Procedural Improvements in Indirect Taxes 23rd June, 2005, Mumbai

1
Procedural Improvements in Indirect Taxes
23rd June, 2005, Mumbai
2
Structure Current

• Chief Commissioner
• Commissioner

Division (4-5 Ranges)
Preventive / Anti-evasion
Audit
Personnel and Vigilance
Technical Legal Tribunal
Adjudication
Range (40-50 units)
Sector
3
Structure Current

• RACE - Revenue Audit Central Excise units
  under CAG
• All India Level Organisations
• DGCEI Directorate General of Central Excise
  Intelligence
• DGRI Directorate General of Revenue
  Intelligence
• Narcotics Agencies
• Directorate General of Audit
• Directorate General of Inspection
• Directorate General of Vigilance
• Directorate General of Service Tax
• Directorate General of Valuation
• Directorate General Systems

4
Structure Recommendations

• Preventive / Anti-evasion to be centralized at
  the Commissionerate Head Quarters level and done
  away with at the Division level. Headquarters
  preventive unit can have branches in case of
  Commissionerates with far-flung jurisdictions.
• Audit function to be continued at the
  Commissionerates Headquarters.

5
Structure Recommendations

• Quality of manpower at the level of Ranges should
  be improved and the Ranges should be strengthened
  in terms of infrastructure, logistics and public
  delivery system -
• Before posting officers at the Range, there
  should be a refresher course for updating their
  skills.
• Departmental manuals containing detailed
  procedures other relevant aspects concerning
  the functioning of the Ranges should be available
  in simple laymans language.
• These items should be made available on the CBEC
  website and maintained updated regularly by the
  CBEC

6
Structure Recommendations

• Departmental circulars posted on the website
  should be comprehensive, providing
  cross-reference and inter-linkages (attach
  circulars) to all previous circulars/instructions.
  
• Ranges should be Technology-driven
  Officer-oriented.
• Computer with Internet connection may be provided
  to all Ranges. Computers may be upgraded
  periodically.
• Software may be developed to generate reports and
  returns on basis of records/data available in the
  Range.
• E-filing must be encouraged.

7
Structure Recommendations

• With EDI connectivity in place in all the
  Divisions by March 2006, some of the aforesaid
  recommendations made in respect of Ranges will
  become relevant for Divisions, which will take
  over most of the technical work of the Ranges (
  e.g Scrutiny of Returns other documents)
• The role of Large Taxpayer Units(LTUs) and the
  Systems, will have to be suitably factored into
  in the next cadre restructuring

8
Structure Recommendations

• Single point of interface for the entrepreneur
  with greater accountability should be aimed at.
• Eliminate overlap of functions, and improve
  efficiency
• Entrepreneurs to be spared of multiple visits by
  authorities
• Create a mechanism for holding periodic Open
  House meetings at the Commissionerate level at
  suitable and accessible locations to all
  stakeholders. Only Commissioners and
  Additional/Joint Commissioners should attend from
  the department. This will act as a feedback
  mechanism at the cutting-edge level.

9
Structure Recommendations

• Chambers and Trade Associations may ensure higher
  level of participation from Trade and Industry in
  all interactive meetings.
• In respect of Zonal PGCs and RACs, names of
  assessees raising a particular issue would be
  kept confidential on request.
• Intelligence Vigilance set-ups may be
  strengthened with more online connectivity,
  logistics and infrastructural support

10
Structure Recommendations

• For the sake of continuity expertise, officers
  in departments dealing with Intelligence, Audit
  and Systems should have a minimum of 5 years
  tenure.
• An appraisal of the staff requirements in the
  Central Excise Commissionerates should be carried
  out, and excess staff, if any, may be deployed
  for service tax work.
• The legal cell in the Commissionerates should be
  strengthened both in terms of quality of
  personnel as well as infrastructure and logistics
  support.

11
Role of Range

• Range will assist and counsel the assessee, and
  encourage voluntary tax compliance. Help Centres
  at suitable locations accessible to all
  stakeholders is recommended.
• Guidelines / advice on procedural matters will be
  provided to the assessee by the Range Officers.
• Specific queries may be replied to in terms of
  the Citizens Charter within one week.
• Range, with the associations involvement, will
  conduct workshops around Oct/Nov every year for
  SSIs approaching threshold levels of Rs 1 crore
  to educate SSIs on compliance issues.

