Corruption in the Excise Tax Department of India

By

Excise Official of India (unedited, published as is)

Department of Revenue of Government of India: It is the fact known to everyone that corruption is prevalent in the Departments of Governments, which are responsible to monitor the payment of different taxes. As the governments have no WILL to set right things, the System is getting rotten.

There is practically no Internal Mechanism to prevent corruption; it is the responsibility of the Public at large to ensure that the corruption is eradicated in India.

The Central Board of Excise and Customs was created to monitor and regulate the collection of indirect taxes viz. Central Excise duty and Customs duty.

The duty of excise was levied on the manufacture of goods in India and consumed in India under the authority from the entry 84 of the Union list (List -I), Seventh schedule read with Article 246 of the Constitution of India. The relevant Law and Rules enacted and framed are the Central Excise Act, 1944 and the Central Excise Rules, 1944 up to 2001 and as on date, the Central Excise Rules, 2002.

It may be interesting to know the history and background and also the procedures adopted during different periods for levy and collection of central excise duty. The legislation related to indirect taxation may be linked to the taxation on salt, which was the main reason for the so called Father of the Nation Shri. Mohandass karamchand Gandhi to go on padayatra to Dandi to protest against the Tax on Salt by the British, which was just to protest against the British Rule in India. Thus the background of taxation itself is not to be proud of anything, instead it shall reveal the cruel intention of taxation by an alien Government even on essential items must for the survival of mankind. Thus the duty of excise is nothing but tax on specified commodities manufactured in India for consumption in India. The Customs duty is nothing but duty, which includes equivalent of domestic excise duty also, levied on goods imported in to India for consumption in India. The manufacturers of the goods are responsible to pay the duty of excise and the Importers are responsible to pay the import duty.

Even after Independence, the Government of India chosen to retain most of the Laws enacted by the British in India for their convenience and the Government was not at all ready even to re name the Laws, which shall clearly show the intention/mentality of the so called patriots of India, the Educated, Power and Fame longing people belonging to the so called Forward Castes in India.

The Central Excise & Salt Act, 1944 was the act enacted by the British Government to enable the Government to levy tax on goods manufactured in India. Different procedures for the collection of Central excise duty were prescribed under the Central Excise Rules, 1944. Though the Act,1944, in the title of which the word ‘Salt’ was removed some time ago, is the basis to levy and collect Central Excise duty even today , the Rules of 1944 was replaced by the Rules of 2002 after 55 years.

Up to the year 1969 the goods manufactured must be cleared from the factory on payment of appropriate duty under the physical supervision of the so called Officers of the Department. Those days were called as days of Inspector Raj. Because of the so many irregularities committed by the so called officers of the Department for their own benefits, the system of Physical Supervision was removed and a System of Self Removal by the manufacturer itself was brought in during the period when Shri. Morarji Desai was the Finance Minister. The system under Self removal was divided in to three based on the nature of commodities and the concerned manufacturers. One system was as existed up to 1969, subjected to Physical supervision of officers for clearance for sales, second one was Production based control and the third one was record based control. During seventies (1969 to 1979), the tax on unmanufactured Tobacco was considered to be attractive for the tax evaders and the corrupt officers. The Gold Control Act, 1968 enacted during the period when Shri. Morarji Desai was the Finance Minister, with good intention to regulate the movement of gold as there was huge smuggling of gold in to the country damaging the economy of the country, was most beneficial only to the so called Officers of the department. The Same way the levy of excise duty on Matches especially in southern Tamil Nadu was only beneficial to the so called officers of the Department. Because of malpractices, the duty on unmanufactured tobacco was removed in the year 1979 during the tenure of the government headed Sardar Shri. Charan Singh. The Gold Control Act, 1968 was repealed in the year 1990 which was also during tenure of the Government headed by Shri.V.P.Singh. The levy on Hand made Matches was exempted from the year 2003 only during the tenure of Government headed by BJP even though there were much oppositions from the Trade with the support of Politicians and so called bureaucrats as the trade gained artificial importance because of central excise duty control resulting tax evasion with the connivance of the so called officers and the department incurred loss as the expenditure exceeded the tax collection. I heard and knew the so called officers who wept because of the actions of Government of India to lift levy of duty on un-manufactured tobacco and handmade Matches and to repeal the Gold Control Act, 1968.

