Page No: 1

[Study Group -II]

PART – A

OVERVIEW

Introduction

Cadre Review 2001

Post Cadre Review 2001 – An Analysis

Page No: 2

[Study Group -II]

Chapter – I

1.1 INTRODUCTION

It is 65 years since the Central Excise Act received the assent of the President

of India. The long journey of 65 years has witnessed many pages of the law being

changed and re-written quite a few times. Many redundant & obsolete practices

have fallen by the way side and in their place rose a more lean and transparent code

that signifies a dynamic response to change. While many quarters of the

Government only kept deliberating on changes, the Central Board of Excise &

Customs implemented changes with an unwavering focus on efficacious service

delivery and tangible transparency in dealings. The Department has evolved into

an efficient tax administration system by adapting itself to the challenges of

the changing economic scenario, technological advancements and the

liberalization process taking place all over the world. From the role of a

controller and enforcer, the Department has emerged as the facilitator. The

change management has been done in a seamless way & we have bound

ourselves in the spirit of the Citizens Charter and pledged to make it a reality, rather

than a mere rhetoric.

The significant milestones of the Department in the journey towards

building of an effective Tax Administration System for a stronger Nation are as

follows:

1969: The "Physical Control System" was in vogue

wherein each clearance from the factory was under the supervision

of the Central Excise Officers. In 1969. "Self Removal Procedure"

was introduced signaling the change of attitude of the Department

towards the assessees.

1978: Record Based Control (RBC) was introduced on

certain commodities as a further measure of liberalization.

1986: MODVAT scheme (presently known as CENVAT

Scheme) was introduced to facilitate the manufacturers to set off

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the duty paid on the inputs and capital goods against the duty

payable on the final products.

1994: Service Tax, the new concept of levying tax on

services was introduced for the first time with an initial coverage of

3 services with a potential to have magnificent growth to cover more

than 100 services in future. On the excise side, the Gate Pass gave

way to the invoice-based system and all clearances are now effected

on the manufacturers‟ own invoices.

1996: "Self Assessment Procedure" was introduced in

the year 1996 which vested total freedom and trust in the

assessees.

2000: Further liberalization by way of acceptance of

assessee‟s records and the removal of statutory records. The year

also saw a significant shift in the manner & conduct of Audit of

units with the introduction of EA-2000. Consignment based

payment of duty was replaced by fortnightly payment.

2003: The restrictions on the movement of excisable

goods on the Budget day were removed. Fortnightly payment of

duty was replaced by monthly payment of duty.

2004: Cenvat Credit Rules, 2004 were introduced to

facilitate both manufacturers and service providers for availment of

Cenvat credit of duty/tax paid on the inputs, input services and

Capital goods

The results of this adroit and timely fine tuning of the laws and procedures and

the planned structural changes, speak for themselves. A snapshot of revenue

contribution over the last 10 years would indicate the significant dominance of the

Department in the Revenue mobilisation efforts of the Government of India:

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Table :: 1 (Rs. In Crores)

Revenue

1999-2000 Revenue 2007-08

Percentage increase

Central Excise 61902 135012 118%

Customs 48420 104145 115%

Service Tax 2128 51925 2340%

Total Indirect Taxes

112450 291082 158.8%

In accordance with the need to synchronize with the policy decisions of

the Government, the Department undertakes various innovative initiatives

periodically to serve the Trade and Industry. The important measures are as

follows:

• Re-structuring Of the various Cadres Of the Department:

To prepare & equip the Officers to face the challenges of the constant

changes and developments around the Department;

• Re-Organization Of the formations at all levels:

To enhance the efficiency of the Department for achieving the goals in

an effective manner for the betterment of the Nation as well as the

Trade and Industry.

The last Cadre Re-structuring and Re-organization of the formations of the

Department, which took place in the year 2001, was based on the statistical

data and economic environment prevalent in the year 2000. To meet the

challenges as existed then, smaller Zones and Commissionerates were created

which has taken the services at the cutting edges of the Department closer to the

locations of the Trade & Industry. In order to ensure speedy disposal of Appeals,

more formations of Commissioners (Appeals) were created. These measures, as

the data available clearly indicate, proved to be result oriented providing a win-

win situation both for the Department as well as the Trade and Industry.

The Department is not an isolated entity immune from external and

internal stimuli. The proactive and responsive Tax Administration that it is, the

Central Board of Excise & Customs has initiated the process of responding to

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the changed economic scenario and other poignant stimulus by initiating a

Cadre Reorganization and Restructuring of the field formations.

The current exercise of cadre Re-structuring and Re-organization of the

formations is significant, as the challenges ahead of us are tough. The present

Global economic meltdown and its cascading effect on all Nations is clear and

profound. The effect of recession in countries having close and significant

economic ties with India needs an imaginative response. The slowdown in the

manufacturing sector and sluggish Exports are alarming. Against these odds, we

have the proud task of moving forward to elevate the Nation to greater heights

with the Vision that India will be one of the super powers of the World by 2020.

1.2 Terms of Reference for Study Group - II

The Central Board of Excise & Customs had initiated the process of Cadre

Restructuring / Reorganization of the Field Formations and pressed into service three

Study Groups to examine and determine the norms of revenue / assesses and

workload. Study Group –II was entrusted with the task of examining and putting up

proposals in respect of Integrated Central Excise and Service Tax

Commissionerates. The terms of reference for this Study Group are summarized and

reproduced hereunder for convenience:

(i) Integrated Central Excise & Service Tax Commissionerates

Quantify the workload of field formations

Suggest norms for reorganization of existing formations & creation of

new formations

Suggest norms for merger of existing formations

Suggest staffing norms for Integrated Central Excise & Service Tax Commissionerate, Division & Ranges

Study impact of IT projects on field functioning

Suggest staffing requirements for customs facilitation work like factory stuffing, clearance from EOU‟s / SEZ

Suggest norms for creation of Audit Teams and its composition in the Commissionerates

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To work out implications for proposed GST by 2010

Officer Requirement for monitoring declarant units and end-use notifications

(ii) Large Taxpayers Units

Quantify workload of functioning LTUs

Suggest norms for staffing the LTUs

Eliciting views of clients of existing LTUs and suggesting means to improve service standards

Interact with other agency, namely Income Tax Department regarding their structure, functional set up and manpower requirement as assessed by them to align our strength in a similar manner

Examine the impact of IT projects on LTUs

1.3 Objectives

Reorganization & Cadre Re-structuring of the field formations is an essential

process to make the formations under CBEC effectively functional and to achieve inter

alia the following important goals:

Realization of revenue in a fair, equitable and efficient manner;

Administration of the Government‟s economic, tariff and trade policies with a

practical and pragmatic approach;

Facilitation of the trade and industry by streamlining and simplifying the

statutory provisions and procedural requirements;

Extension of help to the Trade to enhance the capabilities and competitiveness;

Creation of a suitable environment for voluntary compliance by providing

guidance and building mutual trust;

Combating tax evasion, commercial frauds and misuse of the facilities extended

by the Government by unscrupulous elements.

Achieve a balance between the functional requirements of the Service and the

genuine & legitimate aspirations of the Service officers.

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[Study Group -II]

Chapter – 2

2.0 Cadre Review 2001 2.1 Objectives

To quote the proposal of Cadre Review 2001, “The Objective of periodical Review

of Cadre Strength, as per the policy of the Government is to bring about congruence

between the functional needs of the service and the genuine and legitimate aspirations

of the service officers.”

The objectives of the last cadre review were as follows:

Creation of a tax administration which is officer-oriented, technology driven, positively responsive and assessee- friendly

Maximization of revenue productivity by having closer supervision over compact Commissionerates and Zones. Creation of smaller and compact Commissionerates and Zones will also provide better accessibility to trade and industry and rationalize the workload.

Reinforcement of Directorates of Anti-Evasion and Revenue Intelligence to counter increased skills and capabilities of tax-evasion and smuggling

Speeding up the process of disposal of Appellate cases pending at various levels, thereby unblocking nearly Rs.11000 crores.

Reorganization of the Training Directorate to achieve the required level of capacity development and reinforcement of the Directorates of Audit, Valuation, Drawback & Export Promotion, systems, etc., for increased efficiency in various areas of work.

Achieving faster speed in decision making by replacing manual processing of documents by greater use of computers and other tools of Information Technology

Reducing the interface with the taxpayer especially at the lower level of staff by having more number of senior level officers in the filed formations

Achieving the objective of zero tolerance to corruption by strengthening the Vigilance Directorate and the Grievance redressal machinery

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Downsizing of the Department by rationalizing various formations, grades and cadres into a simpler and uniform structure by a reduction of staff strength from 68,761 to 65,161 (net reduction of 3600 posts, that is 5.24% of the total staff strength)

Higher motivation through improved management of career prospects in all cadres of Group „A‟, „B‟,‟C‟ & „D‟.

2.2 Proposals

Reorganization of Central Excise Commissionerates on the accepted norm of 5 Divisions per Commissionerate and 5 Ranges per Division.

Therefore, it was proposed to have 92 Central Excise Commissionerates and 460 Divisions against existing 59 and 330 respectively. The Ranges continued to be 2300.

The Customs set-up was proposed to be strengthened by having 35 Customs Commissionerates as against the existing 25.

To avoid the unwieldy span of control at the level of Chief Commissioner and to have effective supervision and discharge the statutory and other functions now in the purview of the Chief Commissioner , it was proposed to have 34 Chief Commissioner in charge of Zones as against the existing 16. The Chief Commissioner is also vested with cadre control functions.

Directorates increased from 5 to 11 to provide a focused approach in areas such as Audit, Export Promotion, Legal affairs, Housing, etc., and strengthen the existing Directorates like Anti-Evasion, Anti-Smuggling, Vigilance Systems, Training, etc.

For unblocking the revenue of Rs.3500 crores locked in appeals and to liquidate the 38000 odd cases pending at that level, 54 additional posts of Commissioner(Appeals) were proposed.

For augmenting departmental representation in CESTAT, the Departmental Representation before CESTAT is proposed to be upgraded

by providing 11 SAG level officers for heading DR units for each of the 11 benches. The post of CDR was upgraded to the level of Chief Commissioner.

Directorate General of Vigilance was revamped by posting SAG level officers to head the Regional units and by augmenting staff

Restructuring of cadres was proposed with a one time relaxation sought for filling up vacancies by way of promotion in all cadres. To ensure continuity of traditional parity with Income Tax Department.

Page No: 9

[Study Group -II]

2.3 Norms adopted for CBEC Field Formations In the last Cadre Restructuring exercise initiated in 2001, the following key

norms had been used for creation of Commissionerates (Central Excise & Service Tax):

(i) Minimum Central Excise revenue of Rs.500 crore per annum for a

Central Excise Commissionerate having five (5) Central Excise Divisions

and twenty five (25) Central Excise Ranges.

(ii) Minimum integrated Central Excise and Service Tax revenue of Rs.500

crore per annum for an integrated Central Excise and Service Tax

Commissionerate having five ( 5) Central Excise and Service Tax

Divisions and twenty five (25) Central Excise and Service Tax Ranges.

(iii) Minimum Service Tax revenue of Rs.250 crore per annum for a Service

Tax Commissionerate, having five (5) Service Tax Divisions and twenty

five (25) Service Tax Ranges. (Norms decided by the Board in 2003-04)

However, there was no mention about the normative number of assessees or

units or documents that can be effectively & efficiently handled in this model norm.

2.4 Norms Vs Actual Position in 1999-2000

In 2000, there were 60 Commissionerates, 340 Divisions and 2275 Ranges in

the Country. With the total Revenue collection of Rs.61746 Crores, the average

collections were Rs.1029 Cr per Commissionerate, Rs.182 per Division and Rs.27

Crores per Range.

With the creation of additional Commissionerates & Divisions, notwithstanding

the norm of Rs.500 Crores per Commissionerate and consequently Rs.100 Cr. per

Division and Rs.20 Cr. per Range, the actual average collections would be Rs.671

Crores per Commissionerate, Rs. 134 Crores per Division and Rs. 27 crores per Range,

based on the revenue collections during 1999-2000.

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[Study Group -II]

Consequent upon the growth in Service Tax revenue and the enhanced

workload, the Board created six Exclusive Service Tax Commissionerates and further

ordered creation of Exclusive Service Tax Divisions in a few Commissionerates. The

structure further underwent changes when some Ranges dealing with Central Excise

were converted into Service Tax Ranges.

2.5 Staffing Position – Result of Cadre Review, 2001

Table :: 2

Grade

Sanctioned Strength

Before Cadre Restructuring

After Cadre Restructuring

% increase / decrease

Chief Commissioner 21 47 123.80%

Commissioner 146 289 97.90%

Additional Commissioner 194 300 54.60%

Joint Commissioner 96 276 187.50%

Deputy Commissioner 808 601 (-) 25.62%

Assistant Commissioner 453 790 74.40%

Superintendent of Central Excise

6158 10515 70.80%

Superintendent of Customs (Prev)

1021 1442 41.20%

Appraiser 722 809 12%

Inspector CE 18472 15826 (-) 14.32%

Examiner 456 376 (-) 17.54%

Preventive Officer 2294 1851 (-) 19.31%

CAO 41 155 278%

AO/ACAO/EA 584 972 66.40%

Sr. PS 21 47 123.80%

PS 103 290 181.60%

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[Study Group -II]

Chapter – 3

3.0: Post Cadre Restructuring / Review – An analysis: 3.1 Revenue Growth since 1999 – 2000 Table :: 3.1

(in Rs Crores)

Financial Year

Actual Collections % Growth over

previous year

Central Excise

Customs Service Tax Total

1999-2000 61746 48334 2072 112152 --

2000-01 68636 47615 2540 118791 5.92%

2001-02 72418 40096 3305 115819 -2.50%

2002-03 82253 44912 4125 131290 13.36%

2003-04 90906 48599 7890 147395 12.27%

2004-05 98621 57565 14196 170382 15.60%

2005-06 110706 64911 23053 198670 16.60%

2006-07 116646 86569 37481 240696 21.15%

2007-08 122923 104145 51925 278993 15.91%

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[Study Group -II]

The year-wise net revenue figures are shown above. The table shows a steady

growth in revenue collections over the last six years. The average overall revenue

growth is around 15% since 2002-03. Service Tax collections have increased in

geometric progression as against the steady increase shown in Customs & Central

Excise revenues. Central Excise grew by 99.08% during the period 1999-2000 to

2007-08, whereas Service Tax showed a revenue growth of 2406.03% for the same

period. Customs revenue growth during the period was 115.47%.

0

20000

40000

60000

80000

100000

120000

140000

Rs.

in C

rore

s

Years

Revenue Growth

Central Excise Customs Service Tax

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[Study Group -II]

3.2 CENTRAL EXCISE - PLA - CENVAT TREND

Table :: 3.2

(Rs. in Crores)

YEAR PLA CENVAT TOTAL Annual Growth (Total)

Ratio PLA:Cenvat

1999-2000 61746 43643 105389 19.84% 59:41

2000-2001 68636 44986 113622 7.81% 60:40

2001-2002 72418 47509 119927 5.55% 60:40

2002-2003 82253 53039 135292 12.81% 61:39

2003-2004 90906 66567 157473 16.39% 58:42

2004-2005 98621 76665 175286 11.31% 56:44

2005-2006 110706 96050 206756 17.95% 54:46

2006-2007 116646 128698 245344 18.66% 48:52

2007-2008 122923 152210 275133 12.14% 45:55

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[Study Group -II]

The CENVAT ratio has reversed over the last 9 years. From 59: 41 PLA-

CENVAT ratio in 1999-2000, it now stands at 45:55 in 2007-08. CENVAT credit

availment has overtaken revenue collection (cash) during the last two years. While

Central Excise revenue showed an increase of around 99% since the base year 1999-

2000, CENVAT increased by 248.76% for the same period, showing the increasing

trend in credit utilization over the years.

6174668636 72418

8225390906

98621

110706

116646122923

43643 44986 4750953039

66567

76665

96050

128698152210

0

20000

40000

60000

80000

100000

120000

140000

160000

Rs.

in C

rore

s

Year

PLA -- CENVAT Comparison

PLA CENVAT

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[Study Group -II]

3.3 SERVICE TAX - REVENUE TREND

Table :: 3.3

(Rs. in crores)

Year No Of Services Covered By Tax

Revenue % Growth in

Revenue

1998-1999 30 1875 --

1999-2000 27 2072 10.51%

2000-2001 26 2540 22.59%

2001-2002 41 3305 30.12%

2002-2003 52 4125 24.81%

2003-2004 62 7890 91.27%

2004-2005 75 14196 79.92%

2005-2006 84 23053 62.39%

2006-2007 99 37481 62.59%

2007-2008 100 51925 38.54%

The growth in Service Tax revenue collections was the most dramatic over the

last 5 years. Riding on an increase in the number of services covered and an increase

in rates of tax, the Service Tax revenue grew at a phenomenal rate during the last 5

years. The growth in revenue since the base year 1999-2000 is around 2406%

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[Study Group -II]

3.4 STATEMENT OF COST OF COLLECTION OF INDIRECT TAXES

Table :: 3.4

(Rs. in crores)

Year

Customs Central Excise & Service

Tax Total

Revenue Expenditure

Cost of Collecti

on

Revenue Expenditure

Cost of Collect

ion

Revenue Expenditure

Cost of Collecti

on

1999-2000 48420 487.4 1.01 63800 584.82 0.92 112220 1072.22 0.96

2000-2001 47538 581.01 1.22 70894 615.84 0.87 118432 1196.85 1.01

2001-2002 40268 597.1 1.48 75608 635.79 0.84 115876 1232.89 1.06

2002-2003 44852 403.36 0.90 86163 702.8 0.82 131015 1106.16 0.84

2003-2004 48629 450.46 0.93 98281 750.58 0.76 146910 1201.04 0.82

2004-2005 57611 446.37 0.77 112781 825.9 0.73 170392 1272.27 0.75

2005-2006 65067 466.01 0.72 133720 894.7 0.67 198787 1360.71 0.68

2006-2007 86327 484.3 0.56 154597 974.5 0.63 240924 1458.8 0.61

2007-2008 104119 526.16 0.51 174307 1107.3 0.64 278426 1633.46 0.59

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[Study Group -II]

A graphical view of the manner in which the Cost of Collection (Customs, Central

Excise & Service Tax) has declined over the last few years is given hereunder:

The Cost of Collection of Customs Revenue is as under:

1.01

1.22

1.48

0.900.93

0.770.72

0.560.51

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

The cost of Collection of Central Excise & Service Tax is as under:

0.92

0.870.84

0.82

0.760.73

0.670.63 0.64

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

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[Study Group -II]

The Cost of Collection -- Total of Customs, Central Excise & Service Tax is as

under:

0.96

1.01

1.06

0.840.82

0.75

0.68

0.61 0.59

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

An analysis of the trend of Cost of Collection shows that with regard to

Customs collection, the rate of decline in cost is erratic with a sharp drop in the last

two years. On the other hand, the rate of reduction in Central Excise & Service Tax is

more gradual and proportional over the years. Notwithstanding the nature of decline,

the fact is that the cost of collection of Indirect Taxes has shown significant reduction

over the years.

The Cost of Collection of Revenue has shown a steady decline since

1999-2000. It is a matter of pride that the cost of collection which was Rs. 0.96 is

now down to Rs.0.59 a reduction of 38.5%. These figures are based on the data

circulated by the Principal Chief Controller of Accounts, New Delhi for 2007-08.

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[Study Group -II]

3.5 Growth in Assessee Base

3.5.1 Comparison of Assessee Base 1999-00 to 2007-08

Table:: 3.5 (a)

Area No. of Assessees % increase /

decrease 1999 - 2000 2007 - 2008

Central Excise 120000 92300 (-) 23.1%

Service Tax 115495 1061694 (*) (+) 819.3%

(*) These figures are likely to include assesseess who are within the exemption limit of Rs.10 lakhs and have not surrendered their registrations. 3.5.2 Per Commissionerate Average Assessee Base / Revenue / Gross Revenue Table:: 3.5 (b)

Area 1999-00 2007-08 Absolute Change

% Change

Central Excise

No. of Assessees

2034 992 -1041 -51.20

Revenue (Rs. in crores)

1029 1321 292 28.38

Service Tax

No. of Assessees

1958 11416 9459 483.20

Revenue (Rs. in crores)

35 558 523 1494.29

Total

No. of Assessees

3991 12409 8417 210.90

Revenue (Rs. in crores)

1064 1879 815 76.60

PLA + Cenvat 1756 2958 1202 68.47

PLA + Cenvat + Service Tax 1791 3516 1725 96.31

1999-00 60 Commissionerates 2007-08 93 Commissionerates

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3.6 Composition of Zones & Commissionerates

Table :: 3.6

Sl

No

Name of the

Zone

Integrated

(CX., Cus. &

S.Tax)

Integrated

(CX. & Cus.)

Exclusive CX

Comm.

Exclusive

Service Tax

1 Ahmedabad

Ahm‟bad-III

Rajkot

Bhavnagar

--

Ahmedabad-I

Ahm‟bad-II

Ahmedabad

2 Bangalore -- --

Bangalore-I

Bng‟lore-II

Bng‟lore-III

Bangalore

3 Bhopal Bhopal Indore

Raipur

-- -- --

4 Bubhaneshwar Bub‟swar-I

Bub‟swar-II -- -- --

5 Chandigarh

Chandigarh

Jalandhar

Ludhiana

-- J&K --

6 Chennai Puducherry

Chennai-II

Chennai-III

Chennai-IV

Chennai-I Chennai

7 Cochin

Calicut

Cochin

Trivandrum

-- -- --

8 Coimbatore

Coimb‟tre

Madurai

Salem

Thirunelveli Thiruchuraplli

-- -- --

9 Delhi Rohtak

Panchkula Delhi-III Delhi-IV

Delhi-I Delhi-II

Delhi

10 Hyderabad

Hyd-I Hyd-II

Hyd-IV

Hyd-III

-- -- --

11 Jaipur Jaipur-I

Jaipur-II -- -- --

12 Kolkata

Bolpur

Haldia

Siliguri

--

Kol-I

Kol-II

Kol-III

Kol-IV

Kol-V Kol-VI

Kol-VI

Kolkata

Page No: 21

[Study Group -II]

Sl

No

Name of the

Zone

Integrated

(CX., Cus. &

S.Tax)

Integrated

(CX. & Cus.)

Exclusive CX

Comm.

Exclusive

Service Tax

13 Lucknow

Allahabad

Kanpur

Lucknow

-- -- --

14 Mangalore

Mysore

Belgaum

Mangalore

-- -- --

15 Meerut

Ghaziabad

Meerut-I

Meerut-II Noida

-- -- --

16 Mumbai-I

--

Thane-I

Thane-II

Mumbai-I

Mumbai-IV Mumbai-V

Mumbai

17 Mumbai-II Raigarh

Belapur

Mumbai-II --

Mumbai-III

18 Nagpur

Aurangabad

Nagpur

Nasik

-- -- --

19 Pune Zone

Goa

Pune-I

Pune-II

Pune-III

-- -- --

20 Ranchi

Jamshedpur

Patna Ranchi

-- -- --

21 Shillong Dibrugarh

Shillong -- -- --

22 Vadodara

Daman

Surat-I

Surat-II Vadodara-I

Vadodara-II

Vapi

-- -- --

23 Visakhapatnam

Vizag-I

Vizag-II

Guntur Tirupati

-- -- --

Page No: 22

[Study Group -II]

3.7 Commissionerate-wise Revenue Collection 3.7.1 INTEGRATED COMMISSIONERATES (65) -- 2007-08 Table :: 3.7 (a)

(Rs. in crores)

Sl. No

Name of the Zone

Name of the Com‟te.

