Central Excise - Recommendations of Public Accounts Committee (1993-94) (10th Lok Sabha) - 69th Report- Follow up - Regarding - Central Excise - 58/58/94-CX

Central Excise - Recommendations of Public Accounts Committee (1993-94) (10th Lok Sabha) - 69th Report- Follow up - Regarding Circular No. 58/58/94-CX Dated 19-9-1994 [From F.No. 167/28/94-CX.4] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise and Customs, New Delhi Subject : Central Excise - Recommendations of Public Accounts Committee (1993-94) (10th Lok Sabha) - 69th Report- Follow up - Regarding . Kind attention is invited to the 69th Report of the Public Accounts Committee (1993-94) (10th Lok Sabha) dealing with action taken by the Government on the recommendations / observations of the Committee contained in their 44th Report (10th Lok Sabha) on "Union Excise Duties-Non-leyy / Short levy of duty due to incorrect grant of exemption-Motor Vehicles". 2. Attention is further invited to Para 13 of the said Report (copy enclosed) for information and preventing occurrence of similar cases in future. SIXTY - NINTH REPORT PUBLIC ACCOUNTS COMMITTEE (1993-94) (TENTH LOK SABHA) UNION EXCISE DUTIES - NON LEVY/ SHORT LEVY OF DUTY DUE TO INCORRECT GRANT OF EXEMPTION - MOTOR VEHICLES MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) (Action taken on 44th Report of Public Accounts Committee 10th Lok Sabha) SEAL Presented to Lok Sabha on 22-4-1994 Laid in Rajya Sabha on 21-4-1994 LOK SABHA SECRETARIAT NEW DELHI April, 1994/Chaitra, 1916 (Saka) PUBLIC ACCOUNTS COMMITTEE (1993-94) CHAIRMAN Shri Bhagwan Shankar Rawat MEMBERS LOK SABHA 1. Shri Nirmal Kanti Chatterjee 2. Dr. K.V.R. Chowdary 3. Shri Bandaru Dattatraya 4. Shri Sharad Dighe 5. Shri Jagat Veer Singh Drona 6. Shri Srikanta Jena 7. Smt. Krishnendra Kaur 8. Shri Rama Krishna Monathala 9. Smt. Geeta Mukherjee 10. Shri D.K. Naikar 11. Shri Mrutyunjaya Nayak 12. Shri Motilat Singh 13. Shri S.B. Thorat 14. Shri Satya Pal Singh Yadav RAJYA SABHA 15. Shri S.S. Ahluwalia 16. Shri Somappa R. Bommai 17. Shri Anant Ram Jaiswal 18. Miss Saroj Khaparde 19. Shri Murasoli Maran 20. Smt. Jayanthi Natrajan 21. Shri. Viren J. Shah SECRETARIAT 1. Shri G.L. Batra - Additional Secretary 2. Shri S.C. Gupta - Joint Secretary 3. Shri R.K. Chatterjee - Deputy Secretary 4. Shri P. Sreedharan - Under Secretary *Ceased to be a Member of the Committee on completion of her tenure in Rajya Sabha w.e.f. 2nd April, 1994. INTRODUCTION I, the Chairman of the Public Accounts Committee as authorised by the committee, do present on their behalf this Sixty-Ninth Report on Action taken by Government on the recommendations of the Public Accounts Committee contained in their Forty-Fourth Report (10th Lok Sabha) on Union Excise Duties - Non Levy/Short Levy of duty due to incorrect grant of exemption - Motor Vehicles. 2. In their earlier Report the Committee had examined a case involving short levy of excise duty in the Collectorate of Indore amounting to Rs.136.18 lakhs due to incorrect grant of exemption on motor vehicles in respect of the clearances made during May 1986 to August, 1989. The Committee had also found similar cases involving a total outlay of Rs. 333 lakhs in Meerut and Chandigarh Collectorates. The Committee pointing out certain specific lacunae in the decision of the Board had recommended that the matter be reviewed after consultation with the Ministry of Law and appropriate action initiated. In this report, the Committee have observed with regret that despite the lapse of almost one year since the presentation of their Report and two years since the appeal filed in CEGAT by the Collector the dispute sttit remains unsettled. The Committee are unhappy about the manner in which the Ministry of Law instead of tendering their advice for initiating concrete action by CBEC, sought to pass on their responsibility to CEGAT. The Committee while reiterating their earlier recommendation have desired that all out effort should be made to resolve the matter early and to protect the financial interest of Government. 3. This Report was considered and adopted by the Public Accounts Committee at their sitting held on 4th April, 1994. Minutes of the sitting form Part II of the Report. 4. For facility of reference and convenience the recommendations of the Committee have been printed in thick type on the body of the report and have also been reproduced in a consolidated form in Appendix to the Report. 5. The Committee place on record their appreciation of the assistance rendered to them in the matter by the Office of the Comptroller and Auditor General of India. NEW DELHI Sd/- BHAGWAN SHANKAR RAWAT CHAIRMAN PUBLIC ACCOUNTS COMMITTEE APRIL 13, 1994 CHAITRA 23, 1916 (SAKA) REPORT This Report of the Committee deals with the action taken by Government of on the recommendations and observations of the Committee contained in their 44th Report (Tenth Lok Sabha) on "Union Excise Duties - Non Levy/Short Levy of Duty due to Incorrect Grant of Exemption." 