12
Accountability

• Current practice
• There are no clear lines of responsibility within
  departments
• Large number of unsustainable show cause notices
  are being issued
• Problems
• Errant personnel are going unpunished and there
  are no support structures for honest and hard
  working personnel
• Assessees feel that they do not have a say in the
  system

13
Accountability

• Recommendations
• A charter of duty manual for all officials to be
  in place and updated at least once in two years.
  Duty manual copies should be available to
  assessees and associations for a price.
• The Range Superintendent / Inspector and other
  officials concerned should be held accountable in
  case of gross irregularities time found to have
  been committed over time by the assessees and in
  situations which were expected to be in their
  knowledge.
• Show Cause Notices Review
• How many sustained
• How many dropped
• This data to be kept online in the public domain

14
Accountability

• Recommendations
• Detailed specific instructions may be issued
  regarding issuance of reasoned and substantiated
  Show Cause Notices.
• Specific guidelines based on observations in
  Supreme Court Judgements may be issued on the
  matter of invoking the suppression clause for
  extended time limit.
• There should be periodic review of issues based
  on which Show Cause Notices are issued.
• The 335J Registers Call Books to be maintained
  and reviewed periodically.

15
Accountability

• Recommendations
• Before issuing Show Cause Notice on new issues,
  other than evasion and suppression matters, the
  assessees should be given time to take the matter
  to the next higher authority for resolving the
  dispute before issuing the Notice.
• Unique identification number can be assigned to
  all employees to assess their performance through
  systems generated reports.
• When a Show Cause Notice is clearly unsustainable
  and dropped full refund of the deposit made
  before issuance of Show Cause Notice may be made
  with interest at bank rate.
• (Note Some of the Show Cause Notices are being
  issued as per the CAG objections and Board (CBEC)
  directions. These notices are beyond the control
  of the issuing authority. The matter needs to be
  resolved with CAG.)

16
Accountability Auditing

• Current practice
• As on date, while auditing, there are no
  mechanisms to examine the nature and validity of
  queries raised by officials
• Problem
• The assessees are being harassed on trivial or
  illogical and clearly unsustainable queries while
  auditing

17
Accountability Auditing

• Recommendation
• All supplementary queries should be raised with
  approval of next higher authority and queries
  should be specific.
• There should be tracking system on refunds how
  many and in what time-frame have they been
  disbursed
• The officials should be held accountable in case
  of arbitrary and unsustainable acts eg., raids
  and show cause notices (Provisions of Sections 22
  and 40 of The Central Excise Act, 1944 may be
  reiterated).

18
General Recommendations

• Protection for whistle blowers with time limit
  for reward disbursal.
• Ensuring Confidentiality (amendment of Preventive
  Manual). Only requirement should be
  identification of informer by the officer
  recording the information, at the time of the
  reward disbursal. In order to take due care to
  protect the informer, only two identification
  marks to be recorded at the time of recording
  information. The sealed cover to be opened only
  by the Disbursing Authority
• Where assessees make specific complaints of
  harassment/extortion against officials, a
  credible and effective mechanism must be put in
  place to ensure confidentiality and rigorous
  follow-up action. CVC may please examine and give
  suitable guidelines.

19
General Recommendations

• As trade volumes are growing exponentially,
  timely clearance is critical in order to meet
  delivery schedules, avoid penalties and retain
  market share. Strict time limits should be
  enforced in giving all statutory clearances.
• Citizens Charter should be updated, publicized
  widely, and effectively enforced in a time-bound
  manner. Wherever possible, mechanisms for
  compensation should be evolved for delays with
  strict monitoring for compliance. Wherever
  possible, the core provisions of the Citizens
  Charter may be incorporated in the corresponding
  enactments / rules / circulars

20
General Recommendations

• A manual should be evolved for Central Excise and
  Customs officials, benchmarking against the
  global norms and adopting the best practices and
  updated at least every two years. This manual
  should be available to the assessees,
  associations and the public for a price.
• Guidelines should be issued regarding
  acknowledgement of complaints from the trade
  within a stipulated time frame. Further, such
  complaints should be addressed within specified
  time frame (time frame to be decided by CBEC)

21
General Recommendations

• Strengthening honest and efficient officials
• Improve HRD policies in terms of placement
  training policies, expertise/professionalism,
  performance rewards, promotions with due regard
  to the core competence and domain expertise and
  facilities like housing, transport and such other
  perks as motivational and aspirational policies.
• Increase in facilities like housing, transport,
  and payment of such perks should be linked to
  performance

22
General Recommendations

• Uniform to be dispensed with except for customs
  and airport officers, and inspection of vehicles
  on the road.
• Feedback should be collected formally from
  assessees, in terms of tangible parameters such
  as accessibility, responsiveness, sensitivity and
  timeliness of service delivery. Such a feedback
  will be a valuable input to assess the
  performance of officials.