Central Excise (PLA)

CENVAT Credit

Service Tax

Revenue

Customs Revenue

C.Ex. Units

S.Tax Units

1

Ahmedabad

Ahm‟bad-III 394.8 1601.94 152.21 1.9 1214 7543

2 Bhavnagar 573.5 830.15 107.57 0 539 8969

3 Rajkot 3775.16 2790.11 594.91 576.24 1488 16735

4

Bhopal

Bhopal 1545.97 1230.67 266.75 15.19 1351 18061

5 Indore 981.95 2633.36 314.6 173.47 1590 31147

6 Raipur 4646.86 2863.52 333.05 0.64 1231 11020

7 Bub‟swar

Bub‟swar-I 743.59 1093.19 412.44 48.67 907 10028

8 Bub‟swar-II 1703.47 1204.9 280.61 0 480 5567

9

Chandigarh

Chand (I & II) 899.26 2541.98 516.47 0 1424 14569

10 Jalandhar 451.07 1323.03 434.88 0 834 10120

11 Ludhiana 663.16 2195.68 157.21 0 1523 12350

12 Chennai

Chennai-III 1041.26 3045.2 116.56 14.86 1456 7439

13 Pondy 522.81 1725.5 76.53 0 852 4428

14

Coimbatore

Coimbatore 434 1360.18 320.45 41.64 1668 8061

15 Madurai 300.7 364.77 101.34 -0.11 466 7450

16 Salem 390.78 733.62 116.95 0.69 985 3001

17 Thiruchuraplli 1292.1 1036.43 255.42 0 606 8089

18 Thirunelveli 220.82 1011.51 145.68 0 920 8662

19 Delhi

Panchkula 166.68 282.65 102.24 0.07 662 7126

20 Rohtak 5795.43 2327.37 133.77 1.51 1172 6675

21

Hyderabad

Hyd-I 807.57 2161.77 43.61 0 947 3276

22 Hyd-II 1109.15 205.62 1417.93 902.64 205 20377

23 Hyd-III 1001.7 1255.6 172.44 1.52 1485 7173

24 Hyd-IV 397.58 1259.2 183.58 0 1387 5096

Page No: 23

[Study Group -II]

Sl. No

Name of the Zone

Name of the Com‟te.

Central

Excise (PLA)

CENVAT Credit

Service

Tax Revenue

Customs Revenue

C.Ex. Units

S.Tax Units

25 Jaipur

Jaipur-I 936.69 3042.71 621.91 0 1942 32585

26 Jaipur-II 1588.96 1419.5 209.99 0 939 17504

27

Kerala /

Cochin

Calicut 291.49 417.8 198.56 32.47 805 5880

28 Cochin 4751.36 600.07 467.45 0.1 592 9253

29 Trivandrum 32.25 64.61 267.95 30.55 250 5507

30

Kolkatta

Bolpur 1382.28 1297.18 132.72 7.43 1518 4876

31 Haldia 3044.62 2283.56 158.15 0 637 2624

32 Siliguri 56.4 38.63 46.78 0 1408 3890

33

Lucknow

Allahabad 809.89 762.93 111.38 0.01 1249 10791

34 Kanpur 863.72 842.64 186.22 53.93 1015 15038

35 Lucknow 4824.06 1139.95 310.71 4.23 900 13439

36

Meerut

Ghaziabad 938.35 1896.88 111.39 178.18 902 6211

37 Meerut-I 2525.08 840.36 149.86 40.67 627 12574

38 Meerut-II 403.1 1043.15 99.03 49.34 688 9528

39 Noida 1050.39 3781.87 508.34 1647.57 1517 5073

40 Mumbai-II Raigarh 1624.21 3228.16 277.31 11.63 429 3356

41

Mysore

Belgaum 1818.58 1756.39 271.79 0 938 11161

42 Mangolore 5001.22 226.2 209.83 0 455 5382

43 Mysore 511.5 858.19 85 10.59 561 5724

44

Nagpur

Aurangabad 908.93 3292.92 196.96 115.61 1415 13533

45 Nagpur 1120.88 2125.37 338.62 200.17 1178 16636

46 Nasik 1351.34 2980.78 193.21 27.22 1362 13965

47

Pune

Goa 753.64 1500.76 203.43 924.88 596 7795

48 Pune-I 1788.16 6701.23 269.87 0 2318 10449

49 Pune-II 704.1 1516.53 133.74 0 1502 10768

50 Pune-III 1397.93 4135.11 1454.46 0 2402 37050

Page No: 24

[Study Group -II]

Sl. No

Name of the Zone

Name of the Com‟te.

Central Excise (PLA)

CENVAT Credit

Service Tax

Revenue

Customs Revenue

C.Ex. Units

S.Tax Units

51

Ranchi

Jamshedpur 2678.21 3547.59 163.01 0 627 3251

52 Patna 3770.09 225.22 179.17 0 969 7179

53 Ranchi 1962.22 598.04 152.11 0 521 5075

54

Shillong

Dibrugarh 1508.97 63.84 60.11 0 658 3694

55 Shillong 2444.36 510.83 167.72 0 860 7219

56

Vadodara

Daman 746.36 3082.7 88.39 0 1901 4916

57 Surat-I 687.11 3752 260.75 463.34 501 8641

58 Surat-II 404.42 1526.39 36.1 0.17 856 2756

59 Vadodara-I 8583.12 1946.08 227.42 3.64 971 7886

60 Vadodara-II 1654.49 3872.36 244.26 1.23 1111 9702

61 Valsad/Vapi 618.32 4422.54 37.1 10.48 1584 2119

62

Vizag

Guntur 416.37 384.83 177.15 71.95 597 10662

63 Tirupati 671.16 577.68 72.06 4.21 511 6373

64 Vizag-I 5694.28 1152.49 298.59 4.58 236 4721

65 Vizag-II 446.45 309.75 101.33 677 297 4663

3.7.2 Exclusive Central Excise Commissionerates (28) for 2007-08 Table :: 3.7 (b) (Rs. in crores)

Sl. No

Name of the Zone

Name of the Com‟te.

Central Excise (PLA)

CENVAT Credit

66 Ahmedabad

Ahmedabad-I 220.36 668.73

67 Ahmedabad-II 458.56 1197.79

68

Bangalore

Bangalore-I 725.39 1650.24

69 Bangalore-II 2715.17 1231.18

70 Bangalore-III 447.88 918.73

71 Chandigarh J & K 1404.14 698.72

72

Chennai

Chennai-I 3620.35 1243.34

73 Chennai-II 561.85 1798.73

74 Chennai-IV 284.02 3698.71

Page No: 25

[Study Group -II]

Sl. No

Name of the Zone

Name of the Com‟te.

Central Excise (PLA)

CENVAT Credit

75

Delhi

Delhi-I 223.24 756.8

76 Delhi-II 380.27 671.22

77 Delhi-III 1956.12 8558.85

78 Delhi-IV 757.7 2756.64

79

Kolkata (A)

Kolkatta-I 51.5 83.57

80 Kolkatta-II 157.68 592.03

81 Kolkatta-III 318.83 724.84

82 Kolkatta-IV 217.97 649.78

83 Kolkatta-V 186.74 311.37

84 Kolkatta-VI 1010.78 411.41

85 Kolkatta-VII 106.83 211.33

86

Mumbai-I

Mumbai-I 4232.24 438.65

87 Mumbai-IV 457.66 173.87

88 Mumbai-V 257.45 563.48

89 Thane-I 398.3 1870.59

90 Thane-II 552.51 1630.1

91

Mumbai-II

Belapur 650.99 3333.55

92 Mumbai-II 9707.96 738.53

93 Mumbai-III 326.16 639.19

3.8 Impact of LTUs

As per the approach paper on LTUs, it is proposed to have 12 LTUs catering to

around 5237 units involving a revenue of Rs.85,446 crores and CENVAT of Rs.39,410

crores. Considering that the Total Central Excise revenue collection in 2007-08 is Rs.

1,22,923 Crores from around 90000 assessees, the figure of Rs.85,446 crores is a

huge chunk of revenue that gets transferred to the LTUs. This being the case, one

gets the feeling that LTUs and Normal Commissionerates are mutually exclusive at

the revenue level if all 12 LTUs are commissioned and opted for as per the Approach

paper.

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[Study Group -II]

However, it must be said that the actual threshold norms for entry into LTUs

are different from those suggested in the Approach Paper. But suggestions made to

expand the coverage of LTUs to Associate Companies, etc will increase the no. of

switchovers further curtailing the strength of the jurisdictional Commissionerates.

This exodus of asseessees towards the LTUs will have a definite and profound effect

on the need, scope and functioning of the feeder Commissionerates.

The trend of the LTUs towards exclusivity and functional independence and

severance of all controls and interaction with the jurisdictional Commissionerates

further ensures that the parent field formations would be left with reduced revenue.

However, the Committee recognizes that LTUs cater to Large Taxpayers‟. These

units in terms of nos. are small but revenue-wise big. As can be seen from the

Approach Paper, it is expected that 5000 odds units out of around 92000 would be

opting for LTUs Therefore, the Commissionerates will be left with a large no. of units

with reduced revenue to administer. Therefore, the impact on unit coverage will be

minimal. But in terms of revenue it would be high. At present however only 133 Large

Taxpayers having 729 CE registrations and 649 ST registrations have gone to the LTU

located at 4 places. Considering the rate at which new units have opted to join the

LTU, the Group feels that the total number may not exceed 900 to 1000 registrations

(LTU projections are @ 175 per LTU). Considering the above, the existing

Commissionerates will continue to have almost the same workload that they presently

have because the Department still has to cater to over 91000 Central Excise assessees

and around 10 lakhs Service Tax assessees. Rules & procedures being the same, the

interaction, scrutiny, workload would be the same as the no. of returns would not

show a significant reduction, the Audits will continue to be the same, the need for

preventive monitoring will continue. Therefore, while there would be an impact on the

revenue front, at the functional level the workload continues unabated. Further, from

a Trade Facilitation point of view, there is justification for the continuance of the field

formations despite the LTUs.

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[Study Group -II]

3.9 Impact of SEZ Growth

SEZ‟s have mushroomed the length and breadth of the Country. To cater to

the needs of these SEZ‟s the Ministry of Commerce has agreed to obtain Customs

Officers on Cost Recovery basis. The Central Board of Excise & Customs has

communicated the encadrement of Customs Posts for over 144 notified SEZ‟s.

Notwithstanding the requirement to post officers on Cost Recovery basis, the high

vacancy position in some Zones is hampering proper deployment of officers to these

SEZ‟s.

Considering the nature of the SEZ‟s, the need to be more vigilant cannot be

over-emphasized. The workload has further increased with the issue of the

Notification No: 9/2009 dated 3-3-2009 as amended by Notification No:15/2009 dated

20-5-2009. Additional responsibility has been placed upon the Assistant

Commissioner and his office to process refund claims from SEZ units. Circular

No:114/8/2009-ST dated 20-5-2009 lays down the procedure and checks and the

time-limit within which the refund claims are to be sanctioned as follows:

“Notification No.9/2009-Service Tax, dated 3.3.2009 was issued to

provide refund of service tax paid on taxable services specified in section 65(105) of the Finance Act, 1994 which are provided in relation to the authorised operations (as defined under SEZ Act, 2005) in a Special Economic Zone (SEZ), and received by a developer or units of a SEZ, whether or not the said taxable services are provided inside the SEZ. 2. Notification No. 15/2009-Service Tax, dated 20.05.2009 has been issued to amend the aforesaid Notification 9/200-ST dated 3.3.2009 to provide unconditional exemption to services consumed within the SEZ without following the refund route thus dispensing with the requirement of first paying the tax by the service provider and then

claiming the refund thereof by developer/unit. The exemption by way of refund would be limited to situations only when taxable services provided to SEZ are consumed partially or wholly outside SEZ. 3. In cases where refund needs to be claimed, notification No. 15/2009-Service Tax, dated 20.05.2009 provides for certain conditions. One of the conditions is that the Assistant / Deputy Commissioner should satisfy himself that the said services have been actually used in relation to the authorised operations in the SEZ. This may be primarily done through the documents submitted with the claim. The notification requires that the refund claim shall be accompanied by the following documents,-

Page No: 28

[Study Group -II]

(i) a copy of the list of specified services required in relation to the authorised operations in the SEZ, as approved by the Approval Committee; (ii) documents evidencing payment of service tax. 5. The Assistant / Deputy Commissioner may, in select cases, especially where the refund amount claimed is significant cause verification of the end-use of services consumed for which refund claim is filed. 6. Board’s Circular No. 809/06/2005-CX, dated 01.03.2005 read with Circular No.857/15/2007-CX, dated 02.11.2007 which prescribes the procedure relating to sanction and pre-audit of refund / rebate claims, shall apply mutatis mutandis to cases where the individual refund claim amount exceeds Rs.5 lakh under the said notification. 7. As regards the issues relating to jurisdiction for the purposes of refund of service tax, STC code to be issued to the developer or unit of a SEZ and document evidencing payment of service tax, Board’s Circulars No. 101 /4 /2008-ST, dated the 12th May, 08 and No. 106 /9 /2008-ST dated the 11th December, 08 shall apply mutatis mutandis to the refund scheme under this notification. 80% of the due refund amount is to be sanctioned as adhoc interim refund to developer or unit of SEZ, within 15 days of filing of a refund claim, subject to the condition that refund claim is complete and contains the requisite documents. 8. It is reiterated that refund of service tax paid on taxable services used in relation to the authorised operations in the SEZ should be

disposed of expeditiously. The refund claims should be finalized within a maximum period of 30 days from the date of filing of refund claim and in any case not beyond 45 days from the date of filing of the refund claim. 9. Commissioners are advised to put in place a system of review and monitoring of disposal of refund claims filed and disposed within the prescribed time limits. 10. Any difficulty faced in implementing the above provisions may be immediately brought to the notice of the undersigned. “

The Committee feels that this enhanced workload should be factored

into the proposal as this is a new item of work which did not exist at the

time of the last restructuring exercise.

3.10 Customs Work in Integrated Commissionerates

Some of the integrated Commissionerates also handle Customs work which

includes Preventive Operations (inland and offshore). Factory stuffing of export cargo,

rebates, drawback claims, warehousing, ACC/ICD/ CFS operations, Air and Sea ports,

Page No: 29

[Study Group -II]

etc. Apart from this, preventive operations, in view of the recent security concerns and

increased threat perception, require coordination amongst various Law Enforcing

Agencies. The coordination warrants exchange of data, besides intelligence & joint

operations. In this case the Customs Preventive Officers should be well versed with

data conversion and mining methods.

3.11 Statutory and procedural changes

In tune with the process of liberalization and Trade facilitation efforts,

the Department has been constantly making significant changes to the

statutory provisions as well as procedural requirements relating to Central

Excise and Service Tax. It has to be remembered in this context that

liberalization of statutory provisions and procedural requirements is always

directly proportional to the work load of the Officers of the Department in view

of the need for maintaining a vigilant monitoring mechanism against possible

misuse of the largesse of the Department. In view of this, there is increased

work load and additional responsibilities at all levels of the Officers on account

of liberalization.

While making analysis on the subject matter, only the statutory and

procedural changes of important nature involving additional work load and

enhanced responsibilities have been taken into account. The changes are as

illustrated below:

(a) Central Excise (statutory changes)

Introduction of Central Excise Rules, 2002;

Introduction of Central Excise Valuation (Determination of the Price of

Excisable Goods) Rules, 2000 (Additionally, an important rule viz. rule lOA was

introduced w.e.f 1.3.2007);

Central Excise (Removal of Goods at Concessional Rate of Duty for

manufacture of Excisable Goods) Rules, 2001;

Amendment of the definition for Manufacture under 2 f (ii) of the Central

Excise Act, 1944.

Amendment relating to the place of removal under Section 4 of the Central

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[Study Group -II]

Excise Act, 1944.

Amendment of Section 4(A) of the Central Excise Act, 1944 relating to

clearance of goods without declaring Retail Sale Price, etc.

Insertion of proviso under Section 11 relating to recovery of tax arrears.

Amendment to Section 11D relating to recovery of duties of Central Excise

collected from the buyers.

Insertion of Section 11DDA relating to provisional attachment of property for

the purpose of protecting the interest of revenue during the pendency of any

proceedings under Sec. 11A or Sec. 11D of the Act.

Requirement of review of the orders passed by the Commissioners and

Commissioner (Appeals) by a Committee of Chief Commissioners and

Commissioners respectively in terms of Section 35 E.

Introduction of Cenvat Credit Rules 2004 facilitating availment of Cenvat credit

of duties/taxes paid on the inputs, input services and capital goods by the

manufacturers as well as service providers.

o Introduction of Central Excise (Compounding of Offences) Rules, 2005.

o Introduction of Central Excise (Determination of Retail Sale Price of Excisable

Goods) Rules, 2008

(b) Central Excise (procedural changes)

Increase in the number of periodical returns filed by the assessees from

ER1 to ER-7, by more than 100%.

Duties, Functions and Responsibilities of Range Officers and Sector as

prescribed by CBEC in F.No.224/37/2005-CX.6 dated 24.12.2008.

Mandatory monthly inspection/visit to 100% EOU by the Range Officer

Requirement of second stage scrutiny of ER-1/ER-3 returns based on the

Risk Analysis in addition to first stage scrutiny involving additional

workload.

(c) Service Tax (statutory changes)

There is a significant increase in the number of taxable Services with an

addition of 88 new Services during the period from 2001 to 2008 whereas

the number of taxable services prevalent in 2000 was only 26.

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[Study Group -II]

Insertion of new Section 73C for provisional attachment of property

pending during pendency of any proceedings.

Cenvat Credit Rules, 2004

o The Export of Services Rules, 2005

The Service Tax (Registration of Special Categories of Persons) Rules, 2005

Taxation of Services (Provided from outside India and received in India)

Rules,

2006;

Service Tax (Determination of Value) Rules, 2006.

Insertion of Section 65A relating to Classification of taxable Services.

Works Contract (Composition Schemes for payment of Service Tax) Rules,

2007.

(d) Service Tax (procedural changes)

Introduction of Best Judgment Assessment under Section 72 with effect

from 16.5.2008.

The field formations are required to monitor collection of Service Tax from

the SEZ units which are under the governance of Ministry of Commerce.

(e) General

Anticipated work load as a result of additional responsibility to have

Administrative Control over the SEZ/EOUs.

Due to increased awareness of the Trade to claim Cenvat benefit, the SSI

units which are under the threshold limit of RS.150 Lakhs are

volunteering themselves to discharge duty liability from the beginning.

Similarly, there is an increased Registration of Dealers due to requirement

of Cenvat benefits by the small scale manufacturers.

Extension of the benefit of Dealership Registration to the Second Stage

Dealer resulting in an increase of the assessee base of the Dealers of

Excisable goods. Consequently, there is an increase in work load as the

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[Study Group -II]

Department is required to effectively monitor against misuse of Cenvat

benefits such as issue of Cenvat invoices without supply of goods,

irregular passing of Cenvat Credit as a result of nexus between the dealers

and manufacturers etc.,

3.12 Performance in Key Result Areas

One of the objectives of the cadre re-organization exercise was to improve

efficiency and reduction in pendencies in various areas of the Department.

The summary of change in position of Key areas of work will clearly show a

marked decrease in the pendency position and significant progress in liquidation of

Appeal cases pending with Commissioner (Appeals).

3.12.1 Arrears -- Central Excise & Service Tax Table :: 3.12.1 (a)

Unit

Year Amount

Year Amount Absolute

Change %

Change

Ou

tsta

ndin

g

Central Excise

No.

2002-0

3 42760

2007-0

8 30045

-12715 -29.7

Rs. in crores

44865

16902

-27963 -62.3

Service Tax

No.

2004-0

5 6747

2006-0

7 6810

63 0.9

Rs. in

crores

236

480

244 103.4

Collecti

on

Targ

et Central

Excise + Service Tax

Rs. in crores

2004-0

5

2250

2007-0

8

2600

350 15.6

Realiza

tion

Central Excise

+ Service Tax

Rs. in crores

2004-0

5

1799

2007-0

8

3655

1856 103.2

Page No: 33

[Study Group -II]

RECOVERY OF ARREARS – Year wise

Table ::

3.12.1(b) (Rs. In Crores)

Head

2004-05 2005-06 2006-07 2007-08

Target Realis

ation Target

Realis

ation Target

Realisa

tion Target

Realis

ation

Central Excise 2250 1799 1682 1658 1300 1379 1550 1957

Service Tax * * 300 881 500 1060 1050 1698

TOTAL 2250 1799 1982 2539 1800 2439 2600 3655

(*) - NOTE :- Not separately reported as it was included in Central Excise

.

The recovery of arrears has doubled over the last four years, from Rs.1799

crores in 2004-05 to Rs.3655 crores in 2007-08.

3.12.2 Adjudication No. of cases Disposed

Table :: 3.12.2 (a)

Year No. of Cases Year No. of Cases

Central Excise 2001-02 49499 2006-07 31055

Service Tax 2000-01 23000 2006-07 35519

Pendency of Adjudications Cases (Central Excise) Table :: 3.12.2(b) (Amount Rs.in Crs)

2006 - 07 2007 - 08 Age-wise Breakup (2007-08)

Number Amount Number Amount Less than

1 year 1 to 3 Years

More than 3 years

10443 6279.40 11594 8348 11144 445 5

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[Study Group -II]

3.12.3 Provisional Assessment Pendency of Central Excise Cases Table :: 3.12.3

Year 2001-02 2007 – 08 ABS Change % Reduction

No. of Cases 503 326 177 35%

3.12.4 AUDIT PERFORMANCE -- Central Excise & Service Tax

Table :: 3.12.4 (Rupees in Crores)

Financial Year No. of Assessees

audited Total Detection Spot Recovery

2000-01 1441 647 47

2001-02 4183 1277 76

2002-03 12242 925 58

2003-04 17863 1355 105

2004-05 21313 1661 196

2005-06 25938 2094 280

2006-07 28596 3846 581

2007-08 30883 5101 930

The emphasis on audit is manifest in the tremendous increase in the no. of

units audited, detections made and recoveries effected. The growth in assessee base

and revenue means that more number of units need to be audited mandatorily, as per

the norms stipulated.

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[Study Group -II]

3.12.5 Pendency in Appeals -- Commissioner (Appeals)

Table:: 3.12.5

2000 - 01 2007 - 08 Absolute Change

% Change

No. of Commissioners (Appeals) 28 57 29 103.5

No. of Appeals Pending 38000 12669 -25331 -66.7

Amount Involved in Pending Appeals (Rs. in crores)

3500 2724 -776 -22.2

Page No: 36

[Study Group -II]

PART – B

INTEGRATED CENTRAL EXCISE & SERVICE TAX COMMISSIONERATES

Factors Considered for Reorganization/ Restructuring

Reorganization of Formations

Restructuring of Cadres

Page No: 37

[Study Group -II]

Chapter – 4

4.0 Factors Considered for Re- Organization / Re-Structuring 4.1 Observations of Standing Committee on Finance 2005-06 Taking stock of the functioning of the Revenue Department, the Standing

Committee on Finance (2005-2006) Fourteenth Lok Sabha, in para 75 of the

Report had observed as follows :

“The Committee observed that restructuring of the department under the

Central Board of Direct Taxes (CBDT) and Central Board of Excise & Customs

(CBEC) had been undertaken resulting in perceptible difference in the performance

of the departments. However, the Committee have been told on many occasions

that shortage of manpower, particularly at the level of Inspectors etc is affecting

the efficiency of the tax departments. In this regard, from the data submitted to

them by the Government, the Committee note that the restructuring process in

CBDT has resulted in an increase of 222.22% of the posts of Chief Commissioner

but a rather poor 17.07% augmentation at the level of Inspectors. In CBEC, the

posts of Chief Commissioner have been increased by 123.80% and at the level of

Inspector, there has been a decrease of 14.32%. This exercise, in the Committee’s

view, has made the top slots heavy, and negligible or even negative growth in the

number of posts at the cutting edge levels like that of Inspectors, Income Tax

Officers, Superintendents and Customs Appraisers. This, the Committee feel, may

further worsen the much-felt shortage of work force at these levels leading to

serious problems in the overall functioning of the two departments. The Committee

note that the Government have now started taking measures to fill up these gaps.

