA) in case of accredited clients (ACP), as the records and books to be verified are common to all the taxes administered by the CBEC. In major cities where exclusive Central Excise or Service Tax Commissionerates are functional, the audit function should be assigned to a specific Audit Commissionerate for carrying out integrated audit of customs, central excise and service tax. With the creation of Audit Commissionerates, integrated audit has been launched. Circular No. 985/09/2014-CX, dated 22-9-2014 issued in this regard. 5. VI.18.(c) (v) Broad-based selection filters for the risk assessment matrix should be put in place. There is also a need to set up a standard operating procedure which recognizes the iterative method, testing them ex-post, to develop effective and efficacious parameters for the risk assessment matrix. Selection of units for audit is done based on risk parameters developed by DG Audit. (e) Refunds 6. VI.18.(e) (ii) Refunds sanctioned should be paid along with the applicable interest automatically as is done in the case of income tax and not on demand by the taxpayers. As in the case of direct taxes and customs duty drawback, the refund and interest payment should be directly credited to the bank account of the taxpayer. Circular No. 1013/1/2016-CX, dated 12-1-2016 issued. 7. VI.18.(e) (vi) Refund claim subjected to pre-audit verification should be issued within a specified time. The post-audit verification of refund claim should be risk-based. The relevance and practicality of the present practice of pre-audit and post-audit of refund claims are being reviewed in the light of coming into existence of exclusive Audit Commissioner-ates. 8. VI.18.(e) (vii) An easier and simplified scheme should be introduced for service exporters. The entire refund filing and processing mechanism should be online. Circular No. 187/6/2015-S.T., dated 10-11-2015 lays down a scheme for speedy dispersal of pending refund claims of exporters of services under Rule 5 of the CENVAT Credit Rule, 2004. (g) Tax collections 9. VI.18.(g) (i) There should be a separate vertical for tax collection as recommended in Chapter III of this report. To improve the efficiency of debt collection activities, both the Boards should work on setting up risk assessment models to compute risk scores for each new tax debt case that reflects the likelihood of the taxpayer paying their debt based on objective criteria. Directorate General of Performance Management (DGPM) monitors the recovery of Indirect Tax arrears. 10. VI.18.(g) (ii) Stay of demand information should be uploaded electronically on the central server of the departments so that tax collectors can have system generated prior intimations regarding the expiry of stay orders. In view of the introduction of the provision for pre-deposit, there is no longer any relevance to capture such information. Nonetheless, as a part of action to build MIS for CBEC, modules are being developed to capture such information as well. (h) Related party transactions 11. VI.18.(h) (i) Both Boards should frame detailed documentation requirements for transfer pricing as well as custom valuation, keeping in view that such documentation should be reasonable, to bring certainty and predictability for the taxpayers. Circular nos. 4/2016 and 05/2016, dated 9-2-2016 have been issued for revising the systems and procedures surrounding the SVB process. 12. VI.18.(h) (ii) There is a need to align the process in India with global best practices and to do away with the current process. With self-assessment in place, import transactions should only be subjected to post-clearance audit. Valuation risks would be an important component of the risk matrix for audit selection. Import transactions are already subjected to Post Clearance Audit. The expansion of scope of On-site Post Clearance Audit (OSPCA) to cover other categories of importers is under examination. (i) Manual of tax departments Already such manuals have been developed and placed on the CBEC website. 13 VI.18.(i) (i) Departmental manuals should be annually updated and put up on the website for easy downloading by both taxpayers and tax officers. CBEC s STATUS OF ACCEPTED IMPLEMENTED OF RECOMMENDATIONS OF TARC SECOND REPORT - CHAPTER VIII CUSTOMS CAPACITY BUILDING S. no. Para no. Recommendations Status (i) Governance 1. VIII.6.(i) (a) The CBEC should immediately commence work on tire development of a customs vision and strategic plan, setting out the strategic goals and the implementation strategy that will ensure its place among best in class customs administrations. (Section VIII.4.a) DRISHTI is an overall vision document for the Department which was submitted to the Finance Minister. (v) SAFE Framework and Trade Facilitation 2. VIII.6. (v) (ce) The CBEC should follow best international practice by regularly undertaking and publishing time release studies, (Section VIII.4.g) Time Release Study on the lines of WCO guidelines are conducted in 6 monthly basis and the results of the same are uploaded in the website. 3. VIII.6. (v) (dd) The CBEC should be enabled, through appropriate administrative and legal empowerment, to play a leadership role among the various border agencies to ensure proper co-ordination at the border, ensure trade facilitation, allow greater participation of all agencies in a common risk management framework and enable the development and implementation of a single window (Section VIII.4.h) Indian Customs Single Window project is under implementation. Seamless electronic messaging is already operational on pilot basis with Food Safety Standards Authority of India (FSSAI) Plant Protection, Quarantine and Storage (PQIS) Department. It will be operational by 31-3-2016. SECOND REPORT - CHAPTER IXINFORMATION EXCHANGE S. No. Para No. Recommendation Status (iii) Third Party Exchange 1. IX.8(iii) (k) All collaborating organisations must categorise the data or information into what can be granted general accessibility and what can be considered for limited sharing or for somewhat spontaneous sharing. The categorisation must be known a priori to the other organisations. (Section IX.5.g) The CBEC s data sharing policy already categorises the data as sensitive or non-sensitive and has indicated the process through which the same could be shared with third party. 2. IX.8(iii) (l) This categorisation will help the organisations in being specific in their requests. These requests must be mutually respected. (Section IX.5.g) It has been incorporated in the CBEC Data sharing Policy. 3. IX.8(iii) (m) The data or information exchange with third parties must be on a digital platform in a seamless manner and exchange of data or information through physical media, i.e., through paper, compact disc, external drive, etc., should be avoided (Section IX.5.c) The CBEC Data Sharing Policy categorically mandates exchange of information through a secure manner in a seamless electronic environment with the third party entities. (vii) Audit and Accountability 4. IX.8 (vii) (gg) A robust audit and accountability policy must be developed to address the purpose and scope of information sharing, roles and responsibilities of dedicated teams, authorization layers access to data, review of the safeguards put in place by an agency receiving information and the secure storage, disposal and confidentiality of the data and information. Along with the policy, sound processes are required to facilitate the implementation of the policy. These audits must be conducted by dedicated teams who should report the findings of the audit to the DG (System of the two Boards for course correction. (Section IX.5.1) CBEC has already implemented a half yearly Information Security audit by a Third Party Auditor for IT controls related to Information Security. In addition CBEC has adopted an ISO:27001 compliant security policy for which STQC has conducted Annual compliance audits. As regards the business audit across organizations in respect of data shared, this is a policy matter and can be implemented only after an in-principle decision has been taken and the modalities finalized.