keralataxes

The entire approach to intelligence work should undergo a radical change. The emphasis should be on intensive investigation on a selective basis rather than routine check so that concretc results are obtained in atleast a few cases. Impediments, if any, in the collection of information or the smooth operation of raids and associated actions whether from lack of co-ordination with other authorities or legal constraints, should be removed. There should also be better arrangement for follow up in cases where incriminating materials is found. In order that intelligence work is not reduced to a routine, it would be desirable for the intelligence wing to give up inspection work and concentrate more on areas calling for prompt and vigorous action. (Para 6.21).

For better results from inspection and raids, performance of the officers engaged in detection and intelligence work should be judged more by quality than mere numbers. Some remission from the quota may be allowed wherever an Officer detects substantial evasion. (Para 6.22).

For effective action, raids by the central and local squads should be better planned and carried out with adequate preparation. Payment of rewards to informers should be permitted. (Para 6.23).

The Intelligence wing should undertake special investigations on its own initiative. It should select areas and commodities for intensive investigation and locate the offending dealers with the help of data collected from banks, railways, clearing and forwarding agents, etc. (Para 6.25).

Since economic offences are often interrelated, proper co-ordination of the tax authorities under the Central and State Government is desirable. (Para 6.26).

Assessment of cases where substantial evasion is involved should be handled in special circles by special officers of appropriate rank. (Para 6.26).

So far as prosecution work is concerned, Sales Tax Officers should be specially trained for the purposes and one S.T.O. (Law) may be posted in each district to look after prosecution as well as other work requiring spectalised knowledge of Civil and Criminal laws. (Para 6.29).

To remove deficiencies in the working of checkposts, the following measures should be implemented:

(i) Checkposts should be adequately equipped with proper lighting including a searchlight, metallic gate (preferably of the see-saw type), storage facilities, weighbridges and telephones. Wireless transmitters may be provided at important check posts.

(ii) Every major checkpost should be in charge of an Inspecting Assistant Commissioner. Besides, there should be one Officer, one Inspector and one Clerk to man these check posts round the clock on eight hour shifts. Minor check posts should be placed in charge of Sales Tax Officer assisted by one Inspector and one clerk on similar shifts. There should be one Inspector and one clerk at each checkpost as reserves. No one should be required to serve at check posts for more than a year at a stretch.

(iii) Proper accommodation facilities should be provided at the check posts. Suites and dormitories should be constructed for the accommodation of officers and their staff.

(iv) Registers at the check posts should be simplified and reduced in number. There should be one basic movement register: in two separate parts, one for incoming vehicles, the for outgoing ones.

(v) Forms prescribed for vehicles transporting goods should also be revised. Form 27-B should be so drawn up as to require use of separate forms for each consignor / consignee in order that they can be easily sorted out and dispatched. Delivery notes (Form 26) and waybills should be prescribed in duplicate so that one copy may be surrendered at the check post. The original and the duplicate copies of the delivery notes should be printed in different colours as is practiced in some States. Duplicates should invariably be carbon copies of the original. Waybills and other allied certificates should also be security-printed.

(vi) It would be useful to have common checkposts for Sales Tax, Motor Vehicles, Excise and Civil Supplies Departments.

(vii) The working of the checkposts should be properly supervised. (Para 6.31)

Considering the volume of goods moving through railways, an effective method urgently needs to be devised for ensuring that the true particulars of the consignors and consignees are recorded in the Station registers and no one can dispatch goods in fictitious names. If it is not possible for the railways to undertake the task of checking permits etc. before booking or delivery of goods. But since this might give rise to many inconveniences, the Railways should be requested to co-operate and help in evolving a mutually convenient arrangement with the sales tax authorities of the states whereby malpractices can be effectively checked. (Para 6.33).
The Collation Branch should be reactivated and expanded. Information gathered at checkposts and by other agencies should be collected at this branch of the Intelligence Wing. It would be more convenient to get the declaration forms sent over to the Collation Branch who would sort them out and send them on to the concerned officers, with an intimation to the Inspecting Assistant Commissioners in charge who would in turn check whether the information had been made use of. Other sources of information like the customs manifestos and returns forwarded by the clearing and forwarding agencies should be similarly collected. (Para 6.34).

There should be a separate Research and Statistics Cell to undertake collection of data bearing on sales tax yield such as production and turnover of commodities, price trends, channels of trade and so on. It should be the function of this cell to gather material from all possible sources and organize collection of data where there are gaps in knowledge. It should also undertake analysis of such data with a view to arriving at independent estimates of turnover of various commodities. The cell should function in close co-operation with the Intelligence Wing and should bring out periodic bulletins for use of assessing officers. The cell should be able to help in the formulation of policy changes. In view of the importance of the work, the proposed cell should be headed by a qualified officer of a senior rank, preferably of the rank of Additional Director. (Para 6.35).