23
Procedures Registration

• For registrations of applications,
  acknowledgements or deficiency notes should be
  given within two days positively. Deficiency note
  should be formatted.  
• In case of non-delivery of registration
  certificate in seven days, where proper
  acknowledgement has been given by the department
  for application, the assessee will make his own
  registration number (on the basis of PAN number).
  The department will notify/publicize on how to
  give own number in such situations. The assessee
  will intimate the registration number so
  generated to the jurisdictional Assistant/Deputy
  Commissioner of the Central Excise Division.

24
Registration

• Online registration should be operationalized by
  March 2006. The submission of application form,
  along with the attendant documents, physically
  will be dispensed with, once computerization is
  complete.
• On the issue of filing returns/documents in
  person, Association can collect these returns on
  behalf of the assessee and file with the
  department. This will prevent individual assessee
  and department interface. Proposed Help Center in
  public-private partnership can be given this
  mandate.
• Once computerization is complete, assessees
  should be allowed to file all returns online.

25
Inspections

• Right to enter premises shall be only with prior
  permission of the Asst./ Dy. Commissioner of
  Central Excise except in the following cases - 
• During audit or for carrying audit related
  function with prior intimation
• When a documented information is received against
  manufacturer or importer/exporter
• When any vehicle with goods is caught on the way
  without appropriate Central Excise invoice
• To collect information for parliamentary queries
  with prior intimation
• In any other case, the written permission of the
  Asst./ Dy. Commissioner of Central Excise will
  be required

26
Inspections

• A register should be maintained in all units
  where details of their name, designation and
  purpose of their visit should be entered.
• Officials must maintain their own dairy in which
  all these details of visits shall be recorded,
  and the assessees signatures obtained.
• All inspecting officials should present their
  identity cards at the time of visit of factory.

27
Inspections

• Assessee should be allowed to have his
  officials/advisors during inspection get
  information/ factual details.
• As a policy, the inspection/audit staff shall be
  adequately trained in areas like studying the
  financial statements, manufacturing process,
  commercial part of the business, etc. of the
  assessees whose records would be
  inspected/audited by the former.

28
Summons

• In case of requirement of documents initially, a
  letter requesting for copies of documents should
  be issued.
• Summons should be issued only when all other
  modes of obtaining information have failed. 
• Summons should be issued only after approval is
  obtained from appropriate authority (Asst. / Dy.
  Commissioner).

29
Summons

• The notice should clearly state the reason for
  which an individual is being summoned and the
  time of appearance. 
• The summons should specify the nature and number
  of documents required. 
• The circular which states that Director and MD
  need not be summoned in the normal course, should
  be reiterated. Ordinarily, only the functionaries
  concerned should be called in for
  deposition/testimony.

30
Audit

• The documents required can be sought through
  other means (courier and e-mail) and as far as
  practicable, there should be only one audit
  visit.
• As far as possible, the team that visits for
  data collection should also visit for audit. 
• Travel facilities for the audit team should be
  made available by the department.

31
Audit

• The practice of issuing Show-Cause Notices as a
  result of CERA systems reviews, including policy
  decision/notification should not be followed
• There should be onsite consultation between CAG
  and assessees and assessees views should be
  recorded.

32
Adjudication

• The documents should normally be retained for a
  period of one year. In case of exceptions, the
  documents can be retained for a further period of
  one year with permission of Joint /Additional
  Commissioner and for further one more year with
  the permission of the Commissioner.
• Certified copies required for statutory and
  financial purposes should be given, at the cost
  of the assessee, within 30 days from the date the
  documents are taken by the department.
• In case the seized documents are required by any
  other Central or State agency, they should be
  requested to directly obtain the documents from
  the department. The assessee should be spared of
  the responsibility of furnishing such seized
  documents to another agency.

33
Adjudication

• The adjudication procedures should be expedited
  if the assessees file the replies within one
  month.  The order should be issued by the
  adjudicating authority within 30 days of
  completing the personal hearing. There must be
  special efforts to ensure that adjudication is
  completed within 6 months.
• All the communications from the assessees should
  be acknowledged immediately upon receipt. Failure
  to acknowledge should be reviewed by the
  immediate senior officer. For this purpose, a
  register must be maintained.