Nevertheless, the Committee are led to the conclusion that the restructuring

proposal was done in a manner that chose to ignore the requirements at the

middle and lower level of the functionaries, resulting in continuation of shortage of

manpower. The Committee therefore, recommend the Government to again assess

the present structure of the department under both the Boards carefully and set

right the anomalies that have creeped up as a result of restructuring.”

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[Study Group -II]

4.2 Skewed ratio between different Cadres The present administrative set up starting from the level of the Chief

Commissioner to Group –B executive cadre under the CBEC after the cadre

restructuring and subsequent creation of 4637 posts in all Grade is shown

below. The figures do not include the posts sanctioned for SEZs.

Table :: 4.1

Post

Sanctioned Strength after

Restructuring 2001

Subsequent

Increase

Present Sanctioned

Strength

Ratio to Next

Lower Cadre

Chief Commissioner 47 -- 47 1 : 6.28

Commissioner 289 6 295 1 : 1.01

Additional Commissioner

300 -- 300 1 : 0.98

Joint Commissioner 276 17 293 1 : 2.0.5

Deputy Commissioner 601 -- 601 1 : 1.54

Assistant Commissioner

790 135 925 1 : 15 (*)

Group –B (Gazetted) Executive Officers

12766 1110 13876 1 : 1.27

(*) The ratio between the cadre of Assistant Commissioner and Group „B‟

(Gazetted) becomes 1:30 due to the reason that 50% of the 925 posts are intended for

direct recruit candidates. The remaining 50% of the posts are to be filled from the

three feeder cadres viz., Superintendent of Central Excise, Superintendent of Customs

and Appraiser of Customs in the ratio of 6:2:1.

The present Group- wise distribution of posts in the Department is as

under: Table :: 4.2

Category Group A Officers

Group B (Gazetted)

Group B (Non-

Gazetted)

Group C Officers

Group D Officers

TOTAL

Sanctioned strength

2961 15905 22821 21950 9105 72742

The table indicates both main stream cadres as well as others and is a total of both Executive and Ministerial cadres for each Group.

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[Study Group -II]

4.3 Manpower vis-à-vis Growth in Assessee Base

(a) Growth in Assessee base and Revenue:

The last Cadre Restructuring exercise was carried out in 2001 based on

the 1999-2000 data. Thereafter, there has been a consistent increase in the

assessee base, and tremendous growth in revenue realization as a result of

which, the work load also has increased. The comparison chart will give an idea

about the manifold increase in the work load:

Table :: 4.3

Details

At the time of last

cadre Re-structuring (1999-2000)

Present

position (2007-08)

% of increase

No. of Employees 68673 72742 6%

C. Ex Revenue 61902 Cr. 135012 Cr. 118 %

Customs Revenue 48420 Cr. 104145 Cr. 115 %

Service tax Revenue 2128 Cr. 51925 Cr. 2340 %

No. of services 26 106 308 %

As could be seen from the above Table, there is a manifold increase in the

work load. It is also worthwhile to note that the Cadre Restructuring exercises in

the past including the one which took place in the year 2002 (based on the data

for the year 2000) have not taken into account the requirement of manpower as

a result of administration of Service Tax matters.

It has to be kept in mind that the future of business expansion as well

as scope for generation of revenue is more in the Service Sector, which

contributes around 55% of the GDP. The Service Tax which was introduced in

1994 with 3 services had expanded to cover 106 services and the list is likely

to grow.

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[Study Group -II]

4.4 Impact of IT implementation in the filed formations:

CBEC has embarked upon a program to extend computerization in the areas of

indirect taxation covering all its offices across the country in order to provide quality

services to stakeholders, including tax payers, by consolidating its information

technology (IT) infrastructure.

This IT Consolidation Project, is concerned with the comprehensive automation

of Central Excise based on the re-engineered business processes and will be based on

a centralized architecture. This project would be covering over 582 buildings on a

high-speed network and 600 outlying ranges on ISDN/broad band connectivity. All

officers of CBEC across the country would access the software applications relevant to

them that would be deployed from a National Data Center. The program is designed to

include 20,000 internal users in CBEC's offices. In addition, all indirect tax assesses

would be provided e-services through a common portal.

Business Process Re-engineering in indirect taxation:

To improve efficiency and to ensure tax payer comfort, Business Process Re-

engineering was critically looked into at each of the business processes by a working

group before the implementation of ACES. The key business processes identified are:

Registration

Revenue reconciliation

Return Scrutiny

Audit

Dispute Resolution

Anti-Evasion

Training

In order to implement this BPR it was suggested

Automate Work Flow function.

Organizational restructuring based on the principle of ensuring

institutional ownership of the key business processes.

Skill Upgradation.

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[Study Group -II]

Automation of Central Excise and Service Tax (ACES):

The Automation of Central Excise and Service Tax [ACES} is the software based

on work flow and it aims to automate a majority of the processes in Central Excise and

Service Tax through a workflow based application. ACES is the second generation of

software which has been developed to replace the current application of SERMON,

SACER, SAPS, STREMS used in Central Excise and Service Tax for capturing returns

and registration details in the field.

Implementation of the ACES application will result in a sea change in the way

the Central Excise and Service Tax formations conduct their regular business. E-filing

and e- processing is expected to replace manual filing and handling of paper

documents. Since ACES is a workflow application, it will impact the way in which we

conduct our business on a daily basis. Officers at all levels will be required to work on

the application hosted on a Central Server by connecting to it from their thin clients

through a wide area network or through internet.

Impact of ACES on cadre restructure:

Generally the performance is measured on two factors Viz. Augmentation of

revenue effort and Skill.

Augmentation of revenue effort:

Scrutiny of Returns.

Auditing of accounts of the Assessee

Anti-evasion

Recovery of Arrears.

Skill:

Knowledge of Indirect taxation law.

Computer related skill.

Scrutiny of Financial Records.

Page No: 42

[Study Group -II]

Expected skill level: Table :: 16

Area of work Skill expected

Return Scrutiny Knowledge of law, Computer related skill and study of

financial records Audit

Anti Evasion,

Arrears of Revenue

Knowledge in Indirect taxation law, General Civil &

Criminal Law, Skill in Drafting of Notices, Computer

related skill, Data analysis of third party information

In this background the impact of ACES on cadres has been studied.

After the implementation of ACES, on a typical workday the Superintendent in

a Range would switch on his computer, which would connect to the Server through

the network and give him a list of pending tasks. These tasks would have been

assigned to him as part of the workflow, by the Divisional AC/DC, as well as by the

system itself as part of the review and correction process of various documents

submitted by the assessee. A similar screen would be available to the AC/DC of the

Division, the Additional/Joint Commissioner in charge of the Division, the

Commissioner and the Zonal Chief Commissioner. So hereinafter the field offices are

not working in isolation. The Range Office, Divisional Office, Audit, Appeal work will be

monitored and their performance will be watched closely on a daily basis. All the

officers of the Department are expected to improve upon their taxation knowledge,

analytical skills, computer related skills, etc. for effective tax administration.

At the time of introduction of Service tax it was told that the tax will be

implemented with the existing staff of the Department. Now the service tax has grown

leaps and bounds, service net and assessee base has been expanded and is the

major revenue contributor to the exchequer. This work also will be carried out with

the help of ACES. Currently, reasons for non-filing of Returns are not effectively

studied. ACES will help analyze the trends – macro and micro – in Service Tax and

Central Excise Revenue collections, Cenvat Credit Availment etc. closely.

In view of the forgoing, the implementation of ACES will in no way lead to

reduction in work load or staff but only enhance the quality of service delivery and act

Page No: 43

[Study Group -II]

as a force multiplier to aid the officer in his normal duties. Tasks requiring manual

intervention like survey, verification, Audit etc have to continue in the normal course

and the introduction of ACES would in no way reduce this requirement. The efficiency

of the Officers and the Department as a whole stands to gain with ability to take

control over areas that previously would have been put away till time was made

available. In addition, the ACES require new breed of Departmental Officers to handle

specialized jobs such as the Information Technology, Human Resource, Training [for

the Staff and Tax payers], Call Centre Handling [ Help Desk Services] etc.

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4.5 Workload pattern in field formations

The functions of the Commissionerate cover a variety of activities relating

to enforcement of the three statutes of indirect taxation and other allied laws viz.

Administration, Executive, Revenue augmentation, Judicial, Review, Legal, Audit,

Anti-Evasion, Trade facilitation, Staff welfare and many other miscellaneous

functions, such as monitoring of the 100% EOUs, STPI units, Service Tax matters

relating to SEZs etc.

Customs work

There are many Commissionerates which also handle the work relating to

remotely located minor customs formations such as Airports, Air Cargo complexes,

Inland Container Depots etc providing Export and Import solutions for the Trade at

their door steps. The work load relating to Customs, though not contributing much

revenue in the minor Customs formations, is very high in view of the facilitation for

the Export activities provided by the Department by way of grant of Drawback benefits

and other Export related schemes.

Besides, in view of the increased security concerns, it will be desirable to

station field Officers even in the remote places also irrespective of revenue

consideration. Our long coastal belt on the three sides of Nation almost unmanned

now is to be properly guarded against smuggling and antinational activities. The

newly formed National Intelligence Agency (NIA) also has advocated the need for

regular interaction with all agencies concerned including Customs and Central Excise.

Hitherto, the enormous work load in respect of Central Excise and Service Tax

has been managed by the Zones and Commissionerates with the existing manpower

due to the strong will and dedicated efforts of the Officers of the Department at all

levels. In view of the increased work load as a result of introduction of various

statutory and procedural changes and liberlisation and the need to check tax evasion

etc., there is a need for a shift to 'effective governance' with qualitative performance

from a mere managing the affairs, attitude.

The Study Group attempted a workload study in order to quantify the man-

hours required for normal discharge of duties by the Officers in various field

formations, documents handled, etc. However, the Group encountered difficulty in

Page No: 45

[Study Group -II]

collection of data from all Zones as the nature of duties are vast and varied and the

collection of data from 93 Commissionerates, 440 odd Divisions and around 2200

Ranges within the given span of time was proving very elusive. Therefore, an attempt

is made here to only list out the main activities in the Ranges, Divisions &

Commissionerates.

Scrutiny of ER-/ ER-3 returns

Scrutiny of Dealer‟s Invoice

Processing of Statutory Reports

Processing of ER-6 Returns

Processing of rebate claims / proof of exports

Processing PLA/ CENVAT credit extracts to be sent to CAO

Annexure D Verification

Compilation of O-41 data

Reconciliation of revenue receipts (TR-6 / GAR -7 Challans)

Handling Special Reports

Scrutiny of ER-4/ER-5 returns

PBC Checks

Exports – In-house stuffing

Response to Audit paras (IAD & CERA)

Scrutiny of ST-3 Returns

Scrutiny of Input Credit distributor returns

Scrutiny of ST-1 returns

Issue of ST-2 Certificates

Issue of clarifications to assessees

Processing of Refund claims

Processing of Draft Show Cause Notices

Handling Arrears of Revenue Matters

Provisional Assessments

Verification of Premises / Survey

Adjudication of cases

Revenue Monitoring

Administrative Work

Legal Matters

Review

Handling Tribunal Cases

Grievance Redressal

Anti Evasion

Vigilance Related

Etc.

This is not an exhaustive list, but covers a major part of the work expected of

the field formations under Central Board of Excise & Customs. Secondly, since the

Central Excise Act and Rules and the procedures thereto are common across the

Country, this work pattern is to be expected in all formations with minor deviations

Page No: 46

[Study Group -II]

due the presence or absence of Customs Work / Service Tax Work, etc.

It would be pertinent to note in this context that the Board vide Circular

F.No.224/37/200S-CX.6 dated 24.12.2008 has elaborately prescribed various

functions, duties and responsibilities of the Range Officer and the Sector Officer with

a view to enhance the efficiency of the Department. This is an effective mechanism for

the administration of the Ranges in order to garner more revenue in a smooth and

taxpayer friendly manner.

4.6 Impact of Returns ER-1 to ER-7 As on date, there are seven Excise Returns to be filed by assessees, on a monthly / Quarterly / Yearly basis. This list of returns are :

Return No.

Description of Return Relevant

Rule Frequency

ER -1 Monthly return for production and removal of goods and other relevant particulars and CENVAT Credit

CER - 12 Monthly

ER -2 Monthly return for 100% EOU in respect of Goods manufactured, goods cleared and receipt of inputs and capital goods

CER – 17(3) Monthly

ER -3 Quarterly Return for Clearance of Goods and CENVAT Credit

CER – 12 Quarterly

ER -4 Annual Financial Information Statement CER – 12(2)(a) Annual

ER -5 CENVAT – Annual Return of information relating to Principal Inputs

CCR – 9A(1) Annual

ER -6 CENVAT – Monthly Return of information relating to Principal Inputs

CCR – 9A(3) Monthly

ER -7 Annual Installed Capacity Statement CER – 12(2A)(a)

Annual

CER – Central Excise Rules, 2002 CCR – CENVAT Credit Rules, 2004 The Department has also issued the “Manual for the Scrutiny of Central Excise

Returns, 2008” as per which scrutiny of the returns is to be undertaken by the

Page No: 47

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concerned officers. The Committee recognizes that there is regular and sustained

work involved in the scrutiny of returns. While E-Initiatives like ACES etc., would aid

to some extent, more important issues surface which need manual intervention and a

thorough scrutiny. The Annual Statements cover information pertaining to various

activities of the assessee. This information needs to be cross checked with the

Monthly returns, scrutinized for details from sourcing of raw materials to selling

patterns and credit recovery methods. Information on service utilization and

compliance with Service Tax requirements need to be seen. These activities cannot be

casual and intermittent. Therefore the Range has to be given sufficient resources and

manpower to comply with the requirements of such scrutiny.

4.7 Need for intensive, High Impact Audits – CAAP – Audit Planning The structured Audit programmes adopted by the Department under the EA-

2000 regime are ensuring a systematic check on the assessees working. The selection

of Units based on revenue parameters and risk assessments and the choice of units

for High Impact Audit is to ensure effective monitoring of the assessees.

However, the proliferation of Computers and IT initiatives in all fields including

Accounting and Book-Keeping calls for a Tech-Savvy Officer capable of meeting the

challenges of Computerized Accounting Systems.

Towards this end, the Computer Assisted Audit Program (CAAP) now being

implemented is aimed at equipping the officers to handle the intricate world of

computerized accounting adopted by the assessees. The officers have to be trained in

data recovery techniques, made to understand the working of various Computerized

Accounting tools and provided with Laptops and data mining software to be able to

interface with the assessees‟ systems and retrieve data in the format and form

required for proper conduct of audit and to ensure that the officers are empowered

to hold their own in the recovery of computerized accounting data. This needs highly

skilled and trained Audit Officers.

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[Study Group -II]

4.8 Need for Anti- Evasion presence:

The Indirect Tax Administration functions on the basis of trust and has reposed

faith in the assessee. The assessee now clears goods under the Self Assessment

procedure, Classifies his goods himself, undertakes self sealing procedures, etc. Since

the role of the Department has shifted from enforcer to facilitator, intelligence

development, market analysis and a last resort invasive action in cases of evasion,

need no emphasis. In such a liberalized Taxation Structure, a skilled & specialized

Anti Evasion structure to work as a deterrent to tendencies to evade payment of Tax,

has to be in place.

Adverse PLA – CENVAT Ratio

The PLA – CENVAT ratio has now shifted from 59:41 in 1999-2000 to 45:55 in

2007-08. While part of the contribution to this shift in the ratio could be attributed to

the introduction of Service Tax credit, however in general, the scope for mis-utilisation

cannot be ruled out. Additional manpower coupled with the IT initiatives such as

ACES would serve the purpose.

Export Related Frauds

Schemes like DEPB, DEEC, SEZ, EPCG, EPZ, 100%EOU, warehouse, advance

license and draw back have to be monitored properly. There are several cases of

under valuation and mis-declaration and misuse of end-use notifications, etc. A well

structured organization with adequate manpower and proper IT support would ensure

a watchful eye.

Enormous increase in the work load

The work load of the Commissionerates is continuing to grow fired by the

liberalization initiatives, increase in the assessee base and coverage of

additional services year after year.

The following chart is illustrative of the factual position as on 1999-2000

and 2007-08:

Page No: 49

[Study Group -II]

6867361902

48420

2128

51925

104145

135012

67272

0

20000

40000

60000

80000

100000

120000

140000

160000

Employees CX Revenue Cus Revenue ST Revenue

Re

ven

ue

Rs.

in C

rore

s

1999-00 Vs 2007-08

As could be seen from the above, there is an abundant growth in revenue

whereas the work is managed with a lesser work force. In fact, the working

strength is only about 80% of the sanctioned strength. The Department, which

is required to handle multiple functions, should have a need based structural

set-up for its effective functioning.

4.9 Review & Legal Work 4.9.1 Review of Adjudication Orders In 2005, the Review of Orders in Original passed by the Commissioners was to

be done by a Committee of Chief Commissioners and similarly, the orders passed by

the officers subordinate to the Commissioners were to be reviewed by a Committee of

commissioners. Added to this, in the year 2007, the time limit for Review of the

orders has been reduced to 3 months from the previous time limit of one year.

This puts an additional strain on the Commissionerates and the Chief

Commissionerates as the task is a time-bound one with the additional constraint that

the Review will have to be done by the Committee. This involves scrutiny by two Chief

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[Study Group -II]

Commissioner‟s or two Commissioners‟. This was not envisaged at the time of the last

cadre restructuring.

The quality of review work has a telling effect on the number of appeals filed by

the Parties and the Department. A judicious review would reduce and forestall

appeals, whereas a revenue biased order would definitely see the party appeals

mounting. In fact on an average around 29000 appeals have been filed annually by

the parties in the last three years against a mere 8000 filed by the Department. (See

Table:: 4.9 (b) for more details). Review of orders should transcend mere nit-picking

and concentrate on the legality and correctness of orders.

4.9.2 Legal Work

A concerted effort to bring down the pendency of cases at the Commissioner

(Appeals) level met with good success wherein the same was brought down from 38000

in 1999-2000 to 12669 in 2007-08. However, the overall picture of pending litigation

work is not so rosy and needs focused attention as there are 58576 cases pending in

different Appellate fora involving revenue of Rs.35144 crores. The pendency of

litigation as on 31-3-2008 is as under:

Table :: 4.9 (a)

(Rs. in crores)

Appellate Forum No. of Party

Appeals No. of Dept.

Appeals Total No. of

Appeals Total Amount

Involved

Supreme Court 591 1734 2325 4825.33

High Court 6468 5928 12396 7635.87

CESTAT 18439 12747 31186 19958.32

Commissioner (A) 10913 1756 12669 2724.40

Total 36411 22165 58576 35143.92

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The Table below indicates the rate of in-flow of appeals in various Appellate fora

over the last three years.

Table :: 4.9 (b)

Appellate Forum

2005-06 2006-07 2007-08

Party Dept. Party Dept. Party Dept.

Supreme Court 176 400 214 518 303 588

High Court 2020 1360 1811 1862 1810 2200

CESTAT 8415 3815 8529 3868 8592 3880

Commissioner (A)

17684 2575 18203 2234 19374 3400

Total 28295 8150 28757 8482 30079 10068

It may be seen that on an average around 36000 appeals are filed before the

various Appellate Authorities every year. Of these, the party‟s appeals are more than

two thirds of the total filed. This may have connotations on the quality of quasi-

judicial orders, manner and approach to review of these orders, etc., which is beyond

the scope of this Study Group and hence not pursued. However, the quantum of

appeals translates directly into workload of the Department at the Commissioner

(Appeals) level. This has been discussed separately in para-6.6 and para-7.7. The

pendency at the Tribunal and Courts level is worrisome and needs serious thought on

manner of liquidating the same. A perusal of the data indicates that there is a steady

flow of party appeals as compared to the ones filed by the Department. Therefore, a

conscious effort has to be made to improve quasi-judicial functioning coupled with

impartial and prudent decision making in review maters. However, further discussion

in this line of thinking is beyond the scope of this Group‟s brief. While it is a matter

over which we have little control as the fora are extra-departmental, yet a difference

can be made in the following manner:

a. Have a legal coordination cell in all places where there are Benches of

Tribunals, High Courts, & Supreme Court. This has already been done.

It is now time to make it a main stream with all facilities to ensure up-to-

date status of cases, prompt receipt of Notices, preparation and filing of

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[Study Group -II]

counters, regular follow up of stay vacations, early hearing petitions, etc.

b. Strengthen the CDR / SDR / JDR offices

c. Improve the quality of Review of orders which would obviate the need for

appeals- both by the Department and mainly by the Party.

4.10 Need for Specialized un-obtrusive and non-invasive Methods for

Service Tax Mop-up It is a matter of time before Indirect Taxation takes the form of Goods and

Service Tax which is an integration of the VAT chain at all levels. Tax on Services

directly affects individuals as it does Business entities. Interaction with individuals

requires a humanistic touch and non-invasive approach. This calls for reduction in

the points of contact, and massive implementation of IT enabled services that removes

the need for contact, enhanced non-intrusive collection and collation of business

intelligence and trends, Risk Analysis, etc. This requires an organized approach and

augmented manpower that would be able to be the “eye in the sky” for the

Department rather than a strike force.

4.11 Need to comply with Citizens Charter & Sevottam Standards The Citizens Charter and the Sevottam Standards lay down timelines

that in some cases are less than that provided by the statute and speak of

commitments that are beyond the call of the law. The Central Board of Excise &

Customs having bound itself in the spirit of the Citizens Charter with the pledge to

make it a reality, rather than a mere rhetoric requires from the organization and the

cadres a single-minded dedication and commitment. Therefore, there is a necessity to

have formations properly staffed that could ensure the service delivery required as per

these Charters. Commitment on paper needs to be backed up with an organization

that is designed to deliver and a workforce that can oblige.

4.12 Grievance Redressal An essential sequel to the Citizens Charter and the myriad laws and procedures

is the Grievance Redressal mechanism. The Chief Commissioners and the

Commissioners are entrusted with the task of redressing grievances; there is a need to

Page No: 53

[Study Group -II]

put in place a performing organization that could back-up the commitments of the

senior officers. Consequent upon the implementation of the CPGRAMS (Centralized

Public Grievance Redress And Monitoring System), the Chief Commissioners under

CBEC have been declared as Subordinate Offices and required to handle grievance at

the field level. As per the Citizens Charter, there is an outer limit of 30 days to

disposal of any pending grievance. Therefore, this additional time bound work

necessitates a unit in place to monitor the grievances in a time bound manner.

