A detailed report of the excise attachment from 31/8/2015 to 9/9/2015

Jurisdiction attached : Delhi-I Commissionerate

Team:Aditya Singh YadavAmit Singh Chandel

Aarthi NairArjun Pradhan JMT

Bullo MamuSushma J

Date of submission: 9/9/2015

Index Pg. No.…………………………………………………………………………………………..

1. Day one 2

2. Day two 3

3. Day three 4

4. Day four 5

5. Day five 8

6. Day six 11

7. Day seven 15

8. Conclusive Comments and observations 17

9. Annexure 1 18

10. Annexure 2 19

Day 1: 31/8/2015

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1. The team reported in the committee room of CR building where the Chief Commissioner (CC), Commissioner, Joint Commissioners of the Delhi Excise commissionerate met us on high tea. The detailed plan of excise attachment was broadly laid out. We were advised to take the best advantage of these attachments as we wouldn't have much time to learn when we join the service on full time where we have to take decisions instantly. We were assigned into 4 groups under respective commissionerates i.e. Delhi 1, Delhi2, Gurgaon, Faridabad.

2. Our team was assigned to Delhi 1 commissionerate. The group members are Aditya Singh Yadav, Amit Singh Chandel, Aarthi Nair, Arjun Pradhan JMT, Avnish Parashar, Bullo Mamu, Sushma J

3. Our reporting Commissioner was Mr. Harinder Bhansi. Our nodal officer was Joint Commissioner (JC)- Digvijay

4. We called upon Smt. Sucheta Sreejesh- ADC of Personnel & Vigilance department. She gave us an overview of the various activities of her department and also shared with us her past experiences in this department and service overall.

5. Next we called upon our Joint Commissioner who gave us an overview of what all comes under his jurisdiction, how to approach to various cases at the critical moments and gave us numerous examples from his experiences. We were assigned to Asst. Commissioner (AC) Surendar Malik for guiding and co-ordinating us as per the planned attachment itinerary.

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6. We also called upon Sri. Rajeev Aggarwal, Joint Commissioner who had made the overall plan of our attachment inclusive of all groups. He also shared his experiences with us regarding the in and out of our department.

Day 2: 1/9/2015

1. We were sent to the range office of Division 1 of Delhi I commissionerate located at Rajendar Place in New Delhi. The AC in charge was- Mr. Sahil Inamdar. We were received by Superintendents Rajeswaran and Chandershekar who guided us very well and gave in detail explanation of the jurisdiction of the range, its activities and their experiences

2. The superintendents gave us an overview of excise act. We were given a detailed map (See Annexure 1) of the range. They explained ER1 (ER-excise return), ER3 returns and the registration (for excisable activities) requirements. They also explained the procedure of evaluating and inspecting the returns online through ACS.

3. One sample registration was shown to us which carried details of the company, address, owner, PAN, TIN and other important details.

4. One sample show cause notice of a company named M/s. Statco steels which was not a registered company under excise act (showing turnover less than 1.5 crores) and not paying excise tax(under rule 4 of CEA,1944)

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5. Field visits have reduced as government wants self assessment and voluntary compliance of taxpayers to increase and to enable ease of doing business. Since we have come to self assessment method of evaluation of excise tax, factory visits cannot be done on own as it would be seen as harassment by department unless any evidence for any wrong doing by that company. The brief of working of preventive/anti-evasion departments of range offices was also explained.

6. Various doubts regarding the above were asked by the probationers, which were answered by the superintendents in a very detailed way, which instilled confidence to the probationers about certain concepts on central excise.

7. The Officer Trainees were given the details about the Range wise revenue realised during the year 2013-14 and 2014-15. (Annexure)

Day 3: 2/9/2015

Visit to NACEN- to witness the passing out of 65th batch passing out ceremony.