34
Adjudication

• The representatives from trade felt interest
  should be paid after 30 days from filing of
  refund claims, as opposed to 90 days now.
  However, the representatives from the department
  felt that any reduction in the present time limit
  is possible only with the change in the present
  system of internal verifications, along with
  infrastructural upgradations, including
  computerization. Once computerization is
  complete, from March 2006, interests should be
  paid for delays beyond 30 days from refund claim.
  

35
Adjudication

• There appears little justification for difference
  in rates of interest for delayed payments (13 by
  assessee) and delayed refund (9 by department).
  The department is reluctant to concede this.
  However, CVC may discuss with CBEC and reconcile
  the issue fairly and equitably.
• Pre-deposit provisions to be simplified by
  accepting cash and/or bank guarantee or other
  securities. The assessee should have the option
  to pay the deposit in cash or through bank
  guarantee. In case bank guarantees are not
  renewed in time, the same may be encashed.

36
Adjudication

• Provisions for a pre-deposit should be made such
  that if the case is not decided within 6 months,
  the amount of pre-deposit shall be refunded. (The
  department is reluctant to agree that delays are
  inevitable. CVC may please discuss with CBEC and
  reconcile this. The assessee cannot be penalized
  for the delays in adjudication, provided he
  cooperates fully, and does not contribute to
  delays).
• Section 35-C(2A) of the Central Excise Act, 1944,
  giving CESTAT a time-limit of 180 days to decide
  the appeal should be amended and the stay granted
  should be valid till the appeal is finally
  decided.

37
Adjudication

• Instead of 4 regions, CESTAT should be in other
  regions also. A study of the appeals arising in
  that particular region should be made for
  deciding the location

38
Separation of Adjudication from Revenue Wing

• Separation of adjudication from Revenue Wing not
  agreed to. Reasons for not accepting this
  suggestion are
• It is not possible to create a separate staff
  cadre for adjudication within a common stream of
  senior officers.
• The officers are periodically interchangeable
  from one wing to another wing of the same
  department.
• Adequate training on judicial and quasi-judicial
  procedures to be given to department officers.
• Other effective measures should be introduced to
  ensure that adjudication and revenue are truly
  separate. Otherwise, the prosecutor will become
  the judge. CVC may please discuss with CBEC and
  help evolve procedures.

39
Penalties

• Two proposals were found to be fair, but the
  department felt that changes of law are required
  
• For procedural and technical lapses not causing
  loss in revenue, there should be no penalty or
  punitive action. 
• New entrepreneur should be dealt with leniently
  while imposing penalties. Similar approach should
  be adopted while levying penalties for violation
  of new levies.
• In order to address these issues, it was
  suggested that the provisions similar to the
  provisions contained in Section 80 of the Finance
  Act, 1994 (Service Tax), should be incorporated
  in the Central Excise Act,1944. The said
  provisions empower the quasi-judicial authorities
  for non-levy of penalty when any act has not been
  performed, for justifiable reasons.

40
Penalties

• Release of seized goods should be made mandatory
  in all cases. In cases release of goods is
  refused, it should be accompanied with a written
  rationale for non-release of goods

41
Penalties

• Arrests should be given up as a weapon to collect
  taxes. There are ample powers available to the
  department to collect revenues and enforce
  compliance.
• In the meanwhile, only in blatant evasion cases
  (duty limit of Rs 1 crore or above), the officers
  should resort to arrest of the assessee where
  sufficient documentary evidence is available.
  This will not apply to habitual offenders and
  cases involving forgery or fraud where an arrest
  can be made even if the duty evasion is less than
  Rs. 1 crore.
• Circumstances warranting arrest should be
  publicized widely so that in non-deserving cases,
  there is no threat or fear of arrest to the
  assessee. This will go a long way in preventing
  the misuse of these provisions.

42
Service Tax

• The date for payment of Service Tax should be
  10th of the following month, instead of 5th. 
• Advance Ruling Authority should be applicable for
  all persons. The service providers should be
  allowed to get clarifications from the authority.
  This authority should be sufficiently
  decentralized, so that assessees have easy
  access.
• The Show-Cause Notices demanding Service Tax
  should be allowed to be settled by the Settlement
  Commission in line with the provisions of the
  Central Excise Customs Acts.