4.13 The Right to Information Act, 2005

The usage of the RTI Act, has increased by leaps and bounds. Demands

for information, voluntary disclosure of information, Appellate provisions and

follow-up at higher fora are time consuming and ardorus in nature. The

Department has to integrate the provisions of the Right to Information Act in

the structure of the Department so that a dedicated channel is available and

functioning. Adequate manpower is a sine-qua non for such implementation.

Since the work related to the RTI Act is a new one, the same has to be factored

into the proposals of the Cadre Restructuring.

4.14 6th Pay Commission recommendations The VIth Central Pay Commission vide Para 6..1.2 of the Report had

observed that the organization should be pyramidal in structure. The

Commission had stated in Para 6.3.15 that it was not making any specific

recommendation regarding restructuring of the individual services and cades

due to the reason that this task could better be performed by the concerned

Ministries and Departments.

Page No: 54

[Study Group -II]

Chapter – 5

COLLECTION AND ANALYSIS OF REVENUE DATA 5.1 Data Sources

The yearly revenue data provided by the Directorate of Data Management is

used for analyzing the annual performance. However, detailed data was specifically

collected by the Study Group from all the Central Excise Zones in the Country. The

data covered revenue and assessee base of Commissionerates, Divisions and Ranges

for all the Zones for the year 2007-08. Hence, this data is adopted for the purpose of

computations. All figures are gross revenue figures, including refunds and rebates.

The revenue figures of each Commissionerate for the last 4 years – from 2004-05 to

2007-08 was analyzed and the trends in PLA, CENVAT and Service Tax noted. In

general it was noted that there was a consistent growth in each of the 4 years. While

there was a spike in revenue growth in 2006-07, the same settled down to the normal

growth rate of around 15% in 2007-08.

The Data for 65 Integrated Central Excise & Service Tax Commissionerates are as

under:

(Rs. in Crores)

2004-05 2005-06 2006-07 2007-08

Central Excise (PLA) Revenue 77597.6 85075.88 86474.1 102660

CX CENVAT Credit 56400.8 68842.49 92402.36 110845

Service Tax Revenue 5501.73 7859.56 12267.12 16237

Total Revenue 139500 161777.9

3 191143.6 229742

Customs Revenue 5326.28 3214.33 4397 6350

Total C.Ex. Units 67575 61198 63094 65737

Total S.Tax Assessees 496728 532390 575500 622411

Page No: 55

[Study Group -II]

5.1.1 CENVAT Impact

As discussed earlier in this document, the CENVAT figures show a significant

increase year after year. In fact the CENVAT in the last two years is more than the

PLA revenue. High growth on the CENVAT front has been attributable to

i) growth in export of duty free goods, causing accumulation of credit on

inputs used in manufacture of such goods,

ii) Slashing of rates of duty over a period of time,,

iii) accumulation of credit on capital goods used for modification, repair,

expansion, setting up of new industrial units,

iv) facility to avail CENVAT credit on input services etc.

Hence, in the Gross Revenue, the major component is the CENVAT credit. It is growth

in Gross Revenue, not PLA which is comparable with the growth rate in manufacturing

Sector and also work load.

5.1.2 Service Tax Effect

Service Tax revenue has shown a marked growth with an overall increase of

around 2000%, and in some Commissionerates, the Service Tax revenue collections

exceeded the Central Excise revenue collection. Workload-wise, the Service Tax work

has also added to workman-hours which is drawing on the limited manpower

resources available. Hence, the combined effect of Central Excise (including Cenvat

credit) and the Service Tax revenue collection was deemed fit to be considered while

proposing the new norms for a Commissionerate.

5.1.3 “Total Revenue” – defined

Therefore all calculations are based on “Total Revenue” unless stated otherwise.

“Total Revenue” is the sum total of Central Excise (PLA) revenue + CENVAT credit +

Service Tax Revenue.

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[Study Group -II]

5.2 Adoption of 2007-08 data

Taking into account the revenue trends over the last four years, the significant

growth in CENVAT, the spiraling increase in Service Tax revenue, among other factors,

the Committee is of the opinion that the revenue for 2007-08 should be considered for

the purpose of analysis and fixation of norms. Further, the effects of creation of

exclusive Service Tax Commissionerates, LTUs, etc, appear to have settled down,

leaving 2007-08 as a stable year for the purpose of adopting the revenue for

calculations.

Further, while up-to-date data for the year 2008-09 was not readily available, it

is also to be noted that there was significant drop in rates of duty/taxes in December

2008 that would distort the whole year figures. Therefore all computations were taken

up on the 2007-08 data.

5.3 Commissionerate-wise Analysis

There are 23 Central Excise Zones in CBEC, consisting of 93 Central Excise

Commissionerates, of which 65 are integrated Central Excise & Service Tax

Commissionerates and 28 are exclusive Central Excise Commissionerates. These 65

integrated Central Excise & Service Tax Commissionerates are distributed in 21 Zones

along with other 20 exclusive Central Excise Commissionerates. The remaining 8

exclusive Central Excise Commissionerates are in the remaining two Zones.

An analysis was undertaken to find out how many Commissionerates fall within

a particular slab of revenue collection. Hence, class intervals with a range of Rs. 500

Crs was taken and data plotted against these classes. The distribution of 93

Commissionerates as per following class intervals of Central Excise revenue covering

only Central Excise (PLA) + CENVAT is as under:

Page No: 57

[Study Group -II]

Revenue range

(Rs in Crs.)

No. of Integrated

Commissionerates

No. of exclusive CX

Commissionerates

No. of Total

Commissionerates

0-500 3 3 6

500-1000 4 7 11

1000-1500 7 4 11

1500-2000 9 1 10

2000-2500 5 5 10

2500-3000 8 0 8

3000-3500 4 0 4

3500-4000 5 4 9

4000-4500 4 0 4

4500-5000 2 2 4

5000-5500 4 0 4

5500-6000 3 0 3

> 6000 7 2 9

Total 65 28 93

The above distribution plotted as a graph is given below. However it was observed

that there is no clear dominant revenue slab in the distribution.

3

4

7

9

5

8

4

5

4

2

4

3

7

3

7

1

5

0 0

4

0

2

0 0

2

4

0

1

2

3

4

5

6

7

8

9

10

(Rs

in C

rs.)

0-500

500-1000

1000-1500

1500-2000

2000-2500

2500-3000

3000-3500

3500-4000

4000-4500

4500-5000

5000-5500

5500-6000

> 6000

Revenue Slabs -- Rs. in Crs.

No

. of

Co

mm

issi

on

erat

es

Integrated Exclusive

Page No: 58

[Study Group -II]

5.3.1 Observation of Revenue in 2007-08 (Rs. in Crores)

S.No

Description Integrated

Commissionerate(s)

(65 nos.)

Exclusive

Commissionerate(s)

(28 nos.)

Total (93 nos.)

1 Central Excise(PLA) 1,02,660 32,388 1, 35, 048

2 CENVAT Credit 1,10,845 38, 222 1, 49, 067

3 Service Tax 16,237 -------- 16,237*

4 Total Revenue (PLA+CEN+ST)

2, 29, 742 70, 610 2, 84, 115

5 Central Excise Units 65,737 30, 462 96,199

6 Service Tax Assessees 6,22,411 --------- 6,22,411

7 Average PLA 1579 1156 1452

8 Average CENVAT Credit 1705 1365 1602

9 Average Service Tax 250 ----- ------

10 Average Total Revenue 3534 2521 3054

11 Average no. of units 1011 1087 1034

12 Average no. of ST Units 9576

* Total Service tax revenue collected by CBEC during 2007-08 is Rs 51,925 Crs from

a total assessee base of 10,61,694. Similarly, 39 integrated Central Excise

Commissionerates collected Customs revenue of Rs 6,300 Cr, while the total Customs

revenue collected by CBEC is Rs 1, 04,145 Cr.

5.3.2 Elimination of abnormal highs / lows in Revenue Data

There are some formations dealing with Oil refinery units. This revenue is

obviously very high and distorts the overall picture as these formations are not

amenable to re-organization as these are single unit Ranges/Divisions. Similarly, the

low and high revenue yielding Commissionerates which distort the solution matrix

should be avoided while calculating the norm. The revenue collected by a Range

varies from Rs.32 Crores to Rs.8583 Crores. The above two (high and low) types of

Commissionerates, drastically affect the average values.

In all the 65 integrated Commissionerates, the three main components (PLA,

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[Study Group -II]

Cenvat and S.Tax Revenue) are common, whereas Customs Revenue is collected by 39

Commissionerates only. Hence, the Total Revenue only is considered to represent the

revenue of a Commissionerate, ignoring the Customs Revenue. The Total Revenue

collected by 65 integrated Central Excise Commissionerates in 2007-08 is Rs 2,29,742

Crs, with an average of Rs 3534 Crs. At this average there are 36 Commissionerates

(about 54%) below this figure. Next, the nine Commissionerates having oil-units

under their jurisdiction and the top five and bottom five Commissionerates in the

revenue range were excluded. After excluding the revenue of these 19

Commissionerates, the average gross revenue of the remaining 46 Commissionerates

worked out to Rs 2192 Crs. Therefore, the Committee feels that a revenue norm of

Rs. 2000 crores would be appropriate for an Integrated Central Excise and Service Tax

Commissionerate. While the distribution of Commissionerates is not concentrated at

any particular revenue slab (as can be seen from the tables above), however, a

majority of them fall in revenue slabs above Rs.2000 crores. A graphical

representation of the 46 Integrated Commissionerate is as under:

5

8

7

3

8

2

3

1

3

6

0

1

2

3

4

5

6

7

8

9

1000

-150

0

1500

-200

0

2000

-250

0

2500

-300

0

3000

-350

0

3500

-400

0

4000

-450

0

4500

-500

0

5000

-550

0

5500

-600

0

Integrated Commissionerates

Page No: 60

[Study Group -II]

5.4 Division-wise Analysis

There are 307 Divisions in the 65 integrated Central Excise & Service Tax

Commissionerates, of which two Divisions deal exclusively with Customs operations

and five Divisions deal with Service Tax exclusively. Out of the remaining 300

Divisions, 230 Divisions handle both Central Excise and Service Tax matters and 70

Divisions deal with only Central Excise matters. It is also observed that in 15

Commissionerates, the Service Tax work is handled by the Commissionerate head-

quarters offices collecting total revenue of Rs 5,000 Crs. Similarly, majority of the

Customs revenue is handled by Customs formations, rather than Central Excise

Divisions.

In the 28 exclusive Central Excise Commissionerates, there are 134 Divisions.

With these, the total number of Central Excise Divisions in 93 Commissionerates is

441. The distribution of 441 Divisions in different class intervals of Central Excise

revenue (C. Ex PLA + C. Ex Cenvat) is as under::

C. Ex Total Revenue

ranges (in Rs. Crores)

No. of Divisions in

Total No. of Divisions

Integrated Central

Excise & Service Tax Commissionerates

Exclusive Central

Excise Commissionerates

0-100 38 35 73

100-400 115 58 173

400-800 79 21 100

800-1200 31 6 37

1200-1600 14 3 17

1600-2000 9 1 10

2000-2400 5 3 8

2400-2800 4 0 4

2800-3200 4 1 5

3200-3600 0 3 3

3600-4000 2 1 3

> 4000 6 2 8

Page No: 61

[Study Group -II]

The distribution of Divisions in various Revenue Slabs is graphically represented as under:

38

115

79

31

14

95 4 4

02

6

35

58

21

63

13

0 13

1 20

20

40

60

80

100

120

140

0-100

100-400

400-800

800-1200

1200-1600

1600-2000

2000-2400

2400-2800

2800-3200

3200-3600

3600-4000

> 4000

Revenue Slabs -- Rs. in Crs.

No

. of

Div

isio

ns

Integrated Exclusive

5.4.1 Observation of Revenue Data in 2007-08 :

For proposing the revenue norm for an integrated Central Excise & Service Tax

Commissionerate, the sum of PLA + Cenvat + Service Tax revenue was considered.

Similarly, in the case of Divisions also, the sum of the above three components

collected by 307 Divisions are taken into consideration. All the 307 Divisions collected

a sum of Rs 229742 Crs from Central Excise and Rs. 11,237 Crs from Service Tax. As

stated earlier, around Rs.5000 Crs was collected in the Commissionerate,

Headquarters. Hence, the average total revenue for a Division works out to Rs 785

Crs [(Rs.229742 Crs. + Rs.11,237 Crs)/307]. However. there are 9 Commissionerates

with POL revenue, 5 low revenue yielding Commissionerates ( Gross varying between

Rs.142 – 940 Crs.) and 5 high revenue yielding Commissionerates ( Gross varying

between Rs.6388 – 8759 Crs.). Therefore, if the total revenue from the nine

Commissionerates having Oil-Refinery units are excluded and also the revenue from

top five and bottom five Divisions are excluded, then the average total revenue (C. Ex

PLA + Cenvat + Service Tax revenue) of a Division comes to Rs 425 Crs.

Page No: 62

[Study Group -II]

Further, since the structure of 1 Commissionerate, 5 Divisions, 5 Ranges is to

continue, then the Commissionerate norm of Rs.2000 Crores is divided by 5 Divisions

also returns an average of Rs. 400 crores. Hence, a revenue norm of Rs 400 Crs may

be appropriate for a Division of an integrated Commissionerate. In the present study,

precisely 141 Divisions are falling below the proposed revenue norm and 166 Divisions

are collecting more than Rs 400 Crs.

A quick look at the Zonal-wise details of Divisions, yielding revenue below and

above Rs.400 Crs. are given below.

Zone No

Name of the Zone

Name of the Comm.

No. of Divisions with Total Revenue < Rs.400

Crs.

No. of Divisions with Total Revenue > Rs.400

Crs.

1 Ahmedabad Bhavnagar

7 6 2 Ahmedabad Ahm‟bad-III

3 Ahmedabad Rajkot

4 Bhopal Bhopal

4 11 5 Bhopal Indore

6 Bhopal Raipur

7 Bub‟swar Bub‟swar-I 3 5

8 Bub‟swar Bub‟swar-II

9 Chandigarh Jalandhar

5 9 10 Chandigarh Ludhiana

11 Chandigarh Chand (I & II)

12 Chennai Pondy 3 7

13 Chennai Chennai-III

14 Coimbatore Madurai

17 9

15 Coimbatore Salem

16 Coimbatore Thirunelveli

17 Coimbatore Coimbatore

18 Coimbatore Thiruchurap

alli

19 Delhi Panchkula 4 4

20 Delhi Rohtak

Page No: 63

[Study Group -II]

Zone No

Name of the Zone

Name of the Comm.

No. of Divisions with Total Revenue < Rs.400

Crs.

No. of Divisions with Total Revenue > Rs.400

Crs.

21 Hyderabad Hyd-IV

10 7 22 Hyderabad Hyd-III

23 Hyderabad Hyd-I

24 Hyderabad Hyd-II

25 Jaipur Jaipur-II 2 9

26 Jaipur Jaipur-I

27 Kerala/cochin Trivandrum

11 1 28 Kerala/cochin Calicut

29 Kerala/cochin Cochin

30 Kolkatta Siliguri

13 6 31 Kolkatta Bolpur

32 Kolkatta Haldia

33 Lucknow Allahabad

12 5 34 Lucknow Kanpur

35 Lucknow Lucknow

36 Meerut Meerut-II

10 10 37 Meerut Ghaziabad

38 Meerut Meerut-I

39 Meerut Noida

40 Mumbai-II Raigarh 1 4

41 Mysore Mysore

6 6 42 Mysore Belgaum

43 Mysore Mangalore

44 Nagpur Nagpur

2 13 45 Nagpur Aurangabad

46 Nagpur Nasik

Page No: 64

[Study Group -II]

Zone No

Name of the Zone

Name of the Comm.

No. of Divisions with Total Revenue < Rs.400

Crs.

No. of Divisions with Total Revenue > Rs.400

Crs.

47 Pune Pune-II

4 14 48 Pune Goa

49 Pune Pune-III

50 Pune Pune-I

51 Ranchi Ranchi

5 8 52 Ranchi Patna

53 Ranchi Jamshedpur

54 Shillong Dibrugarh 6 4

55 Shillong Shillong

56 Vadodara Surat-II

6 21

57 Vadodara Daman

58 Vadodara Valsad/Vapi

59 Vadodara Surat-I

60 Vadodara Vadodara-II

61 Vadodara Vadodara-I

62 Vizag Guntur

10 7

63 Vizag Tirupati

64 Vizag Vizag-II

65 Vizag Vizag-I

141 166

There are two Divisions having Net revenue of less than Rs.1 Cr. Gangtok Division

of Siliguri Commissionerate in Kolkatta Zone has collected revenue of Rs.25.20 Crs,

but paid Refund of Rs.25.98 Crs, resulting in net revenue of Rs. - 78 lakhs. Andaman

& Nicobar Division under Haldia Commissionerate has Net PLA revenue of Rs.12 lakhs

only.

Page No: 65

[Study Group -II]

5.5 Range-wise Analysis

There are 1585 Ranges in the 65 integrated Central Excise Commissionerates,

which mostly deal with Central Excise matters. Very few Ranges have dealt with both

Central Excise and Service Tax. Unlike in the case of integrated Commissionerates

and Divisions, the total revenue for a Range is taken as the sum of Central Excise PLA

and CENVAT only (no Service Tax component). The distribution of Ranges in different

slabs of Central Excise revenue is as under:

Revenue range Rs. In Crs.

No. of integrated

Ranges w.r.t total revenue (C. Ex PLA +

Cenvat)

No. of exclusive C. Ex Ranges

w.r.t total revenue (C. Ex PLA + Cenvat)

No. of total Ranges w.r.t total

revenue (C. Ex PLA + Cenvat)

0-20* 482 271 753

20-80 527 242 769

80-160 297 94 391

160-240 121 31 152

240-320 39 9 48

320-400 31 14 45

400-480 22 6 28

480-560 10 1 11

560-640 8 2 10

640-720 11 0 11

720-800 3 0 3

> 800 34 13 47

Total 1585 683 2268

(* There are about 30 Ranges in integrated Commissionerates and 12 Ranges in

exclusive Central Excise Commissionerates, with Nil revenue and CENVAT. These

Ranges may be dealer Ranges or Customs Preventive formations).

Page No: 66

[Study Group -II]

The distribution of Ranges in different Revenue slabs is graphically represented as

under.

482

527

121

3931

2210 8 11

3

34

271

94

31

9 146 1 2 0 0

13

297

242

0

100

200

300

400

500

600

0-20* 20-80 80-160 160-240 240-320 320-400 400-480 480-560 560-640 640-720 720-800 > 800

Revenue Slabs (Rs. in Crs.)

No

. o

f R

an

ges

Integrated Exclusive

It can be seen that majority of the Ranges in all the Commissionerates are

falling in the revenue range below Rs.80 Crs. The average Central Excise revenue (PLA

+ Cenvat) of a Range is Rs 132 Crs, with an average of 42 C.Ex Units per Range. In the

case of Ranges of integrated Commissionerates, the average Central Excise revenue is

Rs 145 Crs. with an average of 41 C. Ex Units.

5.5.1 Observation of Revenue Data in 2007-08 :

Going by the same elimination process followed for integrated

Commissionerates and Divisions, i.e. excluding the 9 Commissionerates with Oil Units

and top 5 and bottom 5 Commissionerates, the total revenue collected by the

remaining 46 Commissionerates is Rs.100832 Crs. There are 1321 Ranges in these

46 Commissionerates and hence the average of total revenue of a Range is Rs.76 Crs.

Page No: 67

[Study Group -II]

The Zone-wise distribution of number of Ranges yielding total revenue below

and above Rs.80 Crs. is given below.

Sl. No

Name of the Zone Name of the

Comm.

Total No. of

Ranges

No. of Ranges with Total Revenue < Rs.80 Crs.

No. of Ranges with Total Revenue > Rs.80 Crs.

1 Ahmedabad Bhavnagar 19

38 27 2 Ahmedabad Ahm‟bad-III 24

3 Ahmedabad Rajkot 22

4 Bhopal Bhopal 28

41 44 5 Bhopal Indore 34

6 Bhopal Raipur 23

7 Bub‟swar Bub‟swar-I 26 33 19

8 Bub‟swar Bub‟swar-II 26

9 Chandigarh Jalandhar 20

36 38 10 Chandigarh Ludhiana 25

11 Chandigarh Chand (I & II) 29

12 Chennai Pondy 23 28 24

13 Chennai Chennai-III 29

14 Coimbatore Madurai 27

113 22

15 Coimbatore Salem 25

16 Coimbatore Thirunelveli 27

17 Coimbatore Coimbatore 32

18 Coimbatore Thiruchuraplli 24

19 Delhi Panchkula 16 30 8

20 Delhi Rohtak 22

21 Hyderabad Hyd-IV 18

43 35 22 Hyderabad Hyd-III 26

23 Hyderabad Hyd-I 22

24 Hyderabad Hyd-II 12

25 Jaipur Jaipur-II 21 18 30

26 Jaipur Jaipur-I 27

27 Kerala/cochin Trivandrum 20

73 6 28 Kerala/cochin Calicut 31

29 Kerala/cochin Cochin 28

30 Kolkatta Siliguri 32

78 20 31 Kolkatta Bolpur 39

32 Kolkatta Haldia 27

33 Lucknow Allahabad 32

78 13 34 Lucknow Kanpur 29

35 Lucknow Lucknow 30

36 Meerut Meerut-II 19

66 35 37 Meerut Ghaziabad 25

38 Meerut Meerut-I 23

39 Meerut Noida 34

40 Mumbai-II Raigarh 25 10 15

Page No: 68

[Study Group -II]

Sl. No

Name of the Zone Name of the

Comm.

Total No. of

Ranges

No. of Ranges with Total Revenue < Rs.80 Crs.

No. of Ranges with Total Revenue > Rs.80 Crs.

41 Mysore Mysore 16

35 20 42 Mysore Belgaum 26

43 Mysore Mangolore 13

44 Nagpur Nagpur 25

34 41 45 Nagpur Aurangabad 26

46 Nagpur Nasik 24

47 Pune Pune-II 29

34 58 48 Pune Goa 11

49 Pune Pune-III 27

50 Pune Pune-I 25

51 Ranchi Ranchi 23

51 20 52 Ranchi Patna 31

53 Ranchi Jamshedpur 17

54 Shillong Dibrugarh 31 50 12

55 Shillong Shillong 31

56 Vadodara Surat-II 20

63 74

57 Vadodara Daman 21

58 Vadodara Valsad/Vapi 24

59 Vadodara Surat-I 23

60 Vadodara Vadodara-II 25

61 Vadodara Vadodara-I 24

62 Vizag Guntur 20

57 15 63 Vizag Tirupati 20

64 Vizag Vizag-II 15

65 Vizag Vizag-I 17

1009 576

Page No: 69

[Study Group -II]

Further to the zero revenue yielding Ranges, there are 41 Ranges having Single

Central Excise Units whose details are given below, Zone wise.