Day 4: 3/9/2015

1. Visit to legal section- This looks after the cases pending in High Court/Supreme Court on appeals of CESTAT order. We were told that the main issue faced by

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department is improper representation of facts and case arguments which is a resultant of poor record maintenance, follow up and in some cases connivance or weak build up of cases. Too many case files pending and too less manpower to work on it. But we were impressed by the legal acumen and interest shown by the superintendent who was working selflessly for the department.

2. Visit to adjudication section- adjudication of various show cause notices issued by the department- issue of order in original or de novo orders as in respective cases were also observed.

3. Visit to review section- to review the orders of the CESTAT/commissioners.

Sample case followed and observed is as follows:

Review of a Show Cause Notice and Adjudication order issued in Division I to M/s Swarn Enterprises

The facts of the case were that on the basis of intelligence it was found that M/s Swarn Enterprises were evading payment of Central Excise duty by resorting to the suppression of the production and their clearances, the officers of Central Excise Division - I searched the factory premises of M/s Swarn Enterprises on 12.12.2006 by drawing of punchnama (RUD-1).

(PTO)

M/s Swarn Enterprises had contravened the following provisions of the Central Excise Rules, 2002:

Rule 4 & 8 of Central Excise Rules, 2002 in as much as they have manufactured and cleared the said excisable goods without payment of Central Excise duty;

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Rule 6 of Central Excise Rules, 2002 in as much as they did not assess the Central Excise duty payable on those goods;

Rule 9 of Central Excise Rules, 2002 in as much as they had manufactured and cleared the excisable goods without obtaining Registration from the Central Excise Department;

Rule 10 of Central Excise Rules, 2002 in as much as they had manufactured and cleared the excisable goods without proper accounting;

Rule 11 of Central Excise Rules, 2002 in as much as they manufactured and cleared the excisable goods without issuing proper invoice; and

Rule 12 of Central Excise Rules, 2002, in as much as they failed to furnish proper Excise returns to the department.

Adjudication order

It was confirmed that:

1.The central excise duty amounting to Rs.43,503 involved on the goods manufactured and removed clandestinely during the period February 2005 to June 2005.

- Central excise duty amounting to Rs.3,77,979 on account of wrong assessment of the value of goods under Section 4 instead of Section 4A, and

- Central Excise duty amounting to Rs. 3,76,736 on account of clearance made in respect of ‘killer’ & ‘5 CEES’ brand which were not their brand and thus were not eligible for any exemption under Section 11A of the Central Excise Act, 1944.

Adjudication Section

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Denovo case

In one of the case department gave appropriate chances of personal hearing and complied with Principles of Natural Justice and adjudicated the case without party against which the party went to CESTAT. The order of the CESTAT was:

“from the records it is clear that from the very beginning, the appellant’s stand has been that there is no discrepancy between receipt and consumption of the raw material as recorded in the RG-23A register and the raw material consumption based on the quantity of finished goods cleared as recorded in RG-1 register. The department had determined the raw material consumption on the basis of the input output ratio, as mentioned in Para 8 of the SCN and the quantity of the finished products cleared as per its calculation. In this regard, the appellant’s contention is that there is no discrepancy between the consumption of raw material as per RG-23A account and the consumption based on the quantity of finished goods cleared and the input output ratio. We find that though the appellant have requested for supply of copy of RG-1 register, the same has not been supplied and according to the appellant, on the basis of copies of the invoices available with them they can prove that there is no discrepancy. The Commissioner has not given any finding on the appellant’s request for supply of copies of the RG-1 register. In view of this, we are of the view that the impugned order is not correct. The same is set aside and the matter is remanded to the commissioner for denovo decision after supplying copies of RG-1 register.”

Day 5: 4/9/2015

A.Visit to technical and audit section – this sectionhandles

1. RTI queries and appeals- pay fixation and information on

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various applications.

2. Preparation of adhoc reports- reports related to certaincases and notifications or classification.

3. Preparation of regular reports.

4. Pre audit- if refund claim is greater than Rs. 5 lakhs— rule18 of CETA + notification no. 19/2004 CE(NT) dated 6/9/2004. The divisional office is supposed to issue order for the same.

