Article published in Excise Law Times - long back!!

Budget 2003 and Excise Reforms
By Kishore

A budget always evokes knee-jerk reactions from all over and tax proposals occupy a 'pride of place' among the contents of any budget. While articulation of grievances tends to be the mainstay of such reactions, this article attempts to examine a wider range of issues including the budget vis-à-vis the Kelkar Report and a few other policy matters in the Excise realm.

Among the host of recommendations in the legislative and procedural spheres, only two on the statutory side, viz., deletion of reference to SWAM Act in Section 4A, and inclusion, in Section 4 A, of certain processes like labelling, repacking, etc., as manufacture in the case items subjected to MRP based levy, have been accepted. Procedural matters are more fortunate as more have been graced with acceptance. This list includes storage of CENVAT availed inputs outside the factory, abolition of forfeiture clause in Rule 8(4) of Central Excise (No.2) Rules, 2001, consigning budget day restrictions to dust bin, reckoning date of presentation of cheque as date of payment of duty and providing powers to condone procedural lapses in CENVAT cases.

Despite the absence of any study as to the evasionary implications of removal of goods without payment of duty and deferred payment, the trade has been blessed with monthly payment facility. Even in the case of Income Tax, the statute seeks advance payment of tax for certain categories. Corporate world is more trust worthy than the salaried class? Instead of addressing the liquidity problems through this measure, it might have been prudent to accept the Kelkar Task Force (KTF) suggestion of dispensing with pre-deposit in the case of appeals before Commissioner (Appeals). In fact, this suggestion is advantageous to the department also in as much as it obviates the necessity of elaborate process of passing an order for refund and review of such order, where appeal by the assessee is allowed.

Certain laudable suggestions of KTF have been given a go-by without any obvious reason. Divergence in interpretation was sought to be ended by advocating sparing and prospective use of power to define manufacture by the Board and this amendment to Section 2(f) has been given pre-mature death with status quo ante being restored through Finance Bill 2003. A very progressive idea of making value-addition at the processing (of manufactured goods) stage as the basis for the levy of excise replacing the age-old concept of manufacture should have been considered for acceptance. The first stage of making the levy value added has been made almost two decades ago with the introduction of MODVAT and with the Union Government having convinced majority of the States to introduce VAT from 1.4.2003, acceptance of this idea would have carried forward this process and also reduced the scope of evasion by sub-contracting and carrying processes outside the factory, as felt by KTF rightly.

Contd...