RANGES WITH SINGLE CENTRAL EXCISE UNIT

S.No. Zone Comm. Div. Range

2007-2008

PLA Cenvat PLA + Cenvat

1 Ahmedabad Ahmedabad-III Nadiad RANGE I 0.00 0.00 0.00

2 Bhopal Indore . Gwalior R-I Gwalior 2.10 1.40 3.50

3 Bhopal Raipur . Bhilai-I Range BSP-I 21.04 0.00 21.04

4 Bhopal Bhopal . Divn-I, Bhopal

R-I, Bhopal 152.62 187.69 340.31

5 Bhopal Raipur . Bhilai-I Range BSP-II 169.00 0.00 169.00

6 Bhopal RAIPUR . Bhilai-I Range BSP-

IV 1425.11 312.87 1737.98

7 Bhubaneswar Bhubaneswar-II Rourkela-I RSP-II 41.25 15.18 56.43

8 Bhubaneswar Bhubaneswar-II Rourkela-I RSP-I 798.63 158.17 956.80

9 Chennai Chennai-III Hosur-I IC 174.60 33.54 208.14

10 Coimbatore Thirunelveli Tirunelveli Ambai - I 0.18 0.56 0.74

11 Coimbatore Thiruchuraplli Trichy-I BHEL-I 327.79 366.84 694.63

12 Hyderabad Hyd-III Division-I Cherlapalli - III 0.00 0.00 0.00

13 Hyderabad Hyd-II Division-F Sanathnagar-

III 0.17 0.00 0.17

14 Hyderabad Hyd-III Division-I Cherlapalli - II 21.75 10.44 32.19

15 Hyderabad Hyd-II Division-E AZAMABAD-II 414.11 15.45 429.56

16 Kerala Cochin . Ernakulam-II

Div.

Petroleum Products

Range 4512.22 62.56 4574.78

17 Kolkatta Silliguri SILLIGURI Oil Range 0.00 0.00 0.00

18 Kolkatta Bolpur Durgapur-III Range-3 2.67 0.00 2.67

19 Kolkatta Bolpur Durgapur-I Range-1 5.30 46.55 51.85

20 Kolkatta Bolpur Durgapur-III Range-2 51.03 0.00 51.03

21 Kolkatta Bolpur Durgapur-III Range-1 552.06 88.06 640.12

22 Lucknow Allahabad Mirzapur Renukoot-I 489.05 158.66 647.71

23 Lucknow Lucknow Aligarh Mathura-

refinery 4291.83 117.91 4409.74

Page No: 70

[Study Group -II]

S.No. Zone Comm. Div. Range

2007-2008

PLA Cenvat PLA + Cenvat

24 Meerut Ghaziabad Divison-I II 558.91 13.85 572.76

25 Meerut Meerut-I Saharanpur ITC,

Saharanpur 2041.01 55.44 2096.45

26 Mumbai-II Raigad Rasayani RASAYANI-I 0.00 420.37 420.37

27 Mumbai-II Raigad Khopoli PEN-I 754.61 320.34 1074.95

28 Ranchi Ranchi HAZARIBAG BOKARO-V 7.17 4.10 11.27

29 Ranchi Jamshedpur Jamshedpur-

II TELCO-I 374.28 1045.36 1419.64

30 Ranchi Ranchi Bokaro RANGE-I 1234.42 170.90 1405.32

31 Ranchi Jamshedpur Jamshedpur-

I TISCO-I 1479.32 589.72 2069.04

32 Ranchi Patna Patna Barauni-I 2814.83 27.38 2842.21

33 Shillong Dibrugarh Tinsukia Tinsukia-V

(RBC) 0.04 0.03 0.07

34 Shillong Dibrugarh Digboi Digboi-I 187.06 7.51 194.57

35 VADODARA SURAT-I DIV.I R.III 0.00 0.04 0.04

36 VADODARA SURAT-I DIV.IV R.II 91.96 2237.31 2329.27

37 VADODARA VADODARA - II Bharuch I 161.75 100.61 262.36

38 Visakhapatnam Visakhapatnam-

II Rajahmundry Range-V 13.93 26.70 40.63

39 Visakhapatnam Tirupati Karnool Div Cement Nagar

21.21 3.47 24.68

40 Visakhapatnam Visakhapatnam-

I Division-IV VSP III & IV 26.49 0.00 26.49

41 Visakhapatnam Visakhapatnam-

I Division-IV VSP I & II 1186.00 180.56 1366.56

Page No: 71

[Study Group -II]

Chapter – 6

RE-ORGANIZATION OF FORMATIONS -- PROPOSALS

The exercise relating to Re-structuring of various cadres and Re-organization of

the formations of the Department is an integral process, one depending on the other.

The first step towards this mission is to identify the optimum number of formations at

various levels to handle the tax administration relating to Central Excise and Service

Tax besides creation of certain new formations & strengthening of the existing ones.

6.1 Creation of Regions under Principal Chief Commissioners

At present, the Zonal Office headed by the Chief Commissioner is the second

level formation next to the CBEC. Any second level formation should be strong with a

proactive role and qualitative performance and should provide ample & meaningful

support to the first level i.e the Board .

Presently the Chief Commissioner‟s unit is primarily tasked with the following

items of work like a) monitoring of revenue performance in the zone, b) compilation of

Commissionerate reports into Zonal reports c) review of orders passed by

Commissioners d) cadre control functions, e) liaison with Board, Directorates and

other agencies., etc.

The study group feels that there is a need for creation of a more compact

formation above the existing Zones to facilitate the Board entrust certain specified

functions of vital nature such as Budget Allocations, various types of ratio analysis,

protection of the interests of the Department before the Tribunal/Courts and other

appellate bodies, etc. Posts of Principal Chief Commissioner can be created for the five

Administrative Zones viz North, South, East, West and Central Zones/Regions, (co-

terminus with the transfer policy regions) with headquarters at 4 Metros &

Ahmedabad as mentioned below:-

1. Principal Chief Commissioner, Delhi (Northern Region)

Covering the Chief Commissioners of:

a. Chandigarh b. Delhi c. Jaipur d. Meerut (State of Uttarakhand only)

Page No: 72

[Study Group -II]

2. Principal Chief Commissioner, Kolkata (Eastern Region) Covering the Chief Commissioners of:

a. Hyderabad b. Visakhapatnam c. Bhubaneshwar d. Kolkata e. Ranchi (State of Jharkhand only) f. Shillong g. Patna (State of Jharkhand only)

3. Principal Chief Commissioner, Chennai (Southern Region)

Covering the Chief Commissioners of:

a. Chennai b. Cochin c. Coimbatore d. Mangalore e. Bangalore

4. Principal Chief Commissioner, Mumbai (Western Region)

Covering the Chief Commissioners of:

a. Vadodara (UTs of Daman & Diu and Dadra & Nagar Haveli only)

b. Mumbai c. Pune d. Nagpur

5. Principal Chief Commissioner, Ahmedabad (Central Region)

Covering the Chief Commissioners of:

a. Ahmedabad b. Vadodara (Other than the UTs of Daman & Diu and

Dadra & Nagar Haveli only) c. Lucknow d. Meerut (Other than State of Uttarakhand) e. Patna (Other than State of Jharkhand) f. Ranchi (Other than State of Jharkhand) g. Bhopal

This unit of Principal Chief Commissioner will act as the nerve centre and

a connecting bridge between the Zones and the Board. Creation of these posts

at the Administrative Zone levels would ease the burden of the Board to a great

Page No: 73

[Study Group -II]

extent as the less important administrative functions such as

intimation/various permissions/NOC etc., of Group A Officers can be delegated

to the Principal Chief Commissioner. Besides other functions such as Cadre

Control, Administration, Transfers of certain Group „A‟ level within the Principal

Zone, Revenue & Budgetary Allocations among the Zones, follow-up of legal &

CESTAT matters, appointment of counsels for the department, vigilance

machinery and follow up of disciplinary cases, etc. could be handled by the

Principal Chief Commissioners. In a nutshell the functions of the Principal

Chief Commissioner would be as under:

a) Cadre Management of Group „A‟ Officers upto the grade of Additional

Commissioner i) Transfers

ii) Nodal Office for Communicating APARs of all Group „A‟ officers upto

the rank of Commissioner

iii) Grant of permission/sanction in all cases under the Conduct Rules

(where the Board is now the Competent Authority) in respect of

Group „A‟ Officers upto the grade of Additional Commissioner

iv) Grant of Study Leave

v) Disciplinary Authority for Group „A‟ Officers of the grade of

Assistant / Deputy Commissioner within the Region

b) Budgetary Authority for formations in the Region

c) Authority to resolve disagreements in Review matters which arise between the Committee of Chief Commissioners

d) Appellate Authority for Group “B” Officers in Disciplinary Proceedings where Commissioner is the Disciplinary Authority

e) Appointment of Counsels

f) MACP for Group „B‟ Officers

g) Liaison with VAT authorities

The senior most Chief Commissioners may be posted as Principal Chief

Commissioners. A scale of pay on par with that of Director General of Police (Apex

Scale) may also be considered for these 5 Principal Chief Commissioners. xxxxx

Page No: 74

[Study Group -II]

6.2 Creation of Compact Chief Commissionerate Zones

6.2.1 Overview

(a) Presently the Chief Commissioners are assigned with the following tasks:

1. General Administration

Supervision & control over the Commissioners under his charge including Commissioner (Appeals)

Carry out Inspections & Surprise visits

2. Departmental Promotion Committees

Head the DPC for promotion from Group C to B posts

3. Postings, Transfers & Deputations

4. Cadre Controlling Authority for staff upto Group „B‟

5. Miscellaneous Administrative Functions

Oversee Computerization

Oversee Vigilance & anti-corruption work

Visits of Parliamentary Committees

Review periodical returns sent by Commissioners to Board

Keep liaison with Chief Secretaries of States and other Senior Officers of Central & State Government

Keep liaison with Appellate Tribunal & Chief Justices of High Copurt for quick disposal of cases

Sanction leave to Commissioners

Resolve inter-Commissionerate administrative issues

Organize / supervise, co-ordinate training

6. Public Relations & Staff Welfare

Chief Spokesman of the Department for his charge

Participate in RAC, CAC

Deal with Public Grievance & Staff Grievance

Oversee arrangements for purchase of land and construction of office and residential buildings in his charge

Page No: 75

[Study Group -II]

7. Financial Powers

Competent to sanction GPF to Commissioners, car loan and HBA

HOD for his own organization

Budgetary and Expenditure control

8. Technical Functions

Responsible for achieving revenue targets

Monitor the collection of revenue; make in-depth study of reasons for shortfall in revenue and issue suitable directions to Commissioners

Monitor progress of realization of arrears of revenue; liaise with Chief Secretaries of States for realization of arrears under the relevant Act in important cases.

Monitor pendency of various items of work with the Commissioners in his charge;

Ensure uniformity of classification and valuation practices in the zone.

Member of the Committee of Chief Commissioners to review orders of the Commissioners.

Resolve inter-Commissionerate technical & administrative matters

Oversee disposal of prosecution cases

Responsible for achieving Action Plan Targets

Powers of write-off

(b) With these in view, more Chief Commissionerates were created for effective

supervision of the field formations. Geographically the area to be covered by the Chief

Commissioners before the last Cadre Restructure was about 3 lakh Square Kms., with

16 Chief Commissioners to supervise the work of 112 Commissionerates.

(c) However, it is felt that geographical extent or the distance between various

formations located at different directions in the same zone is no longer relevant with

the introduction of Computerization, ACES and other E-solutions for Customs,

Central Excise & Service Tax matters in the Department. Therefore, it is felt that there

is no need to create more Chief Commissionerate zones on the basis of distance

between 2 farthest points in a zone or the area to be covered etc.

Page No: 76

[Study Group -II]

6.2.2 Internal Gearing of the Chief Commissioners Office

The need of the hour is to create an effective well-knit and technically

competent Chief Commissioners‟ units which could effectively supervise the

functioning of the Commissionerates, monitor their performance, provide them with

timely advice and guidance besides functioning as key facilitator of the Department for

the benefit of the Trade and Industry and act as a Central Public Grievance redressal

Unit of the zone for the Trade besides for the career development of various levels of

officers posted in the zone.

(a) There are two types of Chief Commissioner units at present:

(i) Chief Commissioner Offices that carry out supervisory & other jobs as

assigned to them (eg. Chief Commissioner, Visakhapatnam Zone) and

(ii) Chief Commissioner Offices, which apart from these functions, perform

cadre control functions in respect of Ministerial and Executive Officers

up to the level of Group-„B‟, in a State comprising 2 or 3 Chief

Commissioner Zones. (eg. Chief Commissioner, Hyderabad Zone, being

the Cadre controlling Chief Commissioner for Hyderabad and Vizag

Zones in A.P.)

Restructuring has to be accordingly proposed.

Though at present the Chief Commissioner Units are required to carry out a

supervisory function over the Commissionerates of the zone, the Study Group feels

that there is a pressing need to further strengthen the existing Chief Commissioner

Units.

Page No: 77

[Study Group -II]

(b) Research and Analysis :

Research and Analysis of revenue data unit-wise, formation-wise and area-wise

is not being done at the moment in the zones and it is mostly a neglected area as the

officers are preoccupied more with their day today work like sending reports, etc., than

on these types of effective ratio analysis of the data gathered from various returns and

financial documents filed by the assesses of the zone that could throw light on the

functioning of the units / formations and also alert the Department on areas where

more attention needs to be bestowed and where leakages of revenue are suspected.

The Board has been stressing the need to get third party information from other

Government and non-Governmental agencies to correlate with the data furnished to

the Department by the assesses. This is a very important and continuous activity that

needs to be undertaken by a team of competent and technically qualified officers. A

dedicated Research and Analysis wing should be created at the Chief Commissioner

Units under an Additional Commissioner with an Asst. Commissioner / Dy.

Commissioner and at least two Superintendents. It is also advisable to post an

Assistant Director (Cost) as well as a Computer Programmer to the Chief

Commissioner‟s Unit as part of this wing. This wing can also be allowed to make field

visits or associate themselves with the Audit Parties apart from providing useful

information to the Commissioners.

(c) Tax Payer Services Unit

The Chief Commissioners have been designated as the Subordinate Office for

the purpose of CPGRAMS (Centralized Public Grievance Redress And Monitoring

Systems). Therefore, the monitoring and redress of the Public Grievances is a priority

area in the Chief Commissioner‟s Office. In addition, the unit will be responsible for

Page No: 78

[Study Group -II]

the conduct of periodical meetings with the Trade bodies / Chambers & organize

workshops / seminars for client education.

(d) Vigilance Audit :

Proper monitoring of disciplinary proceedings from initiation to conclusion

should be effectively carried out by the Chief Commissioner Units. In fact

appointment of Inquiry Officers and Presenting Officers for all cases in the Zone

should be entrusted with the Chief Commissioners. The Chief Commissioner is

already a Revisionary Authority in all Disciplinary proceedings where the

Commissioner is the Appellate Authority. This may continue. Thrust should be given

to creation of a Preventive Vigilance unit in the Chief Commissioner‟s office. This unit

would be entrusted with the task of implementing the requirements of Preventive

Vigilance, discrete monitoring of suspect officers, implementation of the Vigilance

Action Plan, Systems Studies, etc.

(e) Cadre Controlling Chief Commissioner Offices :

At present in most of the zones the cadre controlling functions in respect of

Gr.B, C, and D are not carried out by Chief Commissioner Units directly, though the

Chief Commissioner is the cadre controlling authority. The basic work, on the other

hand, is carried out by certain Commissionerates in the zone as assigned by the Chief

Commissioner and files are put up by those Commissioners to the Chief Commissioner

for concurrence / approval, etc. As the Chief Commissioner is the cadre controlling

authority, it is better that the job is entrusted to a cadre controlling unit located at the

Chief Commissioner‟s Office itself. Therefore one Commissioner assisted by an Asst.

Commissioner / Dy. Commissioner with sufficient ministerial staff should be created

in the Chief Commissioner Unit itself for carrying out cadre controlling functions.

Page No: 79

[Study Group -II]

Since Commissioners and Additional Commissioners continue to be Appointing

Authorities, having officers of these ranks in the Cadre Controlling Chief

Commissioner‟s unit would take care of all appointments upto the level of Group „B‟.

(f) Quality Assurance Audit:

There is need to strengthen the Audit setup by having a specialized Group

entrusted with the task of overseeing the Quality of Audit done by the field formations.

This would go a long way in avoiding frivolous audit objections, draw upon past data

to implement best practices and avoid duplicity of experience. The experience gained

could be passed on to field formations for implementation at their level.

Page No: 80

[Study Group -II]

6.3 Creation of Compact Commissionerates

6.3.1 Revenue Norm

Considering the analysis of revenue of the Commissionerates (Chapter 5 para

5.3), the Committee is of the opinion that a total revenue of Rs 2000 Crs will be

an appropriate norm for a Commissionerate. Only 18 integrated

Commissionerates will fall below the new revenue norm and 47

Commissionerates will be above that.

6.3.2 Re-organization of existing integrated Commissionerates into new

Compact Commissionerates:

Consequent upon the adoption of Rs.2000 crores as a norm for formation of an

integrated Central Excise & Service Tax Commissionerate, the effect of the proposal

Zone-wise will be as given below.

S. No

Zone

Commissionerates with Total Revenue

Net effect < Rs.500

Crs. (Previous

Norm)

Rs.500 -Rs.2000

Crs.

Rs.2000 -Rs.4000

Crs.

Rs.4000 -Rs.6000

Crs.

Rs.6000 -Rs.8000

Crs.

Rs.8000 -Rs.10000

Crs.

1 Mumbai-I -- -- -- -- -- -- --

2 Mumbai-II Raigarh* +1*

3 Pune Pune-II,

Goa Pune-III Pune-I +2

4 Nagpur Nagpur Aurangabad, Nasik

+2

5 Vadodara Surat-II Daman

Valsad/Vapi,

Surat-I, Vadodara

-II

Vadodara

-I (OIL) +2

6 Ahmedabad Bhavana

gar Ahm'bad-

III

Rajkot (OIL)

7 Bangalore -- -- -- -- -- -- --

8 Mangalore /

Mysore Mysore Belgaum

Mangalore (OIL)

9 Cochin / Kerala

Trivandrum

Calicut Cochin (OIL)

10 Hyderabad Hyd-IV Hyd-I, II,

III

Page No: 81

[Study Group -II]

S. No

Zone

Commissionerates with Total Revenue

Net effect < Rs.500

Crs. (Previous

Norm)

Rs.500 -Rs.2000

Crs.

Rs.2000 -Rs.4000

Crs.

Rs.4000 -Rs.6000

Crs.

Rs.6000 -Rs.8000

Crs.

Rs.8000 -Rs.10000

Crs.

11 Visakhapatn

am

Vizag-II, Tirupathi, Guntur

Vizag-I (OIL)

12 Chennai Pondy Chennai-

III +1

13 Coimbatore

Thirunelveli,

Madurai, Salem

Coimbatore,

Tiruchurapalli

14 Lucknow Kanpur, Allahaba

d

Lucknow (OIL)

15 Meerut Meerut-II Ghaziaba

d, Meerut-I

Noida +1

16 Delhi Panchkul

a

Rohtak (OIL)

17 Ranchi Ranchi Patna (OIL)

Jamshedpur*

18 Chandigarh

Ludhiana

, Jalandha

r, Chandiga

rh

19 Jaipur Jaipur-II Jaipur-I +1

20 Bhopal Bhopal, Indore

Raipur*

21 Kolkata Siliguri Bolpur Haldia (OIL)

22 Shillong Dibrugar

h Shillong

23 Bhubaneshw

ar

Bhubaneswar - I,

II

TOTAL 2 16 25 13 6 3 +10

* Single Unit with huge revenue Net Effect = 65 + 10 =

75

Page No: 82

[Study Group -II]

(a) All the 18 Commissionerates which are presently below the proposed revenue

norm of Rs.2000 Crs were created during the last re-organisation with the specific

intent to bring tax administration to the door step of the assessee. On a quick

examination of the Commissionerate falling in these 18, it is seen that geographically

these Commissionerates cater to the vast recesses of the concerned States. Further,

the committee is of the Opinion that there should be some field formation (Range /

Division) in each District of the States. Therefore, the Committee feels that as a trade

facilitation measure, there is a need to continue these 18 Commissionerates.

(b) There are 25 Commissionerates in the revenue range of Rs. 2000-4000 Crs.

which are within the norm of Rs.2000 crores and hence cannot be considered by itself

for further bifurcation. These Commissionerates can be left untouched or those at the

higher end of the norm could be cannibalized for augmenting the workload of other

Commissionerates below the norm.

(c) As discussed in Chapter-5, the nine Commissionerates with Oil Units and three

Commissionerates with high revenue yielding single units (denoted by * in the table)

can be left out from further bifurcation.

(d) The remaining 10 Commissionerates (65 – 18 – 25 – 9 – 3), in the revenue range

of Rs.4000 Crs and above, are proposed to be bifurcated or trifurcated into 13 more

Commissionerates as detailed in the “Net Effect” column of the table above.

6.3.3. Over-all effect of the above re-organization of integrated

Commissionerates:

According to the above proposal, the present 65 integrated Central Excise &

Service Tax Commissionerates will be reorganized into 75 integrated

Commissionerates. Position of average total revenue of integrated Commissionerates

before and after the proposed re-organization is as under:

Page No: 83

[Study Group -II]

Sl.No Name of the

Zone

Tot. Rev. (PLA +

Cenvat + S.Tax)

No. of existing

integrated Comm'tes

Present Avg. Tot. Rev. of a

Comm'te

No. of proposed integrated Comm'tes

Avg. Tot. Rev. of a Comm'te

after re-organisation

1 Ahmedabad 10820.35 3 3606.78 3 No Change

2 Bhopal 14816.73 3 4938.91 3 No Change

3 Bub‟swar 5438.20 2 2719.10 2 No Change

4 Chandigarh 9182.74 3 3060.91 3 No Change

5 Chennai 6527.86 2 3263.93 3 2175.95

6 Coimbatore 8084.75 5 1616.95 5 No Change

7 Delhi 8808.14 2 4404.07 2 No Change

8 Hyderabad 10015.75 4 2503.94 4 No Change

9 Jaipur 7819.76 2 3909.88 3 2606.59

10 Kerala/cochin 7091.54 3 2363.85 3 No Change

11 Kolkatta 8440.32 3 2813.44 3 No Change

12 Lucknow 9851.50 3 3283.83 3 No Change

13 Meerut 13347.80 4 3336.95 5 2669.56

14 Mumbai-II 5129.68 1 5129.68 2 2564.84

15 Mysore 10738.70 3 3579.57 3 No Change

16 Nagpur 12509.01 3 4169.67 5 2501.80

17 Pune 20558.96 4 5139.74 6 3426.49

18 Ranchi 13275.66 3 4425.22 3 No Change

19 Shillong 4755.83 2 2377.92 2 No Change

20 Vadodara 32189.92 6 5364.99 8 4023.74

21 Vizag 10302.14 4 2575.54 4 No Change

TOTALS 229705.34 65 3551.66 75 3062.73

From the above table it may be seen that there is no change in the number of

Commissionerates in 14 Zones. In the remaining 7 Zones there is an addition of 10

Commissionerates. When the Commissionerate average revenue in a Zone is

compared before and after the re-organization, it may be seen from the above table

that, the total revenue of a Commissionerate is above the new norm of Rs 2000 Crs.

Though there is a possibility of creating more number of Commissionerates in Pune

and Vadodara Zones, the addition of new Commissionerates is restricted to a

maximum of two Commissionerates.

Page No: 84

[Study Group -II]

6.4 Creation of Adequate No. of Divisions

6.4.1 Revenue Norm

Considering the analysis of revenue of Divisions discussed in Chapter 5 para

5.4, the Committee is of the opinion that a total revenue of Rs.400 Crores will

be an appropriate indicator of revenue norm for a Divisions, in the present

study. In this case, 153 integrated Divisions are below the new revenue norm

and 154 are above the revenue norm.