5. Post audit- if refund claim is less than Rs. 5 lakhs

Discussions about Pre Audit and Post Audit.A case where refund/rebate of duty paid on exported goods sought was more than 5 lakhs and the file for pre audit was seen. The provisions applicable in the instant case were:

Rebate of duty paid on goods exported

Rule 18 of CER, 2002 and notification no.19/2004 CE(NT) dated 6.9.2004 provides certain conditions:

A request on the letterhead of the exporter containing claim of rebate, ARE-1 numbers and dates, corresponding invoice numbers and dates, amount of rebate on each ARE-1 and its calculations.

Original copy of ARE-1 Invoices issued under Rule 11 of CER, 2002 Self attested copy of Shipping Bill (EP copy) and Bill of

Lading/Airway Bill. Proof of duty payment Disclaimer certificate in case claimant is other than

exporter

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Any other document in respect of refund claim.

Procedure for refund claim- 1. Application to be made in field division2. Details verified by range office for documents and others.3. Report made by range to division.4. Draft order prepared by division (AC/DC) based on report.5. New file opened in HQs to maintain the refund claims.

One sample exemption notification observed while observing some sample files: section 11(B)(1) with circular — refund of excise duty for vehicle purchased by diplomats residing in India- one year to apply for refund and 3 years vehicle not to be sold

A sample of B1 form (B1 bond) was shown which is used for availing excise refund for merchandise export- refund to be given after verification.

B.Vigilance section- This section maintains the details of the activities of the departmental personnel.

Any anonymous complaint is rejected as it affects functioning of office and officers. This is because as many times the anonymous complaints are made mainly by disgruntled people on personal enmity.

It verifies address/mobile/email of complainant in case

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of complaints received and communicates to the complainant the need to co-operate and comply whenever required with respect to the complaint made in the department.

Three types of complaints are there- one against Group- A Officer, one against Group- B & C Officer, one a Composite type of complaint involving group A and other officers.

Complaint against group-A Officer is forwarded to Board.Complaint against Group B & C and Composite (except Group A) is being dealt in this office.

When address is not found or incorrect then complaint is treated as anonymous.

Complaint might be closed with the approval of disciplinary authority.

If address is found correct, complainant has been called for Guinness and his willingness for cooperation in future investigation.

Vigilance cases include Misconduct, Fraud, Bribe.

Non-vigilance cases include Technical lapse, Late attendance, Disobedience, Insubordination, Negligence, Lack of supervision.

CCS (conduct) rules and Swamy’s handbooks on conducts and rules of behavior are followed to prepare reports.

If officer retires while disciplinary order is pending- board given power on behalf of president to adjudicate.

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The aggrieved or ODI (officer doubtful of integrity) list (after charge sheet is prepared) is prepared by - CBI member and a commissioner.

Day 6- 7/9/2015

A.Audit- met Sri. S.V Singh, commissioner of Audit department of Delhi -- 7 circles are in Delhi commissionerate- 2 of Delhi 1, 2 of Delhi 2, one each of Sonepat, Rohtak, Panchkula

General observations shared by the commissioner: The department does a check on department and its

activities in all spheres.

There is lack of manpower and big files make it disinteresting to handle the auditing work.

This department is unliked by the other sections of department as it views the orders and activities with a suspicion and raises objection if any.

Objection raised by audit department include- lack of documents, wrong interpretations, evasion, connivance

provisional assessment- must be done within the given bracket of time. Nowadays its not done systematically.

Range office not doing full worko ER forms not filed on timeo opening balance of current month not equal to

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o closing balance of last montho bills not available in data baseo bills mentioning wrong units, misguides which are

not observed or willfully ignored by the departmental officers etc.

B. Confidential section- comes under JC/ADC

This department is responsible for

1.Maintenance of ACR- annual confidential report

2.Maintenance of DPC- upto superintendents by March 31 to be done

3.Maintenance ofAPAR- important for promotions, affects it if not filled on time.