43
Service Tax Transport

• It may be necessary for the consignee to get a
  declaration from the Goods Transport Agency on
  the invoice itself that he has not claimed the
  CENVAT Credit or benefit under notification
  No.12/2003. If this declaration is available and
  the Goods Transport Agency is showing the service
  tax amount on 25 of the freight charges, then
  only the consignor or consignee can pay the said
  amount of Service Tax.

44
Service Tax

• In the light of the rapid expansion of services
  under tax net, a comprehensive revision of
  classification and publication of updated manual
  is needed. The manual should be made available on
  the official website, as well as in the form of
  hard copies for sale.
• In case centralized accounting has been opted for
  by a service tax provider, instructions should be
  issued so that individual branches are not put
  into trouble by local Central Excise officers.

45
Other Suggestions in Service Tax

• The rule providing for raising of invoice within
  14 days of completing services shall be omitted,
  as
• It is contrary to the accepted commercial
  practice of raising invoice on monthly basis in
  many cases like transport service, telephone
  service, etc,
• The service tax is on receipt of amount from the
  service receiver, and hence raising of invoice
  does not have impact on the collection of revenue.

46
Other Suggestions in Service Tax

• The Service Tax for the month of March is payable
  by 31st March. It was suggested that a proviso
  should be added to the rule to allow the
  adjustment of excess service tax paid in March,
  against the service tax payable in April.
• The invoice of GTA should contain the name of the
  consignor as well as consignee duly supported by
  L.R to enable the consignee to avail the credit,
  when consignor pays the service tax.

47
Cenvat

• The proposed section 11DDA of the Central Excise
  Act, should be restricted in application and
  should be applicable to only situations where
  there is a reasonable and well-founded doubt of
  alienation of property by the assessee. Detailed
  instructions should be issued to prevent misuse
  of these provisions, when these provisions are
  made effective.
• In the case of removal of capital goods after
  use, the benefit of depreciation in value of
  capital goods should be given to the assessee.
  For the purpose, reversal of credit proportionate
  to depreciated value or transaction value,
  whichever is higher, can be resorted to.

48
Non-Core Area be Delegated

• Certain non-core area like granting registration
  can be outsourced to enable the department to
  concentrate on its core areas of collection of
  revenue. This can be done in line with
  outsourcing done by the Income Tax Department of
  PAN allocation to NSDL.

49
Other Suggestions - Measures to Promote
Transparency, Productivity Efficiency

• The notifications issued by the department should
  have an explanatory note encapsulating the
  background and objective of the notifications.
• The offices of the DGFT and Central Excise
  Customs Department are being electronically
  connected for data transmission and
  verifications. In the new context, a separate
  DGFT has no rationale. Therefore, DGFT can be
  disbanded, and its functions, along with
  personnel, can be merged with the Customs
  department.

50
Customs

• In order to facilitate retrieval of records for
  post-clearance processes such as refunds and
  bonds, it is desirable that the custody of the
  documents be outsourced on the basis of
  double-lock system, wherein Customs retains the
  original and the maintenance is outsourced. Nava
  Sheva and Chennai models could be emulated in
  this regard. There is proposal with ministry in
  this regard and this should be implemented in six
  months. User charges can be collected from the
  industry.
• Bank guarantees from schedule I and II Banks
  should be accepted by all agencies in Customs
  department.

51
Customs

• Export valuation in respect of information-knowled
  ge based and propriety industries should be
  flexible, and the special problems of such
  industries must be handled with sensitivity.
• For valuation of import goods for customs duty
  purposes, a national import database is now
  available only to the department. This can be
  moved into public domain and the industry can
  access them on payment of suitable charges.

52
Customs

• In case of valuation of second hand machines,
  normally a certificate from approved chartered
  engineer should be accepted, if it gives full
  details as prescribed. In case of discrepancies
  on intelligence information, machines should be
  allowed on second-check basis. Customs
  instructions on this should be reiterated.
• Regarding retention of samples on
  importer/exporters goods, the present system of
  sample retaining requires improvement. Sealed
  samples should be given to importer/exporters,
  which can be referred to in case of disputes. If
  there are instructions in this regard, they
  should be reiterated and circulated.

53
Customs

• The provisions of section 27 Customs Act for
  refund are not available in case of assessment of
  Bill of Entry, and provisions of appeal under
  section 128 have to be followed. In case of
  demands, the department can raise demand under
  section 28 within six months and without
  challenging assessment of Bill of Entry.
  Considering the principles of equity and natural
  justice, the provisions needed to be aligned so
  that refunds can be sanctioned without
  challenging the assessment in the Bill of Entry.
  When the assessment claimed by importer is
  accepted, this provision of filing appeal is
  valid. However, if an assessment order has been
  issued, then appeal has to be filed and
  consequent refund claimed.