2. The 44th Report which was presented to Lok Sabha on 28th April, 1993 contained 8 recommendations/observations. Action taken notes in respect of all these recommendations/observations have been received from the Ministry of Finance (Department of Revenue). Government have accepted all the recommendations/observations of the Committee. The Action Taken Notes have been reproduced in Chapter II of this Report. 3. The Committee will deal with in the succeeding paragraph the action taken by Government on the recommendations made by the Committee. 4. As per a Notification No. 162/86-C.E. issued on 1 March, 1986, Public transport passenger motor vehicles falling under Heading 87.02 of the Schedule to the Central Excise Tariff Act, 1985 were chargeable to concessional rate of Central Excise Duty of Rs. 8,000/- per motor vehicle up to 28 February, 1989 and Rs. 8,400 thereafter. This concession of duty wes not applicable to a manufacturer of the chassis used in the manufacture of such motor vehicles. The motor vehicles including the light commercial motor vehicles of pay load not exceeding 4000 kgs. cleared in a complete shape inclusive of chassis fitted with engine and body built thereon were covered by another Notification No. 462/86-C.E. issued on 9 December, 1986 and were chargeable to duty at 10% ad valorem. 5. In their earlier report (44th Report of 10th Lok Sabha) while examining a case of the Collectorate of Central Excise Indore, the Committee had found that an assessee M/s. Eicher Motors Ltd. Manufacturing public transport type passenger motor vehicles, light commercial vehicles falling under Heading 87.02 had manufactured engine fitted with chassis in the factory itself and the body was built elsewhere outside the factory by the body builders on job work basis. The mounted bus body on the cowl and chassis was then returned to the manufacturer by the body builder. Thereafter, the complete motor vehicles were cleared from the factory of the manufacturer to the customers. These motor vehicles on their clearance from the factory were chargeable to duty at 10 per cent ad valorem. The Committee found that these were allowed to be cleared on payment of duty of Rs. 8,000/- per vehicle. Thus, the incorrect grant of exemption had resulted in short levy of concessional duty amounting to Rs. 136.18 lakhs on clearance of 402 numbers of such vehicles during the period from May, 1986 to August, 1989. 6. The Department while confirming demand for Rs. 23.17 lakhs for the period 29-6-1989 to 31-8-1989 with a penalty of Rs. 7 lakhs held the demand for the balance of Rs. 113.01 lakhs as time barred. On the direction of Central Board of Excise and Customs (CBEC) dated 30-9-1991, the Collector of Central Excise filed an appeal on 8 January, 1992 with the Customs, Central Excise and Gold Control Appellate Tribunal (CEGAT) seeking confirmation of entire demand including the time barred one which is pending for decision. 7. The Committee were surprised to find that Ministry of Finance after maintaining all along that the audit objection was accepted and taking necessary action in that direction had suddenly changed their stand through a letter written to audit on 27th August, 1992 that the audit objection was not admissible. This revised decision was stated to have been taken after consideration of matter by the full CBEC. In support of the Board's latest interpretation leading to non-acceptance of audit objection the Finance Secretary had also stated during evidence that basically the concession had been given to the body builder because he was a small manufacturer. Differing with the interpretation, the Committee had recommended review of the position by the Board. 8. The Committee in this connection, in para 43 of the Report had recommended as follows : "As desired by the Committee, the Finance Secretary assured during evidence to place all the facts of the case before the Law Ministry for obtaining a legal opinion in the matter. The Committee desire that the lacunae highlighted in the preceding paragraph should be specifically brought out to the notice of the Ministry of Law and CEGAT. The Committee would like to be informed of the legal opinion tendered by the Law Ministry and further action taken by the Department in the light of this advice. The Committee would also like to be apprised of the outcome of the case of the Department pending with CEGAT. They would urge upon the Government that, if necessary, suitable amendments in the notification and the Laws may be made at the earliest so as to avoid any loss of revenue to the exchequer in future." 