4.Filing of Lokpal from 15 October + filing of IPR (upto ADC level)

5.Exams- STA to inspector, promotion related exams.

6.Any purchase greater than (2X basic pay+ grade pay) tobe reported.

7.Generally observed that there are a lot of backlogs in APAR- no resume/details etc

8.APAR not yet available online unlike All India Services.

9.NOC for going out of country issued by this departmentas it requires vigilance clearance (in case any chargesheet filed or prosecution pending) in which dismissal/

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suspension is pending as per DOPT guidelines

MISC activities of the section- To consider promotion of Superintendents to AC-

compilation of APAR and other details is done for whole zone.

Application for passport - white passport is issued for Group A officers for official foreign visits.

C. Anti Evasion

This section is responsible for following up on all anti evasion activities of the excisable units in its range jurisdiction. It functions independently.

Assessee’s information to be collected on evasion if any through use of information network- informers, disgruntled employees, market survey, physical verification.

It takes care of deployment of staff matters- capabilities, evidences etc. for raids etc.

One should not to lose patience and act in haste while of field duty as resistance and unruly behaviour to be expected.

The Superintendent or Inspector cannot visit without any good proof as per rule/regulation/circulars as it is seen as harassment of manufacturing units in this self assessment era. So it is preferred to use informers etc to gather proof for anti evasion.

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On raids finance, accounting documents and other proof collection is more important than cash or other material seized.

Fake bills available in market- must be noticed

Show Cause Notice (SCN)- is final stage after investigation (within 6 months)

if excess is found than declared- seized or detained, if shortage is found than declared- duty is asked

panchnamas are important in case of search/seizure/arrest

anti evasion and DGCI activities do not overlap most of the times

AE1- filing form for information gathered, AE2- filing form for search/seizure etc.

Day 7 – 8/9/2015

Visit to factories

1. Ayur Products Pvt. Ltd.They are engaged in manufacture of shampoos, cold creams, face gel etc under the brand name of Ayur.

W.r.t. to excisable part, Section 4 dealing with Transaction Value and Section 4A related to MRP based valuation are applicable

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respectively in Ayur. In cases of packing more than 25 kg or less than 10 ml transaction value would be applicable. The company is registered with Excise department and paying huge sum of duty to Division 1. The ratio of PLA to CENVAT credit is 75:25.

In case Ayur is selling product to any OEM or other party then Section 4 would be applicable on Ayur and Section 4A on OEMs.

(The process of manufacturing is shown in the Annexure 2)

2. Deltron (CIBIL) Pvt. Ltd.This company engages in the activity of preparing diodes, transistors and LED bulbs, tubelights, lanterns as per the customer requirements. The labs of manufacturing were shown to us where we could observe the various fabrication units.

W.r.t. excisable part, they have huge cenvat credit available with them. Their effective duty payment is nil. They have huge export orders and cenvat can be availed only on those orders.

3. Aimil Products Pvt. Ltd.

They are engaged in manufacture of ayurvedicproducts like cough syrups, skin creams, hair products under the brand of AIMIL.

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They donot avail any Cenvat credit. All their raw materials are obtained from local market. They pay excise tax under rule 4A.

Conclusive Comments and observations

1. The departmental staff and the respective officers were co-operative and friendly and took care of general requirements daily.

2. The officers we met shared their experiences frankly and also enthused us about various opportunities and challenges available in the department.

3. We felt that we were exposed widely to all the departments and got a good experience of the working of the various departments within our jurisdiction.

4. General things not taught in classroom probation like file notings etc were also shown and explained to us which are going to be helpful when we get posted.

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5. The factory visits helped us to get an insight into working of some manufacturing units and the expectations of tax payers or public in general with respect to our functioning.

6. Overall, we had a very good attachment which was an enriching experience with respect to gathering field and on job knowledge.

Annexure 1

Jurisdiction Map of Delhi

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Annexure 2Process Chart of Manfuacture of shampoos

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