Govt rejigs collection plan of excise, customs arrears

New Delhi, Aug 2 | Updated: Aug 3 2005, 05:30am hrs
The government is reworking a strategy for collection of excise and customs arrears by focusing on realisable arrears which are free from litigation. About 90% of the total indirect tax arrears are locked in either appellate tribunals or in various civil courts. On an average, litigations take about five years for each settlement causing major dent on revenue collections.

Official sources said the standing committee on finance had already approved the proposed procedural changes introduced in the taxation law amendment Bill. In 2004-05, the collection of customs and central excise arrears increased by 272% from Rs 711 crore in the previous year to Rs 2,642 crore. Finance minister P Chidambaram is also hopeful of better collection of arrears during the current fiscal. Customs arrears stood at Rs 3,325 crore as on June 30, while excise arrears were at Rs 12,495 crore at the beginning of the fiscal.

The government feels that collections should not be hampered by litigation. Even appellate tribunals rule in favour of the assessees in 60-65% of cases referred to them.

As per the proposed amendments, the assessee would be given only three hearings after the issuance of a show-cause notice. Recovery process is often hampered by absence of assessees at hearings. Signi- ficantly, customs and excise commissioners would be empowered to pre-emptively attach the assesssees property with the issuance of a show-cause notice. The power to attach properties is now available only to income tax authorities.

Sources said in a bid to maximise collections, any default case would be deemed to have concluded, even if an assessee paid the duty calculated by the excise/customs commissioner along with 25% penalty immediately after the issuance of the show-cause notice. The assessee will also have the option of making the payment in full or in part, and the recovery proceedings will then be limited to the balance amount.

Under the Central Excise Act and the Customs Act, an opportunity for such a settlement is available to the assessee only if he makes the payment within 30 days of the date of comnunication of the order.

Usually, there is a time lag of six months from the date of detection of a case and the issuance of the show-cause notice. The quantification of arrears by the excise/customs authorities usually takes between six months and two years after the issuance of show-cause notice.