54
Customs

• To de-materialize the licenses on various export
  promotion schemes. Since customs EDI captures all
  export data, it can also give credit
  automatically on DEPB etc., which can be debited
  for payment of duty from any port. Security
  systems should be built into EDI
• Quality of the data will determine the success of
  EDI. The units of measurement should be clearly
  specified taking into account international
  standards in this regard. The industry should
  ensure quality of such data and standardize the
  units in import and export documents to ensure
  effective use of EDI, including effective risk
  management system.

55
Customs

• In case of CAG objections, the demand is being
  raised by the department. Where objections raised
  by CAG pertain to policy decisions or guidelines,
  demands should not be raised. If CAG raises
  objections against the guidelines/policies, the
  matter should be referred to the ministry for
  decision and it should have prospective effect.
  In other types of cases, demands may be raised as
  at present and the issue resolved with CAG as
  quickly as possible within six months.

56
Customs

• In case of unjust enrichment, the government
  should come up with a list of situations
  detailing where unjust enrichment will not apply.
  In other cases, where unjust enrichment applies,
  it should clearly be specified what proof is
  required to establish that duty has not been
  passed on to customers.
• The interest on refund should be paid if it is
  sanctioned after three months from date of filing
  applications. Even if the refund becomes subject
  matter of appeal and same is allowed by appellate
  authority, the interest should be paid on expiry
  of three months of the original refund
  application.

57
Customs

• A copy of the statement, which may or may not be
  relied upon, deposed by a witness during the
  course of investigation, should be given to the
  person making the statement. The statement given
  by a person is his own property, and a copy
  cannot be denied to him. This also ensures that
  statements cannot be altered or tampered with
  subsequently.

58
Exports

• Current Practice
• Currently, if an exporter exports any item, s/he
  has 2 options
• To export against bond and after exporting, get
  the entry duty reversed
• Export against payment of duty and after
  exporting, claim the rebate or refund of excise
  duty paid
• The documentation for exports and factory
  stuffing procedures is now under the supervision
  of Range Superintendent

59
Exports

• Problems
• Exporting against bond requires resources/skilled
  staff to handle the detailed documentation which
  most small and medium sized companies cannot
  afford. Hence they export against payment of duty
  and claim rebate or refund
• Getting the refund is a long drawn out process
  involving a lot of paper work
• Documentation and stuffing procedures are
  resulting in undue delay and often harassment.

60
Exports

• Recommendations
• Once Range Superintendent certifies the stuffing
  of the cargo into a container/vehicle, no
  de-stuffing/breaking of the seal should be
  allowed unless authorized by the Assistant
  Commissioner concerned or his superiors. This is
  the current practice. Ref. Customs Circular
  6/2002. These instructions should be reiterated
  and widely publicized. Where the exports have
  taken place in the factory under self-assessment,
  ARE 1 need not be signed by the Range
  Superintendent, if goods are dispatched under
  self-certification.

61
Exports

• Recommendations
• In the simplified procedure, the Final
  Verification Report is given by the Range
  concerned. The department can allow the exporter
  to take the credit for the amount of refund
  (after receiving confirmation letter from the
  Port Officer) on submission and verification of
  export related documents along with RT 12.
  Similar procedure should be adopted for imports
  also. This will avoid delays in refund
• At present, the facility of Advance Ruling is
  only available to Joint Ventures or Subsidiary of
  a Foreign Company. A similar facility should be
  extended to Indian Corporates. Effective
  mechanism to handle the potentially large number
  of applications for Rulings must be evolved.

62
Exports

• Recommendations
• Many of the items used in the manufacture of
  duty-free products are multi-use items. As a
  consequence, even the duty-free products are
  going through tortuous procedure.
  Self-certification should be deemed adequate in
  such cases. Hefty penalties should be levied in
  case of diversion.
• Where assessees seek certificates from the
  Divisional Officer under Circular 36/96, the
  assessees should be given the certificate one
  year at a time, instead of quarterly/consignment-w
  ise.

63
Exports Software Sector Debonding

• For software sector, de-bonding, after fulfilling
  the export obligations, should be simplified,
  and allowed on the basis of self-declaration/STPI-
  Certification.
• Bonding may be made optional.
• Proposed that if EOUs/STP Units in software
  sector wish to debond their systems, they may do
  so on payment of duty, by themselves, under a
  15-day prior intimation to the Range concerned.