6.4.2 Re-organization of existing integrated Divisions into new Compact Divisions:

At present there are 441 Divisions in all the 93 Commissionerates. There are

307 Divisions in 65 integrated Commissionerates and 134 Divisions in the exclusive

Central Excise Commissionerates. There are 2 exclusive Customs Divisions and 5

exclusive Service Tax Divisions in these integrated Commissionerates. The

distribution of 307 Divisions in the Integrated Commissionerates is given below.

No. Divisions of Integrated Comm'tes with Revenue range of Rs.0 - 500

Crs.

0

5

10

15

20

25

0-50 50-100 100-150 150-200 200-250 250-300 300-350 350-400 400-450 450-500

Revenur in Crores

No

. o

f D

ivis

ion

s

Page No: 85

[Study Group -II]

307 DIVISIONS OF 65 INTEGRATED COMMISSIONERATES

Revenue

Range in Rs.

Crores

PLA CENVAT Service

Tax

Total of

PLA

+S.Tax

Total

Revenue

(PLA + S.Tax

+ CENVAT)

0-10 8 12 45 4 4

10-20 9 7 51 2 2

20-30 12 3 40 4 1

30-40 14 8 20 8 2

40-50 15 9 19 8 3

50-100 71 31 26 47 18

100-150 54 38 10 41 12

150-200 29 33 6 23 15

200-250 20 23 7 16 23

250-300 15 27 4 22 20

300-350 6 16 0 8 19

350-400 4 13 2 4 21

400-450 5 12 0 3 16

450-500 2 6 4 15

500-600 8 11 9 17

600-700 6 13 5 21

700-800 3 10 3 15

800-900 5 4 4 13

900-1000 1 6 0 12

1000-1500 5 14 4 26

1500-2000 2 6 3 8

>2000 11 3 8 22

The average Central Excise Revenue and Cenvat of each Division is Rs. 334

Crs. and Rs. 361 Crs. respectively. The average Total Revenue (Central Excise

+CENVAT+ Service Tax) of a Division is Rs 748 Crs.

Page No: 86

[Study Group -II]

6.4.3 Over-all effect of the above re-organisation of Divisions:

Out of 307 Divisions of 65 integrated Commissionerates, 141 Divisions are

below the norm of Rs.400 Crores and 166 are above the norm. Hence, the present 307

Divisions will become 375 Divisions with creation of new Divisions in

Commissionerates as per the table below.

Zone No

Name of the Zone

Name of the Comm.

No. of Comm'tes (Existing/ Proposed)

Existing/ Proposed No. of Divisions

Net Effect in number of Divisions

1 Ahmedabad Bhavnagar

3/3 13/15 +2 2 Ahmedabad Ahm‟bad-III

3 Ahmedabad Rajkot

4 Bhopal Bhopal

3/3 15/15 0 5 Bhopal Indore

6 Bhopal Raipur

7 Bub‟swar Bub‟swar-I 2/2 8/10 +2

8 Bub‟swar Bub‟swar-II

9 Chandigarh Jalandhar

3/3 14/15 +1 10 Chandigarh Ludhiana

11 Chandigarh Chand (I & II)

12 Chennai Pondy 2/3 10/15 +5

13 Chennai Chennai-III

14 Coimbatore Madurai

5/5 26/25 -1

15 Coimbatore Salem

16 Coimbatore Thirunelveli

17 Coimbatore Coimbatore

18 Coimbatore Thiruchurapalli

19 Delhi Panchkula 2/2 8/10 +2

20 Delhi Rohtak

21 Hyderabad Hyd-IV

4/4 17/20 +3 22 Hyderabad Hyd-III

23 Hyderabad Hyd-I

24 Hyderabad Hyd-II

25 Jaipur Jaipur-II 2/3 11/15 +4

26 Jaipur Jaipur-I

27 Kerala/cochin Trivandrum

3/3 12/15 +3 28 Kerala/cochin Calicut

29 Kerala/cochin Cochin

30 Kolkatta Siliguri

3/3 19/15 -4 31 Kolkatta Bolpur

32 Kolkatta Haldia

33 Lucknow Allahabad

3/3 17/15 -2 34 Lucknow Kanpur

35 Lucknow Lucknow

Page No: 87

[Study Group -II]

Zone No

Name of the Zone

Name of the Comm.

No. of Comm'tes (Existing/ Proposed)

Existing/ Proposed No. of Divisions

Net Effect in number of Divisions

36 Meerut Meerut-II

4/5 20/25 +5 37 Meerut Ghaziabad

38 Meerut Meerut-I

39 Meerut Noida

40 Mumbai-II Raigarh 1/2 5/10 +5

41 Mysore Mysore

3/3 12/15 +3 42 Mysore Belgaum

43 Mysore Mangalore

44 Nagpur Nagpur

3/5 15/25 +10 45 Nagpur Aurangabad

46 Nagpur Nasik

47 Pune Pune-II

4/6 18/30 +12 48 Pune Goa

49 Pune Pune-III

50 Pune Pune-I

51 Ranchi Ranchi

3/3 13/15 +2 52 Ranchi Patna

53 Ranchi Jamshedpur

54 Shillong Dibrugarh 2/2 10/10 0

55 Shillong Shillong

56 Vadodara Surat-II

6/8 27/40 +13

57 Vadodara Daman

58 Vadodara Valsad/Vapi

59 Vadodara Surat-I

60 Vadodara Vadodara-II

61 Vadodara Vadodara-I

62 Vizag Guntur

4/4 17/20 +3 63 Vizag Tirupati

64 Vizag Vizag-II

65 Vizag Vizag-I

+68

The above re-organisation of Divisions is according to the proposed re-

organisation of Commissionerates in a Zone (refer section 6.3.2). In some of the Zones

there is requirement of creation of new Divisions and in a few Zones there is a

necessity to reduce the existing number of Divisions. Overall, there is an addition of

68 Divisions in all the integrated Commissionerates.

Page No: 88

[Study Group -II]

6.5 Creation of compact Ranges Offices

6.5.1 Revenue Norm

Considering the analysis of revenue of Ranges discussed in Chapter 5 para 5.5,

the Committee is of the opinion that a total revenue of Rs.80 Crores will be an

appropriate indicator of revenue norm for a Range, in the present study. In

this case, 1009 integrated Divisions are below the new revenue norm and 576

are above the revenue norm.

6.5.2 Reorganization of Ranges

At present, there are 1585 Ranges for 307 Divisions, which implies, that an

excess of 50 Ranges are already there if 5 Ranges per Division is to be followed.

Accordingly, in some Zones the existing Ranges should be reduced and in some Zones

the number of Ranges should be increased. These details are given in the table

below.

Zone

No

Name of the

Zone Name of the Comm.

Total No. of Ranges

Existing/

Proposed No. of Ranges

Net Effect

1 Ahmedabad Bhavnagar 19

65/75 +10 2 Ahmedabad Ahm‟bad-III 24

3 Ahmedabad Rajkot 22

4 Bhopal Bhopal 28

85/75 -10 5 Bhopal Indore 34

6 Bhopal Raipur 23

7 Bub‟swar Bub‟swar-I 26 52/50 -2

8 Bub‟swar Bub‟swar-II 26

9 Chandigarh Jalandhar 20

74/75 +1 10 Chandigarh Ludhiana 25

11 Chandigarh Chand (I & II) 29

12 Chennai Pondy 23 52/75 +23

13 Chennai Chennai-III 29

14 Coimbatore Madurai 27

135/125 -10

15 Coimbatore Salem 25

16 Coimbatore Thirunelveli 27

17 Coimbatore Coimbatore 32

18 Coimbatore Thiruchuraplli 24

19 Delhi Panchkula 16 38/50 +12

20 Delhi Rohtak 22

21 Hyderabad Hyd-IV 18

78/100 +22 22 Hyderabad Hyd-III 26

23 Hyderabad Hyd-I 22

24 Hyderabad Hyd-II 12

Page No: 89

[Study Group -II]

Zone

No

Name of the

Zone Name of the Comm.

Total No. of

Ranges

Existing/ Proposed No. of

Ranges

Net Effect

25 Jaipur Jaipur-II 21 48/75 +27

26 Jaipur Jaipur-I 27

27 Kerala/cochin Trivandrum 20

79/75 -4 28 Kerala/cochin Calicut 31

29 Kerala/cochin Cochin 28

30 Kolkatta Siliguri 32

98/75 -23 31 Kolkatta Bolpur 39

32 Kolkatta Haldia 27

33 Lucknow Allahabad 32

91/75 -16 34 Lucknow Kanpur 29

35 Lucknow Lucknow 30

36 Meerut Meerut-II 19

101/125 +24 37 Meerut Ghaziabad 25

38 Meerut Meerut-I 23

39 Meerut Noida 34

40 Mumbai-II Raigarh 25 25/50 +25

41 Mysore Mysore 16

55/75 +20 42 Mysore Belgaum 26

43 Mysore Mangolore 13

44 Nagpur Nagpur 25

75/125 +50 45 Nagpur Aurangabad 26

46 Nagpur Nasik 24

47 Pune Pune-II 29

92/150 +58 48 Pune Goa 11

49 Pune Pune-III 27

50 Pune Pune-I 25

51 Ranchi Ranchi 23

71/75 +4 52 Ranchi Patna 31

53 Ranchi Jamshedpur 17

54 Shillong Dibrugarh 31 62/50 -12

55 Shillong Shillong 31

56 Vadodara Surat-II 20

137/200 +63

57 Vadodara Daman 21

58 Vadodara Valsad/Vapi 24

59 Vadodara Surat-I 23

60 Vadodara Vadodara-II 25

61 Vadodara Vadodara-I 24

62 Vizag Guntur 20

72/100 +28 63 Vizag Tirupati 20

64 Vizag Vizag-II 15

65 Vizag Vizag-I 17

+ 290

The addition of 290 Ranges makes the total number of Ranges into 1875

Page No: 90

[Study Group -II]

6.6 Overall net effect of all the formations as per the proposed re-organization.

The overall net effect of re-organization on integrated Commissionerates, their

Divisions and Ranges is given below.

Sl.No Unit Existing Number

Proposed Number

Net effect

% Increase

1 Integrated Commissionerates

65 75 +10 15 %

2 Divisions of Intg. Com‟tes 307 375 +68 22 %

3 Ranges of Intg. Com‟tes 1585 1875 +290 18 %

The above proposed re-organization results in an average 15% to 22% increase

of number of formations.

Page No: 91

[Study Group -II]

6.6 COMMISSIONER (APPEALS) UNITS

The alarming pendency of cases before the Commissioners (Appeals) to the

extent of 38000 as on 31.03.2000 led to the creation of more posts of Commissioner

(Appeals). The measure had yielded considerable results and as a consequence, the

pendency has declined to 12669 as on 31.3.2008.

Table :: 6.6 (a)

No. of Appeals filed during the last three years

Year Filed by Party Filed by Dept. Total No. of

Appeals Filed.

2005-06 17684 2575 20259

2006-07 18203 2234 20437

2007-08 19374 3400 22774

From the above it may be seen that the average no. of appeals filed before the

Commissioner (Appeals) is around 20000 appeals per annum. Therefore, targeting a

disposal of 750 cases per year, around 40 Commissioner (Appeals) would be able to

dispose of around 30,000 cases per year. The disposal of appeals during the last two

years is as follows:

Table :: 6.6 (b)

Year Disposal during the Year

2006-07 24781

2007-08 19758

Average Disposal 22270

(44539/2)

No. of Commissioner (Appeals)

35 (approx. working Strength)

Average Disposal per Commissioner(A)

636 (22270/35)

Page No: 92

[Study Group -II]

As on 1-7-2008 the Sanctioned Strength in the cadre of Commissioner

(Appeals) was 57. Therefore with the recommendation for a reduced strength of 40

posts only, there would a reduction of 17 posts. These posts can be diverted to the

Principal Chief Commissioner‟s Office (5), Cadre controlling Zones as Commissioner

(Administration)(15), etc.,

Page No: 93

[Study Group -II]

Chapter – 7

7 RESTRUCTURING OF CADRES

7.1 Introductions of New Cadres

7.1.1 Principal Chief Commissioner

Consequent upon the proposal to create Principal Zones, there is a need to

create a new post of Principal Chief Commissioner. There would be 5 Principal Chief

Commissioners manning the 5 Regions suggested in Chapter 6, para 6.1. As stated

earlier, the senior most Chief Commissioner in a Region may be designated as

Principal Chief Commissioner. A scale of pay on par with that of Director General of

Police may also be considered for these 5 Principal Chief Commissioners.

7.1.2 Deputy Assistant Commissioner

The Committee took cognizance of the fact that there are quite a number of

Superintendents of Central Excise who are in receipt of 2nd Financial Upgradation or

Scales equivalent to an Assistant Commissioner. Many of these officers have put in

over 25 years of service in the Department in various field formations. This is a

reservoir of experience that could be used for higher calling but could not be used due

to the bottle-neck in the promotions from Group –B to Group –A (Assistant

Commissioner). However, as these officers are already drawing the financial benefit of

an Assistant Commissioner, it will be beneficial to empower them to execute some of

the statutory functions under the Act and Rules and to place them in leadership

positions in other functional areas for their career growth as well as for the benefit of

the Department and Service delivery to the Trade.

The Committee therefore recommends that all Superintendents of Central

Excise with 25 years of Service and who have drawn the second financial up gradation

and placed in a scale equivalent to that of an Assistant Commissioner be re-

designated as Deputy Assistant Commissioners.

Page No: 94

[Study Group -II]

The following work could be entrusted to these officers:

a. Adjudication of Central Excise & Service Tax cases with a limit of Rs.3 lakhs duty involvement / Rs.10000/- Penalty

b. Empowered to Issue Search Warrants and Head the Anti-Evasion teams

c. Sanction of Rebate and Refund claims of upto Rs.1 lakh duty involvement

d. Head the Audit Teams

e. Head the Tax Recovery Units at the Commissionerate Headquarters.

f. Department Representative before the Commissioner (Appeals)

The Committee feels that this measure would capitalize on the experience of the

officers, aid in reduction of pending Adjudications, work as a Trade Facilitation

measure in quick disposal of Refunds and rebate claims, bring in accountability and

flexibility in issue of Search Warrants and monitoring the searches, provide suitable

leadership to the Audit teams and bring in the expertise to handle Tax Recovery. On

the side of the Officers there would be functional responsibility now added to their

financial benefit with the added emphasis on the leadership position among equals.

7.2 Promotional Avenues for Group „D‟ Sepoys

The Group „D‟ Officers Association has been advocating a tenure based

systems of promotion with a chance to reach the level of Sub-Inspector of

Central Excise within 30 years of Service. The Committee examined this

proposal within the frame work of the Terms of Reference and found that there

could be a possibility to consider the upgradation of these officers towards the

executive cadres.

In the present setup, though these officers are uniformed officers for

around 20 to 25 years of their service, there is no avenue for them to grow in

the Uniformed service and are then placed in the Ministerial cadre as an Lower

Division Clerk. This is a waste of services of these officers who have cultivated

Page No: 95

[Study Group -II]

over a period of time certain field traits that could be an advantage in the

executive line.

Further, the Hawaldars and Head Hawaldars the next cadres in th line of

promotion from Sepoy are already categorized as Group „C‟. It is also to be

noted that the recommendations of the 6th Pay Commission require that all

Group „D‟ Officers be placed in the Group „C‟ category in the Pay Band of PS1 on

completion of the requisite upgradation skills. This being the case, there is a

case to re-designat these officers in a suitable manner so as to put to use their

services in the executive line.

It is therefore, recommended that the channel of promotion for the Sepoy

level officers may be considered as follows:

After 10 years as Sepoy : Promoted as Hawaldar

After 10 Years as Hawaldar : Promoted as Head Hawaldar

After 10 Years as Head Hawaldar : Promoted as Assistant Sub-Inspector

As per the Recruitment Rules, the qualifying service for promotion from

Sepoy to Hawaldar and from Hawaldar to Head Hawaldar is 3 years each.

However due to lack of vacancies, etc., these officers get the promotion well after

3 years. While financial upgradation through ACP and now MACP is available,

yet the functional role is not bestowed on these officers till next promotion.

It is therefore suggested that officers stagnating in one cadre without

promotion to the next could be promoted to the next grade after a minimum

period of 10 years. Further, in order to gain from their executive service, an

avenue in the form of Assistant Sub-Inspector could be envisaged after a

minimum tenure of 30 years. The sanctioned strength of all these cadres could

be made flexible so that even if there is no vacancy in the higher cadre, a

Sepoy, for example, after completing 10 years could be promoted to Hawaldar

and his post of Sepoy upgraded to that of Hawaldar till such time a natural

Page No: 96

[Study Group -II]

vacancy arises in the cadre of Hawaldar. Once a vacancy arises, then the

upgraded post gets restored to the lower cadre. Those officers opting to go the

Ministerial line could be permitted for the same.

Page No: 97

[Study Group -II]

7.3 Staffing of Principal Zones

As discussed in para 7.1.1, 5 posts of Principal Chief commissioners are

to be created to man the proposed Principal Zones / Regions. The Principal

Zone / Region may have the composition of officers as suggested below at their

Headquarters:-

Cadre No

Principal Chief Commissioner 1

Commissioner 1

ADC/JC 2

DC/AC 2

Superintendents 4

Inspectors 8

AO 1

DOS 1

STA 1

TA 1

Sepoys 10

PS/Steno 2

Total 34

As stated earlier, the senior most Chief Commissioner in a Zone may be posted

as Principal Chief Commissioner.

Page No: 98

[Study Group -II]

7.4 Staffing of Chief Commissioner‟s Office:

Considering the factors discussed in para 6.2, the Committee feels the

need to list out the various sections in the Chief Commissioner‟s Office along

with the appropriate staff required to man such sections as under:

7.4.1 Sections in Chief Commissioner‟s Office

Sl. No

Name of the Section No. of

Superintendents No. of

Inspectors

1 Technical - CE 1 1

2 Technical – Cus 1 1

3 Technical - ST 1 1

4 Legal / ARC / Audit 1 1

5 Review 2 2

6 Research & Analysis / Computerization

1 1

7 Vigilance / APAR Work

1 1

8 Tax Payer Servicers Cell / RTI

1 2

Total 9 10

Ministerial Staff Cadre Control Zones Other Zones

Administrative Officer : 1 --

DOS : 1 1

STA : 2 1

TA : 2 1

LDC : 1 1 -------------- ----------------- 7 4 -------------- -----------------

Page No: 99

[Study Group -II]

7.4.2 Staffing of Chief Commissioner‟s Office

Therefore, taking into account the factors discussed in para 6.2 regarding

the role and functions of the Chief Commissioners and the Section wise staff

requirement discussed above, the staffing for the Chief Commissioner‟s units is

proposed accordingly:

Post Present Staffing Position

No. of officers

Cadre Controlling

Zones

Other Zones

Chief commissioner 1 1 1

Commissioner -- 1 --

ADC/JC 1 2 1

Assistant Commissioner 2 3 3

AD (Cost) -- 1 1

Superintendent 6 9 9

Inspector 6 10 10

Administrative Officer -- 1 --

Dy. Office superintendent 3 1 1

Senior PS 1 1 1

PS/Steno 1 4 3

Senior Tax Assistant 1 2 1

TA 1 2 1

LDC 1 1 1

Sepoy 8 10 10

Driver 3 3 2

Total 35 52 45

Page No: 100

[Study Group -II]

7.5 Staffing of Commissionerates

The Study Group feels that there is a need to identify the “proper officers”

as prescribed by the statute under various sections and make provision for

manning these positions. There is also a necessity to define the scope and role

of the Addl. / Joint Commissioners functioning in the Commissionerates. The

Group feels that each Commissionerate should have a minimum of three officers

of the rank of Additional / Joint Commissioner who should be entrusted with the

work as follows:

Addl. Commissioner (1) : Anti-Evasion & ARC, Legal & Prosecution

Addl. Commissioner (2) : Audit

Addl. Commissioner (3) : P & V and Other Technical Work.

In addition to the above, these officers will also be entrusted with

overseeing the work of Divisions allotted to them by the Commissioner and be

responsible for Adjudication of cases pertaining to these Divisions falling within

their competence.

These three Additional Commissioners will be further assisted by 5 Assistant

Commissioners as follows:

Addl. Commissioner (1) : Assistant Commissioner (AE) Assistant Commissioner (Recovery, Legal, Prosecution)

Addl. Commissioner (2) : Assistant Commissioner (Audit 1) Assistant Commissioner (Audit 2)

Addl. Commissioner (3) : Assistant Commissioner (Technical)

7.5.1 Group –A Officers for Statutory posts

The Group in its deliberations found that there is a clear mandate and

requirement to have exclusive officers at the Group-A level to handle statutory

matters for which there is a specified post. It is therefore recognized that at the

Commissionerate Headquarters there is a need to augment the Grade of

Page No: 101

[Study Group -II]

Assistant commissioners for the following sections / reasons:

a) Arrears Recovery

The Law requires that one officer of the rank of Assistant commissioner should

be notified as the Arrears Recovery Officer in each Commissionerate. Considering the

steep increase in arrears the fact that the monthly payment scheme has given rise to

defaults, the geographically distributed properties of the defaulter, the need to attach

and auction the properties fast, etc., there is an immediate need to have one AC who

would exclusively deal with Recoveries. However, work relating to Legal & Prosecution

can also be entrusted to him.

b) Anti-Evasion

Consequent upon the Self Assessment schemes, there is a growing need to

strengthen the AE set-up to gather intelligence, develop portfolios, cultivate informers

and strike at the tax evaders. Service Tax assessees on the other hand need to be

handled in a different manner. The AC is also a competent officer to issue Search

Warrants. It would therefore be in the interest of revenue to have an exclusive AC

heading the Anti Evasion wings for better planning and organization. As per the

existing instructions AE parties will all be under the control of the Assistant

Commissioner, Anti Evasion at the Commissionerate Hqrs. and each Divisional

location outside the Commissionerate Hqrs will have an AE party but reporting to the

AC, AE at the Hqrs.

Therefore every Commissionerate should have 5 parties (consisting of 1

Superintendent, 2 Inspectors and 1 Sepoy) each catering to one Division and 1 party

for AE work on Service Tax besides 2 parties at the Commissionerate Hqrs. for

coordination, planning, etc. The total AE strength therefore will be 8 parties (8

Superintendents + 16 Inspectors + 8 Sepoys) headed by an Assistant Commissioner.

c) Audit

Instructions lay down that an Assistant Commissioner should accompany the

Audit parties. Notwithstanding this, the role and scope of Audit has changed

dramatically over the years. Pre-audit planning, profiling, CAAP based audit, post

Page No: 102

[Study Group -II]

audit review etc are some force multipliers that need to be sustained and given

direction. It is therefore necessary to ensure that Audit Teams are headed by an

Assistant Commissioner as far as possible who could give direction and add credence

to the entire exercise.

Considering the stipulated norms for audit of units besides the increased need

to subject certain units to High Impact Audit based on certain parameters, it is felt

that ideally each Commissionerate should have 6 parties dedicated to Central Excise

& 4 to Service Tax audit. Apart from these, there should be one party solely for Audit

Planning & Coordination & 1 Party for follow-up of Audit Objections, replies to AG,

PAC matters, etc. 12 Audit Parties (6 Central Excise + 4 Service Tax +2 Hqrs.) with 2

Assistant Commissioners, one in charge of 6 Central Excise Audit Parties and another

for Hqrs. work and 4 Service Tax audit parties is recommended.

d) Technical

The existing setup of having an AC to oversee Technical matters besides work

relating to adjudication, Appeals, review needs to be continued. This would ensure

that there is no overlap of functions and that each area gets specialized treatment.