9. While observing that similar cases had been reported from other Collectorate of Central Excise also, the Committee in para 43 of the Report had recommended : "The Committee note that similar cases have been reported from the Collectorates of Central Excise Chandigarh and Meerut. In respect of M/s. DCM Toyota Limited in the Collectorate of Central Excise, Meerut the audit has raised objection alleging short levy of duty amounting to Rs. 61 lakhs during the period April to September, 1989. According to the Department of Revenue, the audit has been requested to settle the objection as duty on the motor vehicles had been correctly discharged by the body builders. In respect of M/s. Swaraj Mazda Limited in the Collectorate of Central Excise, Chandigarh the demand for the period from 1-3-1986 to 31-3-1992 amounting to Rs. 2.72 crores has been vacated by Assistant Collector by allowing the benefits in terms of Sl.No. 17 of Notification No.162/86, dated 1-3-1986. The representatives of the Central Board of Excise and Customs assured the Committee during evidence that these audit objections would be finally decided after the issue in the case of M/s. Eicher Motor Ltd. are finally resolved. The Committee desire that all remedial steps in both these cases should be expeditiously be taken to ensure that any part of duty amount do not get time barred. They would like to be apprised of the final outcome of the audit objections in both these cases." 10. In their Action Taken Notes furnished to the Committee in respect of the recommendations made in the Paras 43 and 45, the Ministry of Finance (Department of Revenue) have stated as follows : Para 43 "As desired by the committee, tripartite meeting was held with the Law Ministry on 21-4-1993 for their opinion on this issue. The Law Ministry have opined that since similar matters are pending adjudication before the CEGAT, an authoritative verdict by the Tribunal may be awaited before taking a final view. This case is still pending before the CEGAT. However, efforts are being made to get the case listed for early hearing and an expeditious decisions." Para 45 "The Collectors of Central Excise, Chandigarh and Meerut have reported that regular demands are being issued pending final decision to protect the Government revenue." 11. From the changes made in Central Excise duty in the Budget 1994 it was, however, seen that the scope of exemption to body building of motor vehicles is being restricted. In cases, where a chassis manufacturer sends the chassis for body building to a body builder on his own account and such motor vehicles, after body building, are returned to the chassis manufacturer, or sold even from the premises of the body builder by the chassis owner on his own account, the exemption from excise duty to the body builders shall not be applicable and excise duty would be leviable on such body building. But in case where a chassis is purchased by a customer, who sends the chassis for body building on his own account to a body builder for fabrication of body, in such cases exemption from excise duty would be available. The proviso to Notification No. 162/86-C.E. has been suitably amended for this purpose by Notification No. 49/94-C.E. 12. In their earlier report the Committee had examined a case involving short levy of excise duty in the Collectorate of Indore amounting to Rs.136.18 lakhs due to incorrect grant of exemptions on motor vehicles in respect of the clearances made during May, 1986 to August, 1989. The dispute had arisen on the question of availing of concessional duty by the manufacturer on the body of the vehicles built outside the factory on job work basis. The Committee had found that after accepting the audit objection in respect of the case under examination initially and filing an appeal before CEGAT in January, 1992, the Central Excise Department at Board level subsequently amended their position and maintain that the objections are not admissible. They had also found similar cases involving a total outlay of Rs. 333 lakhs in other Collectorates. Pointing out certain specific lacunae in the decision of the Board, the Committee had recommended that the matter be reviewed after consultation with the Ministry of Law and appropriate action initiated for protecting revenue. In their action taken notes the Ministry of Finance while accepting the Committee's recommendation in this regard have stated that a tripartite meeting with the Ministry of Law was held on 21 April, 1993 and according to the Law Ministry since similar matter was pending for adjudication before the CEGAT, authoritative verdict by the Tribunal be awaited before taking a final view. The Ministry of Finance have further stated that the efforts are being made to get the case listed for early hearing and expeditious decision. The Committee regret to note that despite the lapse of almost one year since the presentation of their Report and two years since the appeal filed in CEGAT by the Collector the dispute still remains unsettled. The Committee are particularly unhappy about the manner in which the Ministry of Law instead of tendering their advice for initiating concrete action by CBEC, sought to pass on their responsibility to CEGAT. The Committee reiterate their recommendation and desire that all out efforts should be made to resolve the matter early and to protect the financial interest of Government. The Committee would like to be informed of the further development in the matter. 13. As regards future cases, the Committee note that Ministry of Finance while effecting changes in the Central Excise duty in the Budget 1994 have since made amendments in the Notification under reference making the position clearer. The Committee trust that these provisions will be scrupulously implemented so as to prevent occurrence of similar cases.