64
Exports Software Sector Debonding

• The destruction of unserviceable/unusable systems
  may be similarly made under a 15-day intimation
  to the RO concerned.
• Need to amend the 52/2003 Notification on
  donation of computers, to make it more
  general/broad to permit donation to a wider group
  of institutions/offices.

65
Exports

• Export documentation should be online export
  license number and other critical details may be
  available as auto-entry with linkages to DGFT
  offices.
• License itself should be dispensed with under
  various export promotion schemes and they can be
  operated on the basis of data on export and
  imports available in customs EDI.

66
Exports

• Export obligation completion documentation
  involves huge documentation and several
  endorsements of Customs officials. Once the
  DGFT-EDI link can be established, it will be good
  progress. Since all export and import data, which
  is the data source of all export promotion
  schemes, is available in the Customs EDI network,
  issue of physical (hard copy) licenses could be
  dispensed with.
• The endorsements made by the customs should be
  linked and uploaded to DGFT database resulting in
  automatic closure of license. Excise department
  certification should be dispensed with.

67
Exports

• Self-Assessment Fast Track are being allowed for
  public undertakings and importers with payments
  exceeding Rs.10 crores. A similar facility should
  be extended to small importers with track record
  of one-year
• Customs Circular 30/2003 (dated 4/4/2003) permits
  Fast Track Self-Assessment but restricts
  self-assessment to companies with track record of
  (at least) 2 years and 25 bills of entry/year at
  the same port. The Circular 12/2005 (dated
  4/3/2005) provides for fast track clear for
  EOUs/STPs it provides for examination of goods
  at the bonded premises of EOUs/STPs. No
  examination needed at custom port. These
  instructions may be reiterated and widely
  publicized.

68
Exports

• At present, the Bill-of-Entry is only provisional
  and could be changed within six months. As
  customs duty is capitalized at the time of
  manufacturing/delivery of service, the initial
  assessment should be full and final

69
Customs

• Current Practice
• For Central Excise, the self removal procedure
  allows the assessee to remove the goods without
  having to inform the Range every time, which is
  not the case with exports
• The Application to Remove Exports (ARE) requires
  submission of proof of export to the Range
  Officers
• ICEGATE operates only in some port collectorates
• Sample testing is delaying the procedure of
  logging in the export books
• Problem
• ARE is not only cumbersome and illogical, but
  becomes an avenue for harassment
• Sample testing is delaying the procedure of
  logging in the export books

70
Customs

• Recommendations
• For established industries and enterprises,
• The self-removal procedure practiced for Central
  Excise may be applied for exports
• Already provided for, as in Circular 30/2003 for
  export goods produced, ARE not required to be
  signed by the RO. Exporter signs copies and
  sends to RO and port. These instructions should
  be reiterated and widely publicized.
• Exporter can maintain the credit and debit
  records for export duty

71
Customs

• The implementation of Indian Customs Excise
  Gateway (ICEGATE) with digital signature and auto
  process may be undertaken at the earliest. The
  filing of shipping bill online is not yet
  popular. So the Dept and Trade should
  collaborate to popularize online filing. Where
  necessary trade representatives should be given
  orientation and training in online filing.
• Export and Import entries which are online in
  major ports should be extended to minor ports and
  ICDs.
• Strict time limits should be enforced for sample
  testing, failing which exporters test reports
  should be accepted. The staff in the laboratories
  should be augmented to cut down delays

72
Customs

• According to the Circular 25/2005 (dated
  6/6/2005), in-house test reports of all ISO 9000
  series certified exporters are accepted.
• For remaining exporters, an upper limit of one
  month must be imposed else, the exporters test
  results could be accepted.
• Lab facilities in all Custom houses can be
  provided.
• Staff vacancies need to be filled - Immediate and
  urgent steps should be taken for filling up
  vacancies in laboratories.
• If the supplier and importer are the same and the
  product is same, the test report should be valid
  for six months, unless there is specific
  information or intelligence.