To sum up, the deployment of AC‟s at the Commissionerate Headquarters would be:

Anti-Evasion - 1

Arrears Recovery - 1

Audit - 2

Technical - 1

Total 5

Divisional Offices will continue to have 1 AC each.

In effect each Commissionerate will have the following Group-A Officers:

Commissioner : 1

ADC/JC : 3

AC/DC : 10 (5 Hqrs. +5 Divisions)

Page No: 103

[Study Group -II]

7.5.2 Sections Required in a Commissionerate & Division

The Study Group also found the need to take stock of the different sections

needed in a Commissionerate and Divisions to undertake the work related to Central

Excise, Customs & Service Tax, including Preventive and Audit functions and matters

relating to Review and Appeals. The following sections were considered necessary to

cater to the normal workload in a Commissionerate and Divisional Headquarters:

Sl.

No Name of Section

Commissionerate Headquarters Divisional Headquarters

No. of

Superintendents

No. of

Inspectors

No. of

Superintendents

No. of

Inspectors

1 Technical - CE 1 1 1 1

3 Technical - ST 1 1 1 (*) 2 (*)

4 Anti-Evasion (#) 8 16 -- --

5 Adjudication 3 6 1 2

6 Legal 1 1 1 2

7 Tribunal 1 1 -- --

8 Review 2 2 -- --

9 ARC 1 1 -- --

10 Statistics 1 1 1 2

11 Computerization 1 1 -- --

12 CIU 1 1 -- --

13 Audit – CE 6 12 1 2

14 Audit – ST 4 8 1 2

15 Audit MIS & CAAP 2 4 -- --

16 PRO / Grievance Cell / RTI

1 1 1 2

Total 34 57 8 15

(#) Anti – Evasion – One party for each Division + 2 Hqrs parties for CE + 1 Hqrs party for ST. (*) Each Division shall have a ST Group that would handle the Service Tax work of that Division.

There will also be Other Sections manned by Ministerial Officers for all

Administrative Matters.

Page No: 104

[Study Group -II]

7.6 Staffing for Divisions & Ranges

There is also a pressing need to increase the no. of field formations. Creation

of Ranges cannot be merely based on revenue as this parameter is not only

unscientific but also impractical. To create a Commissionerate for one unit just

because the revenue from that unit is about Rs. 5000 Cr will sound absurd.

Similarly, the abundant workload from a large number of small scale manufacturers,

dealers, job workers, declarants, small scale service providers, etc., though the

revenue collected is not very high also requires adequate attention, as the possibility

of tax evasion from these unorganized sectors has to be effectively addressed.

It would be pertinent to note in this context that the Board vide Circular

F.No.224/37/200S-CX.6 dated 24.12.2008 has prescribed various functions, duties

and responsibilities of the Range Officer and the Sector Officer with a view to enhance

the efficiency of the Department. This is an effective and foolproof mechanism for the

administration of the Ranges in order to garner more revenue in a smooth and

taxpayer friendly manner.

Besides Central Excise and Service Tax, the field formations in the integrated

Commissionerates are also handling work relating to 100% EOU, STPI, HTPI, etc. In

view of the increased risk to revenue as a result of abuse of the various export

promotion schemes by some of the 100% EOUs, the Ministry has issued directions for

mandatory inspection of the 100% EOU once in a month by the Range Officer.

As the system is mainly based on voluntary compliance of the assessees, in

order to ensure total compliance, the Department will have to undertake protective

measures and therefore, there is a need to have systematic and regular survey of the

potential service providers as well as small scale industries and effective follow up. It

would be pertinent to note that the C & AG is repeatedly pointing out revenue losses

as a result of system failure in the Department to conduct periodical surveys, etc.

The Ranges should be capable of serving the assessee close to their door steps

as in the case of Telecom, Banks, and Post Offices, which penetrate deep into the

Page No: 105

[Study Group -II]

remote areas to serve the clients in a better manner. We should also have the same

approach as the Department is only a facilitator and no more a controller.

For effective implementation of these guidelines in letter and spirit, the Central

Excise Ranges may have the ideal composition of manpower containing the Officers

as indicated below:

Cadre No Remarks

Superintendent 1 To handle Central Excise

Inspector 2 To handle Central Excise

Havaldar/Sepoy 1 Survey, Service of notice for follow up work as a result of survey and other Miscellaneous functions.

For handling Service Tax work relating to registrations, assessment, scrutiny of

returns, etc., one separate Group at the Divisional Hqrs. With One Superintendent, 2

Inspectors and one Sepoy may be created, as this requires a focused approach.

The structure of the Range should be compact for effective monitoring of the

compliance of the assessees in accordance with the provisions of the statute and to

achieve 100% compliance with 'zero tolerance' for tax evasion.

At present there are 92300 Central Excise assessees and 1061694 Service Tax

assessees in the Country. This gives an average of :-

Commissionerate Division Ranges

No. of Formations 93 441 2268

Central Excise 992 209 41

Service Tax 11416 2407 468

Total 12409 2616 509

Page No: 106

[Study Group -II]

Commissioner

Addl. / Jt.

Commissioner

(Audit)

Addl. / Jt.

Commissioner

(Technical and P&V)

Addl. / Jt.

Commissioner

(AE & ARC)

Asst. Commissioner

(Division – A)

Asst. Commissioner

(Division – E)

Asst. Commissioner

(Audit - CE)

Asst. Commissioner

(Audit – ST & MIS)

Asst. Commissioner

(AE)

Asst. Commissioner

(ARC)

Asst. Commissioner

(Division – B)

Asst. Commissioner

(Technical)

Asst. Commissioner

(Division – D)

Asst. Commissioner

(Division – C)

A typical Commissionerate / Division / Range would be as under:

Page No: 107

[Study Group -II]

7.7 Total Commissionerate Staff Strength

Taking into account the sum total of all the proposals made above, the

Staffing of Commissionerates, Divisions and Ranges would be as under:

Post

No. of officers

Commissionerate

Divisions (5)

Ranges (25)

Total

Commissioner 1 -- -- 1

ADC/JC 3 -- -- 3

Assistant Commissioner 5 5 -- 10

CAO 1 -- -- 1

Deputy Assistant Commissioner * * * *

Administrative Officer 2 5 -- 7

Superintendent 34 40 25 99

Inspector 57 75 50 182

Senior PS -- -- -- --

PS 1 -- -- 1

Steno 3 5 -- 8

Dy. Office superintendent 5 5 -- 10

Senior Tax Assistant 5 10 -- 15

Driver 2 5 -- 7

Record Keeper 1 5 -- 6

Tax Assistant 10 20 -- 30

LDC 5 10 -- 15

Head Hawaldar 10 -- -- 10

Hawaldar 10 10 20

Sepoy 9 25 25 59

Total 164 220 100 484

(*) To be accounted for from Superintendent Strength

The total Officers and Staff for Proposed Integrated Commissionerates:

75 Commissionerates (Hqrs only) @ 164 = 12300

375 Divisions @ 44 = 16500

1875 Ranges @ 4 = 7500

----------

36300

-----------

Page No: 108

[Study Group -II]

7.7 Staffing of Commissioner (Appeals) Office

As discussed in para 6.6, the present pendency of Appeals at the

Commissioner (Appeals) level and the rate of increase are capable of being handled

with a reduced number of officers. It is therefore recommended that the number of

posts of Commissioner (Appeals) may be reduced to 40 from the existing 57. These

Commissioner level posts could be diverted to Principal Zones, Cadre Controlling

Chief Commissionerate, etc.

Further, present model sanction of staff to the Commissioner (Appeals)

Office is as under:

Cadres No. Total for 57

Commissioner(A)

Commissioner (Appeals) 1 57

Superintendent 3 171

Inspector 1 57

Sr. PA 1 57

TA 2 114

Driver 1 57

Sepoy 3 171

Total 12 684

There is a need to augment the complement staff in the Commissioner

(Appeals) office. Considering a stiff target of 750 cases a year, it is suggested that the

number of Superintendents may be made 4 instead of the existing 3. Inspectors

should also be increased to 2.

Presently, there is no post of Deputy/Asst. Commissioner in the

Commissioner (A) formations. In order to have qualitative delivery of the decisions,

there is a need to have a Group „A‟ officer in the rank of Deputy/Asst. Commissioner

to provide adequate support for the Commissioner (Appeals). Thus there would be a

requirement of 40 Deputy/Asst. Commissioners in the Commissioner (A) formations.

Page No: 109

[Study Group -II]

The Staffing for Commissioner (Appeals) Office is proposed as follows :

Cadres Proposed

No.

Total for 40

Commissioner(A)

Total for 57

Commissioner (A) Difference

Commissioner (Appeals) 1 40 57 - 17

Assistant Commissioner

1 40 0 + 40

Superintendent 4 160 171 - 11

Inspector 2 80 57 + 23

PS 1 40 57 - 17

Steno 1 40 0 + 40

STA / Tax Assistant 2 80 114 - 34

Driver 1 40 57 - 17

Sepoy 3 120 171 - 51

Total 16 640 684

New Total Strength = 40 X 16 = 640

Old Total Strength = 57 X 12 = 684

Page No: 110

[Study Group -II]

7.9 Total Staff Requirement as per Proposals:

Sl. No

Cadre No. of

Formations Staff

Strength Total Staff

1 Principal Chief Commissioner Zones 5 34 170

2

Chief Commissioner Zones

a. Cadre Control 15 52 780

b. Others 8 45 360

3

Commissionerates

a. Integrated CX & ST 75 164 12300

b. Exclusive CX Commissionerates

c. Exclusive ST Commissionerates

4 Commissioner (Appeals) 40 16 640

5 Divisions 375 44 16500

6 Ranges 1875 4 7500

The staff shown above is for all main stream cadres. Other subordinate cadres

will need to be added as per the existing sanction for each Commissionerate.

Page No: 111

[Study Group -II]

7.10 Overall Increase / Decrease in staff strength in select cadres

Select Cadres

Principal

Chief

Commissio

ner

Chief

Commission

er (CCA)

Chief

Commission

er (Others)

Commissione

rates

Commissio

ner (A)

Office

Total Strength

No. 5 No. 15 No. 8 No. 75 No. 40

Sa

ncti

on

as

on

1-1

-09

Pro

po

sed

Increa

se /

Decrea

se

% C

ha

ng

e

Sta

ff

To

tal

Sta

ff

To

tal

Sta

ff

To

tal

Sta

ff

To

tal

Sta

ff

To

tal

Principal Chief

Commissioner 1 5 0 0 0 0 0 0 0 0 0 5 5 100.00%

Chief

Commissioner 0 0 1 15 1 8 0 0 0 0 23 23 0 0.00%

Commissioner 1 5 1 15 0 0 1 75 0 0 65 95 30 46.15%

Commissioner

(A) 0 0 0 0 0 0 0 0 1 40 57 40 -17 -29.82%

ADC / JC 2 10 2 30 1 8 3 225 0 0 194 273 79 40.72%

AC / DC 2 10 3 45 3 24 10 750 1 40 509 869 360 70.73%

Superintendent 4 20 9 135 9 72 99 7425 4 160 6257 7812 1555 24.85%

Inspector 8 40 10 150 10 80 182 13650 2 80 9435 14000 4565 48.38%

Executive

Cadres 90 390 192 22125 320 16540 23117 6577 39.76%

Admn. Office 1 5 1 15 0 0 7 525 0 0 436 545 109 25.00%

DOS 1 5 1 15 1 8 10 750 0 0 1072 778 -294 -27.43%

STA 1 5 2 30 1 8 15 1125 1 40 1554 1208 -346 -22.27%

TA 1 5 2 30 1 8 30 2250 1 40 2233 2333 100 4.48%

Head Hawladar 2 10 2 30 2 16 10 750 1 40 795 846 51 6.42%

Hawaladar 3 15 3 45 3 24 20 1500 1 40 1539 1624 85 5.52%

Sepoy 5 25 5 75 5 40 59 4425 1 40 2470 4605 2135 86.44%

Ministerial

Cadres 70 240 104 11325 200 10099 11939 1840 18.22%

Total 160 630 296 33450 520 26639 35056 8417 31.60%

Page No: 112

[Study Group -II]

PART – C

LARGE TAXPAYER UNITS

Introduction

Workload & Other Factors affecting LTUs

Staffing of LTUs

Page No: 113

[Study Group -II]

Chapter – 8

8.0 LARGE TAXPAYER UNITS – An Overview

8.1 Introduction

A number of tax administrations in the world have established special systems

to administer the large taxpayers. Most of the developed and transitional countries

have set up full fledged Large Taxpayer Units which are responsible for all tax

administration functions including collection, enforcement of tax arrears, audit and

taxpayer services. In Asia 13 countries have established LTUs at different points of

time, including our neighbours Pakistan, Srilanka, Bangladesh and Nepal. The LTUs

functioning in these countries have achieved a fair deal of success in meeting their

objectives and have universally led to an enhanced satisfaction level amongst

taxpayers by reducing their compliance and transaction cost and by bringing more

efficiency in tax administration. Following the best international practices, the

Hon‟ble Finance minister in his budget speech 2005-06 announced the proposal to set

up Large Taxpayer Units (LTUs) in India which would act as single window facilitation

centre for all large entities paying excise duty, corporate tax/ income tax & service tax.

Four LTUs have been set up in the country with the state of the art infrastructure and

trained manpower to administer the large taxpayers in matters relating to direct/

indirect taxes. Being new formations set up subsequent to the implementation of the

last cadre restructuring, no regular staff has been sanctioned in any cadre to these

LTUs. Work in these LTUs is currently handled by the officers and staff diverted on an

ad hoc basis from the local field formations.

8.2. Concept

Large Taxpayer Unit is designed as a self contained tax office under the

Department of Revenue providing single window facility for both direct and in-direct

taxes in respect of large business enterprises who pay taxes above a defined threshold

limit. LTUs in India administer three streams of taxes namely, Central Excise, Service

Tax and Corporate Income Tax (TDS, FBT, BCCT, Wealth Tax included). LTUs are

responsible for all major tax functions including monitoring compliance of large

Page No: 114

[Study Group -II]

business enterprises, scrutiny of returns, assessment, processing rebates/refunds,

dispute settlement, audit, arrears recovery, taxpayer services etc. The focus of LTU is

to enhance the service delivery and achieve qualitative improvement in compliance

management. Entry into & exit from LTU is optional to the large taxpayers.

8.3. Objectives:

(i) Taxpayer Facilitation: Taxpayer segmentation and single window facility

for improved compliance.

(ii) Collation & Integration of Information: The information gathered from

the declarations and tax returns filed by large business enterprises will help

the LTUs to collate, integrate and interpret the information for improving the

compliance.

(iii) Building multi-disciplinary teams: Creation of multi-disciplinary teams in

LTUs cutting across the organizational boundaries of CBEC & CBDT to

enhance operational efficiency in areas such as audit, scrutiny and

investigation.

(iv) Gaining operational efficiency: LTUs are expected to create a pool of

organizational resources to meet the twin objectives of providing better

taxpayer services and augmenting government revenue.

84. Location:

The Large Taxpayer Units are being set up in the country in a phased manner.

In the first phase, LTUs have been set up at Bangalore, Chennai, Mumbai and Delhi.

The fifth LTU at Kolkata is expected to be operational, shortly. In the second phase,

LTUs are proposed in tire II cities such as Ahmadabad, Coimbatore, Hyderabad,

Lucknow, Vadodara, Pune and Bhopal. In all, 12 LTUs are proposed in 12 locations

across the country (source: Approach Paper on LTUs).

Page No: 115

[Study Group -II]

8.5. Eligibility:

Every taxpayer who is presently assessed to Income Tax/Corporate Income Tax

under the Income Tax Act, 1961 in any of the five cities (Bangalore, Chennai, Mumbai,

Delhi & Kolkata) and who has paid during the Financial Year 2004-2005 or in the

previous Financial Year, Excise Duty in cash of Rs.5 Crore or more, or Service Tax in

cash of Rs.5 Crore or more or Advance Tax of Rs.10 Crore or more is eligible to opt for

the scheme. The taxpayer eligibility is identified on the basis of the single PAN

number. Option to join LTU is exercised by the large taxpayer by filing a „consent

form‟ to the jurisdictional Chief Commissioner of the LTU and the transfer of the

jurisdiction of such large taxpayer is reckoned from the date on which the consent

form is accepted by the Chief Commissioner (LTU). The eligibility criteria has been

recently amended by the CBDT to extend the scheme to eligible tax paying entities

assessed in the jurisdiction of CCITs in charge of trust, societies, International

taxation etc.

The eligibility criteria is likely to be extended further in future as there is

demand for bringing in more and more entities under the cover of LTUs namely,

associated companies, group companies, holding and subsidiary companies and other

related entities. There is also a demand from industry to include those entities who

have paid the threshold limit of taxes through Cenvat, withholding taxes i.e. TDS etc.

This may result in increased workload at the LTUs in future.

8.6. Organisation Structure:

(i) Organisational Set up: Each LTU is headed by an officer of the rank of Chief

Commissioner drawn either from CBEC or CBDT, in an equal proportion. While six of

the proposed 12 LTUs are to be manned by the Chief Commissioners of Income Tax,

the remaining six will be manned by Chief Commissioners of Central Excise. The Chief

Commissioner, LTU reports to the designated Member, LTU in each of the two Boards.

The organizational design envisages officer-oriented structure in which senior officers

are expected to play a proactive role in addressing the unique compliance

requirements of the large taxpayers and achieve qualitative improvement in

assessment to reduce litigation and bridge the tax gaps. The LTUs are provided with

Page No: 116

[Study Group -II]

modern facilities, well equipped with computers and fully networked to harness the

advantages of information technology. Under the Chief Commissioner, a

Commissioner of Central Excise & Service Tax to handle all indirect tax matters and a

Commissioner of Income Tax to attend all direct tax matters are posted. A

Commissioner (Appeals) to handle appeals in the Indirect taxes and a Commissioner

(Appeals) to handle appeals in the direct taxes are also posted in LTU. The

Commissioners are in turn assisted by the Additional/Joint Commissioners,

Deputy/Assistant Commissioners, Superintendents, Income Tax officers, Inspectors of

Central Excise, Inspectors of Income Tax and complementary Ministerial staff.

Page No: 117

[Study Group -II]

The organizational structure of a typical LTU suggested in the Approach Paper

is as under:

LTU ORGANISATION CHART

The Approach Paper on setting up of LTUs in India had proposed the staffing

requirements for LTUs [Chief Commissioner‟s Office, Commissioner‟s Office of Central

Excise and Commissioner‟s Office of Income Tax] as below:

Cross Disciplinary Audit Teams

+ Support Staff + PAO

Member (LTU),

CBEC

Member (LTU),

CBDT

Chief Commissioner

(LTU)

Commr (IT)

Addl Commr

JC’s DC’s

Commr (Cex

& ST)

Addl Commr

JC’s DC’s

Commr (IT)

(Appeals) Commr (Cex

& ST)

(Appeals)

Commr

Industry

(vertical 1)

Addl Commr

JC’s DC’s

Commr

Industry

(vertical 2)

Addl Commr

JC’s DC’s

Commr with

geographical

jurisdiction over

the Factory Field

Unit

Range office

Division

Page No: 118

[Study Group -II]

Staff Requirements for Chief Commissioner‟s Office

Level of officers

Functional Charges and Number of

officers

Total No. of officers

Level of officers

Functional Charges and Number of

officers Assessment Audit Adjudication

Commissioner of Central Excise

1 1

Addl./ Jt. Commissioners

1 1 1 3

Dy./ Asst. Commissioners

4 3 2 9

Supdt. 12 9 6 27

Inspectors 12 9 6 27

Total 67

Supporting personal and Ministerial Staff

Level of officers

Functional Charges and Number of officers Total No. of

officers Administration

Trade Facilitation

Technical Audit and Reveiew

Chief Commissioner

1 1

Addl./ Jt. Commissioners

1 1 1 1 4

Dy./ Asst. Commissioners

1 – Admin 1 – Vigilance

1

1- Revenue 1- PQs/Stat.

1- DAP/CAG

1 – Audit 1- Audit-Follow up

1- Review

9

Supdt. 3 – Admn. 2 – Vigilance

1 – Trade Facilitation 1 – Gr. Redressal 1 – Tax Advisory

1 – Revenue 1- PQs/Stat. 1- DAP/CAG

1 – Audit 1- Audit-Follow up 1- Review

14

Inspectors 6 – Admn.

2 – Vigilance 3 6 6 23

PAO 1 1

Hindi Officer 1 1

Total 53

Supporting personal and Ministerial Staff

Staffing requirements of Commissioner‟s office (Central Excise)

Page No: 119

[Study Group -II]

Staffing requirements for Commissioner‟s Office (Income Tax)

Level of Officers Total No. of

Officers

Commissioner of Income Tax 1

Addl./ Jt. Commissioners 3 + 1

Dy./ Asst. Commissioners 9 + 1

Income Tax Officers 3 + 1

Inspectors 15

Total 31

* Standard LTU administering 100-125 Large Taxpayers

(ii) Organizational Functions (Indirect Taxes):

(a) Chief Commissioner‟s office: General administration, establishment,

vigilance, budget & accounts, monitoring revenue collection, co-ordination of

review & legal work, trade facilitation, taxpayer services, technical,

supervision over field formations, automation, audit follow-up, providing

information under RTI Act and co-ordination between direct & indirect tax

wings within the LTU.

(b) Commissioner‟s office: Registrations, scrutiny of returns, recovery of

arrears, verification of assessment of selected returns, settlement of dispute,

sanction of refunds/rebates, audit, adjudication, anti evasion work, legal,

tribunal & review work in Central Excise, Service Tax including 100 % EOUs/

EHTPs / STPs and implementing information technology initiatives in the

LTU.

(c) Commissioner (Appeals) office: Disposal of appeals filed by large

taxpayers in Central Excise, Service Tax and Customs related issues of 100%

EOUs/EHTPs/STPs etc. of the large taxpayers.

Unlike other field formations under CBEC, the LTUs do not have the concept of

Division/Range. The functions attended by these administrative units in other field

Page No: 120

[Study Group -II]

formations i.e. receipt and scrutiny of returns, export procedure, refunds/ rebates,

audit follow-up, arrears recovery, grant of approvals/permissions etc., are attended by

Group of Large Taxpayers (GLTs) formed in the LTU by merging the functions of

Division/ Range. The GLTs attend to the division/range work in addition to some

work of the Commissionerate (Hqrs). Besides GLTs, the LTU has other sections such

as Technical, Adjudication, Legal, Review & Tribunal, Administration, Accounts,

Establishment, Taxpayer Facilitation, Anti-Evasion & Audit Groups to assist the Chief

Commissioner/Commissioner in the day to day work.

8.7. Relationship between field Commissionerates & LTU:

A Large Taxpayer Unit has jurisdiction over all the factories and other registered

premises of a large taxpayer in matters relating to Central Excise, Service Tax,

irrespective of the location. A LTU has all India jurisdiction in respect of large

taxpayers who opt for the scheme. A large taxpayer may need inter-action with

physical jurisdictional officers of the department in matters relating to export

procedure, physical verification of premises for issue of registration certificate,

destruction of goods etc. The Chief Commissioner, LTU is authorized to assign such

work either to the erstwhile jurisdictional officer or any other officer who is located in a

nearby location to attend such work. Auditing is also contemplated to be carried out

with the co-ordination of territorial jurisdictional officers under the over all

supervision of LTU. Under the transitional arrangements, all pending issues including

appeals, except unsettled refund claims & investigations stand transferred to LTU

once the consent form is accepted by the Chief Commissioner. The cases pending

before the jurisdictional High Courts/ Tribunals, however, are continued to be

monitored by the erstwhile jurisdiction who are expected to render active support to

the LTU till its final disposal.