There were days manufacturers had to wait in the Offices of the Department to get authentication of Gate Passes/Invoices intended for effecting sale of their goods, by the officers. They had to wait to get clearances regarding Classification and valuation of goods before the same were sold. Since all the procedures yielded actually no result in curbing evasion/avoidance of duty of excise and resulted in harassing the manufacturers by the Officers, it was decided to do away with these procedures.

Those are the hay days of the officers of the Department as the manufacturers must have to depend on them to effect sales of their goods manufactured with hard work and heavy investments, in time.

When Physical removal was in force, the concerned officers shall vanish after giving clearance to a favoured manufacturer and the price fixed by the favoured manufacturer shall be the price of the commodity in the market and the market shall be under the control of the favoured manufacturer as during those days most of rates of duty of excise were only Specific and transportation facilities were not as at present days. Other manufacturers shall find very difficult to market their goods without the co-operation of the officers of the department.

If the manufacturers were not obliging the officer’s powers will automatically play in each and every aspect of clearances from the Department. Therefore, a system of MAMOOL was established by the officers of Department. As per system devised every manufacturer had to look after the field formations right from the Sepoy (Peon of the department as these officers have to work as police force in Customs) to the top most level.

During the period of self removal under production based and record based controls, the manufacturers were required to make payment of duty before effecting clearances of their products for sale and the payment of duty were subjected to assessment by the so called officers of the department based on the monthly Return in Form R.T.12 furnished by the manufacturer. The manufacturers had to obtain permission for classification and valuation of their manufactured goods as per the Central Excise Tariff and the valuation provisions of the Central Excise Laws from the Department. These procedures were further relaxed from 1996 onwards. The Manufacturers shall themselves assess the duty liability and they may adopt the classification and valuation as per the relevant central excise Laws. Further the manner of payment of duty of excise was changed drastically from the year 2000 onwards. Government Prescribed procedure to pay duty of excise on fortnightly basis and subsequently on monthly basis. Now the manufacturers are at liberty to discharge the liability of duty of excise on the goods manufactured by them as per the relevant Central Excise Laws. There are no statutory Records prescribed by the Department as existed earlier and the records of the manufacturers have to be accepted.

Now, the manufacturers have to pay duty on their own self assessment and file the monthly E.R.1 return with just copies of Account Current maintained, though there is no authority even for maintaining the Account current and Tax payment Challan in form GAR.No.7. The manufacturers can even file the monthly return and pay the Tax On-Line through Internet. The manufacturers need not visit the Offices of the Department for any purposes, which is the intention of the present day Government of India as frequent contacts with the officers shall lead to corruptive practices.

It is my experience that even after 61 years of independence the mentality of the so called officers of Department did not change. These are officers born only after independence. During British era lower level posts were filled with persons of heavy physical appearances and mostly the high level officers were only British. The mentality of the British superior officers towards the Indian sub-ordinate officers was acquired by Superior officers of Indian origin and even today the so called superior officers are of the opinion that they are the masters of the sub-ordinate officers and they are of the opinion that the existence of Department is in their hands only. They refuse to think even the welfare of the Sub-ordinate officers. The fact can be very well understood from the Sixth Pay Commission Recommendations and subsequent modifications recommended by the review committee, the bodies were headed by only the so called superior officers. It was announced by the Government of India as per the recommendation of review committee, the pay of the middle level officers are substantially increased. We were of the opinion that the middle level officers are the Group B and Group C officers. But the recommendations are only for middle level officers in the Grade “A”. Thus even the Government was compelled not to think of the sub-ordinate officers, who are the actual executers. There were opinions that the only sub-ordinate officers are alone corrupt because they alone interact with the public directly. But at present the fact is completely different. The superior officers are most corrupt and play in each and every field as the chances increased for them because of relaxed procedure and even in posting and transfer of the sub-ordinate officers, they play nonsense. As they are vested with the powers in posting and transfer, the sub-ordinate officers are treated as slaves. Because of corruption among the sub-ordinate officers there will not be much danger for the Revenue due to the Government. But corruption among senior officers has adverse effect on the revenue due to the Government. As a whole the mentality of the Government servants has not been changed to the desired level and they want the erstwhile controls back for their own benefits.