73
Customs

• Current
• A Letter of Undertaking (LUT) has to be executed
  at the end of every financial year
• The Bill of Entry is appraised before the
  clearance of goods even for 100 EOU and SEZ
  Units
• Problems
• Except in a few ports, where computerization is
  being implemented in a phased manner, the Bill of
  Entry involves a lot of documentation

74
Customs

• Recommendations
• The system of executing Letter of Undertaking
  (LUT) after every financial year should be
  dispensed with. The validity of the LUT shall be
  as long as the validity of license. The LUT can
  be dispensed with if bond is already executed
  with the Customs.
• The system of appraising the Bill of Entry before
  clearance of goods should be done away with for
  all export houses and manufacture-importers with
  over one-year track record. (The Circular 30/2003
  provides for self-assessment/appraisal by status
  holders/PSUs and those with a 2-year track
  record. Here, the system appraises and the goods
  can be cleared after payment of applicable
  duties).

75
Customs

• Recommendations
• The importer or the Custom House Agent (CHA) will
  pay the duty based on their own assessment shown
  in the Bill of Entry.

76
Customs

• Current practice
• The cash section shall sign the intimation for
  receipt of the duty but delays in examination
  of goods and clearance.
• Whenever there is provisional assessment,
  valuation is often delayed
• Presently, the import audit is being done online
  at the port where the importer is registered
• Duty drawback is resulting in delays

77
Customs

• Recommendations
• Based on self-assessment and payment of duty by
  the established industries and enterprises, the
  physical examination of the goods can be carried
  out by the shed appraiser and the goods should be
  cleared.
• The order of special valuation branch must be
  passed within the stipulated period of 7 days
  from the date of submission of the questionnaire.
  In case the order is not passed within 7 days,
  the collection of revenue deposit should be
  dispensed with. With online documentation,
  scrutiny of books of accounts and documents
  should be faster, and should facilitate this.

78
Customs

• Recommendations
• Augmentation of staff, by way of redeployment and
  filling of vacant posts is required in the
  valuation branch to prevent delays
• The exporters with ISO 90012000 and Export
  Houses and 100 EOU and SEZ Units may be exempted
  from routine inspection of trade samples. This
  will minimize delays. (Bona fide trade samples do
  not need permission/inspection as RBI has waived
  GR formality up to US 25,000).
• Trade requested that online export audit should
  be implemented to minimize the documentation
  problems faced by the exporter. However, there is
  currently no export audit requirement in place.
  This position may be widely publicized to prevent
  undue harassment of exporters.

79
Customs

• Recommendations
• Customs should do away with verification of Duty
  Exemption Pass Book Scheme (DEPB) / DFRC, etc.
  Licenses issued by DGFT should be available at
  the click of a button. This is the main purpose
  of starting the Electronic Data Interface (EDI)
  System
• Duty drawback to be paid within 48 hours of the
  export of the goods in case of electronic
  declarations and 15 days in case of paper
  declarations
• Filing of ER-1 should be allowed without
  enclosing duty payment documents and they can be
  verified during audit

80
Customs General Recommendations

• Organize workshops all over the country on
  application and use of ICEGATE
• Status-holders, manufacturer-exporters and
  exporters with clean track record of one year
  should be given duty drawback immediately and for
  others duty drawback should be given after inward
  remittance of foreign exchange.
• Wherever the associations project and justify the
  traffic, Air Cargo Customs should work on more
  shifts.

81
Customs General Recommendations

• For technical/administrative decisions against
  which complaints are received, no enquiry should
  be initiated without internal enquiry by a
  committee of two officers, nominated by Chief
  Commissioner.
• In case of quasi-judicial decision, when speaking
  orders are issued, and where appellate remedies
  are available, no vigilance enquiry should be
  initiated, as alternative remedies are available.
  
• Sensitization of cutting-edge officials to trade
  problems should be done.

82
Customs General Recommendations

• Training of officials should be mandatory. On
  taking up new promotion/assignment with which
  the officer in charge is not familiar, training
  should be mandatory.
• A motivational workshop / session by professional
  speakers, professional bodies to enthuse the
  departmental officers in doing their work.  
• More informative interaction should take place
  between department and industry. And open houses
  should include lecture training on the department
  procedures for the benefit of industry covering
  specific subjects

83
Customs General Recommendations

• The possibility of giving sabbatical to officers
  can be explored. The departmental officers can
  join the private sector and members from private
  sector should be allowed to work in the
  department. Lateral employment opportunities can
  be explored. 
• Eight or ten agencies are working at the ports
  (such as health and explosives). There should be
  single window clearance under Customs. Officials
  of all other departments will be on deputation
  with Customs.
• If the government has sanctioned certain number
  of posts after full examination, then sanctioned
  strength should be available at all times. This
  is necessary for effective delivery system to
  operate.