Page No: 121

[Study Group -II]

8.8. Staffing norms suggested by the Human Resource Group:

The Human Resource Group constituted by both CBEC & CBDT at the time of

setting up of LTUs recommended deployment of 296 officers per LTU assuming that

an LTU will handle 100-125 large taxpaying entities, as under:

Sl. No. Grade Central Excise Income Tax Total

1. Chief Commissioner 1 1

2. Commissioner (Executive) 1 1 2

3. Commissioner (Appeals) 1 2 3

4. Additional/Joint Commissioner 4 4 8

5. Deputy /Asst. Commissioner 8 10 18

6. ITOs/Superintendents/TRO 33 7 40

7. Office Superintendent 0 7 7

8. Administrative Officers 2 4 6

9. Sr. PA/PS 3 4 7

10. Stenos 14 18 32

11. Inspectors 41 21 62

12. Sr. Tax Assistants/ Tax Assistants 21 36 57

13. Other Staff (DOS) 5 0 5

14. Notice Servers (in CIT unts) 0 9 9

15. Sepoys 8 0 8

16. Drivers 7 3 10

17. Group “D” (Draftary/Peon) 0 18 18

18. Official Language Officer 1 0 1

19. Official Language Officer‟s Staff 2 0 2

TOTAL 152 144 296

*Standard LTU administering 100-125 Large Taxpayers

Page No: 122

[Study Group -II]

Considering the increased threshold limit of taxes paid for joining LTU, the

requirement to administer entities under both Central Excise and Service Tax, the

staff recommended by the Human Resource Group needs to be suitably adjusted. In

respect of CBEC administered LTUs, adequate number of support staff in

administration, establishment, accounts, vigilance, taxpayer services have to be

provided. It is suggested that a separate staffing norms needs to be evolved for LTUs

administered by CBEC and those administered by CBDT.

Page No: 123

[Study Group -II]

Chapter – 9

9. Work Load: & Other Factors affecting LTUs

9.1 Workload as per Approach Paper

As per the Approach Paper 12 locations have been identified for setting up of

LTUs; Mumbai, Delhi, Chennai, Kolkata, Hyderabad, Bangalore, Lucknow, Pune,

Vadodara, Coimbatore, Bhopal and Ahmedabad covering 3849 Corporate income tax

assessees covering 5237 Central Excise assessees who have paid Rs.1 Cr and above in

PLA in the year 2004-05.

WORK LOAD AS PER APPROACH PAPER

Sl.No. Name of the LTU No. of

Units

Duty in

PLA (in

Crores)

Cenvat

(in Crores)

Total Duty

(in Crores)

1 Mumbai 388 8381.51 3455.19 11836.7

2 Pune 420 3769.06 3260.43 7029.49

3 Ahmedabad 305 5409.85 1241.68 6651.53

4 Bangalore 328 5680.69 1894.3 7574.99

5 Hyderabad 360 6940.68 1673.02 8613.7

6 Chennai 400 4974.36 3642.42 8616.78

7 Delhi 707 10957.61 6400.55 17358.16

8 Kolkata 462 11261.52 3705.73 14967.25

9 Lucknow 432 7445.24 3240.39 10685.63

10 Vadodara 524 8799.93 5611.11 14411.04

11 Coimbatore 370 4711.33 1340.83 6052.16

12 Bhopal 541 7114.22 3944.61 11058.83

Total 5237 85446 39410.26 124856.26

9.2. Current Position

The above figures however do not include the assessees who were eligible to join

from the service tax stream. When the scheme was implemented, the threshold limit of

taxes paid has been raised to Rs. 5 Crore either in Central Excise or Service Tax.

Applying the current eligibility criteria, the study undertaken in 2005 indicated that

Page No: 124

[Study Group -II]

839 assessees were eligible to join the LTU scheme in the country, the break-up of

which is as under: (1) Bangalore –84 (2) Chennai –132 (3) Mumbai –282 (4) Delhi –

202 (5) Kolkata-139. The number of eligible taxpayers has gone up in the last three

years, particularly in view of the eligibility of Service Tax assessees to join the LTU

scheme.

Page No: 125

[Study Group -II]

9.3 LTU-wise Worklaod

The present work load / revenue of LTUs at Bangalore, Chennai, Mumbai and

Delhi is as under:

LTU, Bangalore Number of Registrants : 58 (Rs.in Cr.)

Sl No

Description of Work 2006-07 2007-08 2008-09 2009-10

1 C.Ex Registrations 73 160 170 170

2 S.Tax Registrations 65 107 209 858

3 ER-1 Returns filed 369 1344 1718 277

4 ST-3 Returns filed 243 319 102

5 SCNs issued No. 76 331 284 43

Amt. 42.25 227.62 644.9 376.02

6 SCNs adjudicated No. 44 326 243 26

Amt. 12.78 104.8 584.22 47.26

7 Refund/Rebates filed No. 2204 5738 7150 586

Amt. 9.52 27.29 51.64 14.95

8 Refunds/Rebates sanctioned No. 2203 5177 7090 347

Amt. 9.27 26.37 36.62 4.45

9 Drawback applications filed No. 22 304 151 9

10 Arrears of Revenue – Cex.SC/HC/CESTAT/Comm(A)

No. 35 83 104 14

Amt. 7.69 10.87 35.89 1.54

11 Arrears of Revenue – S.Tax SC/HC/CESTAT/Comm(A)

No. 9 66 120 20

Amt. 12.86 107.77 413.21 170.45

12 Appeal filed – CCE(A) 9 100 63 10

13 Appeal disposed off – CCE(A) 9 92 46 5

14 Audits conducted

No. of Units 0 11 81 5

Amt. Realised

(Spot recovery)

0 32.83 26.17 5.12

15 IAR No. of paras 0 45 160 64

Amt. detected 0 32.16 59.27 40.22

16 CERA Objections dealt No. of paras 30 180 93 17

Amt. detected 7.19 156.47 50.38 44.73

17 CENTRAL EXCISE REVENUE 360.7 902.52 614.43 72.29

18 SERVICE TAX REVENUE 141 401.33 982.49 167.3

Page No: 126

[Study Group -II]

LTU, Chennai Number of registrants -37 (Rs.in Cr.)

Sl No Description of Work 2007-08

(Dec'07 to Mar'08)

2008-09 2009-10

(Upto May'09)

1 C.Ex Registrations 207 289 293

2 S.Tax Registrations 202 258 262

3 ER-1 Returns filed 405 1800 310

4 ST-3 Returns filed 198 498 Nil

5 SCNs issued No. 12 235 32

Amt. 20.02 153.3 44.53

6 SCNs adjudicated No. 5 107 4

Amt. 9.53 103.85 10.16

7 Refund/Rebates filed No. 643 1418 131

Amt. 128.03 1123.5 226.96

8 Refunds/Rebates sanctioned No. 614 1400 101

Amt. 73.04 1058.25 295.23

9 Drawback applications filed No. 8 104 42

10 Arrears of Revenue – Cex.SC/HC/CESTAT/Comm(A)

No. 100 152 159

Amt. 177.78 92.55 77.03

11 Arrears of Revenue – S.Tax SC/HC/CESTAT/Comm(A)

No. 9 23 30

Amt. 2.72 16.21 23.13

12 Appeal filed – CCE(A) 10 77 27

13 Appeal disposed off – CCE(A) 10 22 0

14 Audits conducted

No. of Units 0 1 2

Amt. Realised

(Spot recovery) 0 0.87 1.98

15 IAR No. of paras 0 20 22

Amt. detected 0 0.87 1.98

16 CERA Objections dealt No. of paras 20 214 33

Amt. detected 39.98 166.63 5.74

17 CENTRAL EXCISE REVENUE 1576.68 3999.02 594.59

18 SERVICE TAX REVENUE 134.08 771.11 113.48

Page No: 127

[Study Group -II]

LTU, Delhi Number of Registrants - 16 (Rs.in Cr.)

Sl No

Description of Work 2008-09 2009-10

(Upto May'09)

1 C.Ex Registrations 7 7

2 S.Tax Registrations 10 10

3 ER-1 Returns filed 143 43

4 ST-3 Returns filed 9 49

5 SCNs issued No. 25 169

Amt. 88.61 95.26

6 SCNs adjudicated No. 5 1

Amt. 0.15

7 Refund/Rebates filed No. 70 108

Amt. 3.01 4.13

8 Refunds/Rebates sanctioned No. 0 33

Amt. 0 2.09

9 Drawback applications filed No. 12 9

10 Arrears of Revenue –

Cex.SC/HC/CESTAT/Comm(A)

No. 7 16

Amt. 1.08 1.62

11 Arrears of Revenue – S.Tax SC/HC/CESTAT/Comm(A)

No. 1 1

Amt. 0.03 0.03

12 Appeal filed – CCE(A) 0 1

13 Appeal disposed off – CCE(A) 0 0

14 Audits conducted

No. of Units 0 0

Amt. Realised (Spot

recovery)

0 0

15 IAR No. of paras 0 0

Amt. detected 0 0

16 CERA Objections dealt No. of paras 0 0

Amt. detected 0 0

17 CENTRAL EXCISE REVENUE 118.72 78.03

18 SERVICE TAX REVENUE 542.08 160.11

Page No: 128

[Study Group -II]

LTU, Mumbai Number of LT Payers - 22 (Rs.in Cr.)

Sl No

Description of Work 2008-09

1 C.Ex Registrations 263

2 S.Tax Registrations 172

3 ER-1 Returns filed 612

4 ST-3 Returns filed 27

5 SCNs issued No.

Amt.

6 SCNs adjudicated No. 26

Amt. 7.74

7 Refund/Rebates filed No. 1783

Amt. 300.29

8 Refunds/Rebates sanctioned No. 1067

Amt. 169.33

9 Drawback applications filed No. 13

10 Arrears of Revenue –

Cex.SC/HC/CESTAT/Comm(A)

No. 130

Amt. 86.49

11 Arrears of Revenue – S.Tax SC/HC/CESTAT/Comm(A)

No.

Amt.

12 Appeal filed – CCE(A)

13 Appeal disposed off – CCE(A)

14 Audits conducted

No. of Units 2

Amt. Realised (Spot recovery)

0

15 IAR No. of paras 2

Amt. detected 10.03

16 CERA Objections dealt No. of paras 0

Amt. detected 0

17 CENTRAL EXCISE REVENUE 16.95

18 SERVICE TAX REVENUE 276.8

Page No: 129

[Study Group -II]

9.4 Dynamic Factors to be Considered

The work load of a LTU cannot be assessed solely on the basis of the number of

eligible large taxpayers joining the unit. The work load is largely influenced by the size

and the complexity of the operations of the large tax paying entity. For example, a

large taxpayer like M/s. ABB Ltd., who is administered in LTU, Bangalore has 13

manufacturing units in different locations and service tax registration at 23 premises

spread across the country. The annual business turnover of this entity exceeds

Rs.10,000 Crore and the indirect taxes paid (C.Ex. & S.Tax) in the previous year is

Rs.500 Crore (apprx). M/s Reliance Industries who have joined Mumbai LTU recently

have 156 registrations and paid taxes over Rs.2,500 Crore. As LTUs have multi-

locational jurisdiction, the work load is largely dependent on the number of multi-

locational entities opting to join in a particular LTU. Large taxpayers have complex

business operations often involved in diverse business interest such as

manufacturing, trading, service, retail etc.,. Such entities also generally have global

presence and the intricacies involved in international taxation cannot be overlooked.

Considering the complexity, concentration of revenue and consequent risk,

administering the large business entities calls for a focused approach. This requires

deployment of skilled manpower in sufficient number. The expectations from LTU on

time bound disposal of work, qualitative scrutiny of return/ assessment, reduction in

dispute and taxpayer facilitation require posting of adequate number of officers in the

LTUs. The requirement of officers and staff will also largely depend upon the number

of locations in which the large taxpayers have registered manufacturing/service

providing units. Migration of litigation matters to the LTUs is also likely to increase the

workload.

9.5. Feed back on LTU Functioning

As a part of terms of reference, the study group interacted with the large

taxpayer unit clients both at Bangalore and Chennai. Copy of the minutes of the

meetings is enclosed as Annexure. During these interactions, it has emerged that the

LTs have requested for providing additional facilities in LTU such as Advance Ruling,

Transfer Pricing, Post Clearance Audit in respect of imports cleared under RMS,

Page No: 130

[Study Group -II]

reducing the threshold limit of tax to widen the participation in the scheme, extending

the eligibility to the associated/ group companies etc. If these suggestions are

accepted by the government, the workload in LTUs is likely to go up which may

require augmentation of staff.

9.6. Impact of Information Technology

Information technology projects such as ACES, CAAP etc. will improve the

quality of work. However, the quantum of work may not come down immediately.

Considering the large business operations, centralized registration in Service Tax

matters and complexity involved and the attendant revenue risk, the quality of

scrutiny of returns, audit verification require deployment of additional staff. While

non discretionary work load such as routine verification of documents like checking

the arithmetical accuracy of the data furnished in the return, admittance proof of

export through matching of document etc. may come down, the automation at the

present stage cannot reduce the discretionary work load such as assessment scrutiny,

dispute resolution, sanction of refunds & rebates, audit, anti-evasion etc. The ACES

pilot running successfully in both Bangalore and Chennai LTUs indicate that the

considerable amount of time is required for the officers to carry out the review and

correction of the ER1 returns filed by the assessees electronically. While in the long

run successful implementation of the consolidated IT initiatives could bring down the

man power requirement, there is requirement for providing sufficient manpower in the

LTUs to carry out critical functions such as verification of self assessed returns under

both Central Excise & Service Tax, Audit, Anti-Evasion, Dispute settlement, Arrears

recovery etc.

Page No: 131

[Study Group -II]

Chapter – 10

10. Staff Norms for LTUs

10.1 Staff Deployment in LTUs:

The present deployment of staff in LTUs cannot straight away be taken as a

standard model. LTU, Bangalore administering 58 large tax paying entities has a total

staff strength of 61 while LTU, Chennai administering 37 large taxpayers has 73

officers. LTU, Mumbai administering 22 large taxpayers has 35 officers, while LTU,

Delhi administering 16 large taxpayers has only 16 officers. The number of Central

Excise and Service Tax registrations in these LTUs also vary widely. The revenue

collection can also not be a standard criteria for determining the staffing norms, as the

revenues collected by the LTUs vary widely. The number of returns filed, documents

handled could be to some extent relied upon to estimate the work load of an LTU.

Considering the current level of automation, a number of processes are still attended

to manually which is likely to continue in the near future until all the modules under

ACES are implemented.

The impact of implementation of ACES may not be significant on the number of

personnel to be posted in LTUs as considerable work process will continue to be

manual. The large entities being complex, diversified and high revenue yielding, pose

considerable risk if not monitored properly by the department. The number of

documents handled in respect of these entities relating to assessment, export

procedure and refunds & rebates is also considerably huge that calls for optimal

deployment of officers in LTU. Auditing of large multi locational entities also require

additional man days compared to units in other field formations.

Page No: 132

[Study Group -II]

10.2. Aligning staffing norms with Direct Taxes:

On the question of aligning the staffing norms followed by the income tax

department, the Group feels felt that the same may not be feasible, given the

fundamental difference in the nature of work handled by the two departments.

Periodicity of filing returns, the nature of scrutiny done by the direct tax officers are

different from the procedure followed in the indirect taxes. Income tax officers are not

required to undertake field visits to scrutinize the returns, verification of source/

transaction documents such as invoices which are essential on the indirect taxes side

for allowing credit, refund/ rebate of taxes etc. The Income Tax officers do not

reconcile the revenue receipts on a monthly basis as done by the central excise

officers. Therefore the Group is of the view that the staff requirements of indirect

taxes cannot be compared or aligned with the staffing norms followed by the Income

Tax department.

Page No: 133

[Study Group -II]

10.3 Proposed staffing norms for LTUs:

Based on the Approach Paper, the recommendations of the Human Resource

Group, the operational experience gained in the last two and half years, the following

staffing norms are proposed for a LTU that would administer approximately 100 -125

large tax paying entities.

Sl. No.

Grade CCs OFFICE

+ Appeals COMMR‟ S

OFFICE Total

1. Chief Commissioner 1 0 1

2. Commissioner (Executive) 0 1 1

3. Commissioner (Appeals) 1 0 1

4. Additional/Joint Commissioner

2 3 5

5. Deputy /Asst. Commissioner 3 7 10

6. Chief Accounts Officer 1 0 1

7. Superintendents 9 28 37

8. Administrative Officers 1 1 2

9. Sr. PA/PS 2 1 3

10. Stenos 5 6 11

11. Inspectors 11 39 50

12. Sr. Tax Assistants/ Tax Assistants

9 10 19

13. Other Staff (DOS) 2 2 4

14. Sepoys 8 6 14

15. Drivers 3 4 7

16. Official Language Officer 1 0 1

17. Official Language Officer‟s Staff

2 0 2

18. Assistant Director (Cost) 1 0 1

TOTAL 62 108 170

Page No: 134

[Study Group -II]

The staff deployment in each of the office in LTU is suggested as under:

10.3.1 Chief Commissioner‟s Office

Level of officers

Functional Charges and Number of officers Total No. of

officers Administration,

Taxpayer Services Technical,

Legal and Review

Chief Commissioner

1 1

Addl./ Jt. Commissioners

1 1 2

Dy./ Asst.

Commissioners 1 1 2

Supdt. 1 – Vigilance 1 – Taxpayer Services

1- PQs/Stat./ Tech 1- DAP/CAG 1- Audit-Follow up 1- Review 1 – Legal & Tribunal

7

Inspectors 1 – Vigilance 1 – Taxpayer Services

1 – Stat 1 – Technical 3 – Audit 1 – Review 1 – Legal & Tribunal

9

CAO 1 0 1

AO 1 0 1

DOS 2 0 2

Sr. PS 1 0 1

Stenos 1 3 4

STA 2 2 4

TA 2 2 4

Hindi Officer 1 0 1

Hindi Staff 2 0 2

Driver 2 0 2

Group „D‟ 3 3 6

AD (Cost) 0 1 1

Total 25 25 50

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[Study Group -II]

10.3.2 Commissioner of Central Excise & Service Tax (Executive)

Level of officers

Functional charges of officers Total

Number of officers

Scrutiny, Assessment, Adjudication

Audit Anti

Evasion

Review, Legal & Tribunal

Commissioner of Central Excise

1 1

Addl./ Jt. Commissioners

1 1 1 3

Dy./ Asst. Commissioners

4 1 1 1 7

AO 1 1

Supdt. 14 10 2 2 28

Inspectors 20 13 4 2 39

PS 1 1

Stenos 6 6

DOS 2 2

STA 5 5

TA 5 5

Drivers 4 4

Group „D‟ 6 6

Total 108

* The proposal is for each Commissioner‟s charge handling 75 to 100 large taxpaying entities.

10.3.3 Commissioner of Central Excise & Service Tax (Appeals)

Level of officers Functional charges of officers Total Number of

officers Appeals

Commissioner of Central Excise

1 1

Addl./ Jt. Commissioners

0 0

Dy./ Asst. Commissioners

1 1

Supdt. 2 2

Inspectors 2 2

PS 1 1

Stenos 1 1

STA 1 1

Drivers 1 1

Group „D‟ 2 2

Total 12 12

Page No: 136

[Study Group -II]

Cadre Break-up:

S.

No Cadre

Chief

Commissioner‟

s office

Commissioner

(Executive)

office

Commissioner

(Appeals) office Total

1 Gr. „A‟ 6 11 2 19

Gr. „A‟

(Ministerial) 1 0 0 1

2 Gr. „B‟

(Gazetted) 7 28 2 37

Gr. „B‟

(Ministerial) 2 2 1 5

3 Gr. „B‟ (Non Gazetted)

9 39 2 50

4 Gr. „C‟ 19 22 3 44

5 Gr. „D‟ 6 6 2 14

Total 50 108 12 170

Summary:

S.No. FORMATIONS STAFF REQUIREMENT

1 CHIEF COMMISSIONER‟s OFFICE 50

2 COMMISSIONER‟s OFFICE (EXECUTIVE) 108

3 COMMISSIONER‟s OFFICE (APPEALS) 12

TOTAL 170

The staff strength has to be proportionately revised as and when the number of

large taxpayers administered by a LTU exceeds 100 -125 in each LTU.

Page No: 137

[Study Group -II]

10.4 Recommendations

The taxpayer participation in LTUs at Bangalore, Chennai, Mumbai and Delhi

has registered positive growth and the feed back obtained from the large taxpayers

indicate high satisfaction levels. Compliance improvement in the form of improved

recoveries through audit/ anti-evasion etc., also points to the benefits that will accrue

to the department in the long run due to focused approach on large business entities

who account for substantial tax revenues to the government. The present system of

posting officers and staff on ad-hoc basis needs urgent review. Though the entry into

and exit from the scheme is optional, it is worth noting that none of the large

taxpayers have opted out of the scheme from any of the LTUs in the last two and half

years which clearly indicates that the scheme has come to stay and will be continued.

If adequate number of officers are not posted in LTUs, the risk to revenue cannot be

ruled out especially when eligibility criteria applicable at present do not distinguish a

large taxpayer whether compliant or not as is being followed in RMS in the Customs

side. The staff compliment suggested above takes into account the norms suggested

in the Approach Paper, the report submitted by the Human Resource Group

constituted by CBEC & CBDT and the working experience gained in the last two and

half years, particularly at Bangalore and Chennai. Suitable adjustments in the

staffing requirement has been suggested in this paper, compared to the suggestion

contained in the aforementioned reports in view of the increase in the eligibility

threshold limit from Rs.1 Cr. to Rs.5 Cr., inclusion of Service Tax assessees in the

scheme and the reduced role of jurisdictional Commissionerates in respect of Large

Taxpayers opting for the scheme.

Page No: 138

[Study Group -II]

Chapter – 11

11.0 Conclusion This exercise in examining and suggesting norms for Reorganization of the field

formations under the Central Board of Excise & Customs and proposing staffing

norms for a full fledged Cadre Restructuring has been a fulfilling experience for the

members of the Study Group -II.

The Study Group wishes to place on record its sincere thanks to CBEC for

entrusting this job to us. We are also thankful to DG(HRD) and all the Chief

Commissioners and Commissioners who have readily spared their valuable time &

effort to furnish data requested by us. We would also like to thank the Chief

Commissioners and Staff Associations who have given valuable feedback and

suggestions that helped this Committee to put forth its rational proposals.

The recommendations of Study Group –II for the Reorganization of Integrated

Central Excise & Service Tax Commissionerates and Large Taxpayer Units and the

consequential Cadre Restructuring proposals are submitted herewith for further

necessary action.

(Shambhoo Nath) (D.P. Nagendra Kumar) (C. Rajendiran)

Additional Director (NACEN), Hyderabad

Commissioner (LTU) Bangalore

Commissioner of Central Excise, Coimbatore

(P.N. Vittal Dass)

Chief Commissioner

Customs & Central Excise, Visakhapatnam Zone