It was experienced that it is very difficult to be honest and forthright in a revenue Department like ours because the system itself corrupt persons with the well balanced mentality as it will be very difficult to refuse repeatedly offer of money just for the existence in the Department as Officers indirectly which are not to perform duties. Further in most of so called sensitive places of posting, the illegal receipt will be for the Formation or Section and even if an officer not interested in it there will be no result. Survival of an honest officer in the Department itself is very difficult because of the fact of corrupt system, the Government of India is very well aware of the prevailing practices in the Department. At present the Politicians are interfering even in the posting of supporting Officers like Peons and because present day politicians are most corrupted they don’t have the will to correct the Department. Consequently once considered to be self disciplined Government Employees become most corrupt as they are not ready to think of the people of India.

The attitudes of the British Bureaucrats towards the people of India were as Master to Slaves. The same attitudes are seen in the present days Government of India employees. They are not ready to think that they are just employees to the People of India. Without introspection the Superior officers are thinking of past controls to improve performances in the Department.

It is the fact that major contributors of Central Excise duties are the Large Tax Payers in organised sector and it will not be good for the interest of the Country to come to the conclusion that all these large Tax Payers are evaders of central excise duties. Only because of the fact that the cumbersome procedure prescribed for the Central Excise assesses yielded no substantial results and the policy of the Government has been made to change from the policy adopted during pre-Independence era consequent to change in the concepts of the Country and the Government worldwide, the procedure in this regard have been relaxed substantially expecting the assesses to comply voluntarily. Just because there are evasions mostly in the unorganized sector, it is not fair to think of the discarded procedure adopted earlier, in the era of communication and Right to information. The commodities having no impact on revenue receipts may be exempted from duty giving no scope for corruption.

If the Department has the will to prevent duty avoidance/evasion, there are many ways to achieve the results. The requirement is nothing but action after introspection. The Department must change to the requirement of present communication and right to information era. Citizen’s charter, observation of vigilance awareness week, Sermons regarding honesty, sincerity and dedication will not yield the desired results. If it is tried to establish that the Department is not aware of evasion/avoidance totally, there shall not be any remedy. The corrupt Officers must be punished at all levels. The officers not interested to change including corrupt officers, indentified incompetent and irresponsible officers, officers creating nuisance in the offices and the Office visiting officers must be shown the doors. Corrupt officers must not be given importance. Time has come to create separate wings from top to bottom for Central Excise, Customs and Service Tax as the nature of work are entirely different even though indirect. Experienced officers at all levels in a particular Taxation Law and Procedure definitely will help to improve the performance. Disparities among officers up to the level of Group B in the existing different wings in administration matters and promotion prospects must be removed to enable the officers to work for Department whole heartedly with satisfaction. Otherwise existing separation up to the level of Group-B has to be abolished. The Officers of the Revenue Department must be paid highly in order to reform the oscillating officers, who are the majority. Competent officers must be selected for posting without considering the seniority or the influences, considering only the requirements of the different formations and sections of the Department.

Since the mentalities of the Indian community at large have been changed and high values, morality, honesty, truth have no place, the public itself encouraging corruption in this great country India. It is the responsibility of patriotic Indian to initiate action with dedication to free the country from the dangerous weed, corruption.

Even the Agencies created to detect and prevent corruption are not corrupt free. It is not at all a difficult task if the Governments have the will.

Direct action without going through legal proceedings must be taken. Properties of all the bureaucrats in the country must be checked and if there is no proper evidence to substantiate the possession, immediately the same must be confisticated. I know very well that the documents and evidences produced to escape are bogus. In India corrupt officials who were punished are negligible. With the connivance of concerned Agencies and the Courts in India, these corrupt officers managed to escape and continue in the system with the full support of the system. It is the fact, in each and every Department only the most corrupt officials are playing important roles. Even the society does not care to ignore these corrupt officials, instead glorify these corrupt bureaucrats. The term Officers coined by English must be removed from usage. They must be made to realize that they are just servants to the people.