The area in which computerization will be most useful is the indexing of information on major assesses whereby all relevant information relating to each major assesses can be collected on one card and drawn upon as and when necessary. It would also be useful to put the checkpost data on the computer so that information regarding movement of goods can be related to individual dealers and also subjected to various classifications such as commodity-wise and destination-wise that may be needed for cross verification. (Para 6.37).

While an efficient information system will help improve the quality of assessments, to produce the much needed deterrent effects, effort must be directed to concentrate on cases involving evasion or fraud and frame the orders in such a way that the taxes and penalties levied are fully sustained on appeal. One successful heavy assessment or penalty is obviously more valuable as a deterrent than a hundred cases of petty additions. To achieve this, firstly, in fructuous and unproductive work must be cut down, and secondly, due regard must be paid to quality of assessments in the evaluation of an officer’s performance (Para 6.38).

The burden on the Member, Board of Revenue, in charge of sales tax appears to be heavy considering that in addition he has also to administer Agricultural Income Tax and the Money Lenders Act. The powers under these two Acts may be delegated to the Additional Secretary (Taxes) who should still continue under the control of the Member in charge (Para 7.10).

Since the Secretary (Taxes) has to issue direction to subordinate officers of the Sales Tax Department including Deputy Commissioners, the rank of the Secretary (Taxes) should be raised to that of a joint Commissioner (Para 7.10).

The set up and distribution of work in the Board’s office may be recorganised on the following lines:

(i) Audit work should be taken out of the responsibility of the Deputy Commissioner (Intelligence).

(ii) There should be a separate section to look after Audit and Public Accounts Committee matters. There should be a Deputy Commissioner (Audit) to head this section. The post of a Superintendent should also be created for this section. Control over the Inspecting Assistant Commissioners (Audit) should be transferred to the Deputy Commissioner (Audit).

(iii) The Law Section in the Board’s office should be headed by a separate Assistant Secretary (Law). At present this section is looked after by a Superintendent while the Deputy Commissioner (Law) functions from Ernakulam. Office of the Deputy Commissioner (Law) appears to be understaffed. The burden on the Deputy Commissioner (Law) can be somewhat lightened if field officers are asked to refer law points to the Deputy Commissioners (Zonal) through their respective Inspecting Assistant Commissioners, and only when the former require clarification, the points may be referred to the Deputy Commissioner (Law).

(iv) Monitoring of changes in law and procedure in other States should be the responsibility of the Law section of the Board of Revenue which should, therefore, be strengthened by the appointment of an Assistant Secretary.

(v) To assist the Additional Director (Research and Statistics) adequate staff should be provided. There should be adequate staff for statistical work in the field. Each Sales Tax Office should have a Compiler (Para 7.11).

It would be desirable to train up, from an earlier stage, suitable officers of the IAS to hold the post of the Sales Tax Commissioner, considering the technical nature of the work involved. For this purpose, one post in the rank of Deputy Commissioner and two in that of Assistant Commissioner should be encadred (Para 7.13).

For effective control of field staff, the chain of command should be clearly laid down and the controlling officers should have adequate powers to enforce their authority. Duties of officers at various levels should be specified. For effective supervision work norms should be decided on a rational basis, and there should be a well-planned periodic review of work done at all levels (Para 7.19).

As far as possible, reporting on an officer by more than one superior authority of equivalent level should be avoided (Para 7.22).

The form of reporting should be carefully devised so that all important aspects of an officer’s work are adequately reflected. In order to reduce the subjective element in the confidential reports, it would be useful to specify norms for evaluating each item of work such as assessment and recovery (Para 7.23).

To improve the quality of assessment, first, the quota should be related to turnover and secondly, quality should find an explicit place in the evaluation of an officer’s performance. Quotas for assessment work should be laid down in terms of units should be fixed on the following lines:

Unit

For cases with turnover of not more than Rs.1lakh ½

For cases with turnover between Rs.1-2.5 lakh 2/3

For cases with turnover of more than Rs.2.5 lakh 1

The quota of assessment for S.T.Os. Should be fixed at 300 units per year. Cases above Rs.5 lakh turnover should continue to be dealt with by Assistant Commissioners. The quota for them should be reduced from 275 to 250 per year to enable them to devote greater attention to each case. To encourage officers to turn out assessments of better quality, attention should be paid to the number of cases where evasion is detected and penalty imposed in rating an officer (Para 7.29)

Arrangements for inspection, and review of inspections should be streamlined. (Para 7.35)

To enable the Inspecting Assistant Commissioners to provide more effective guidance to the S.T.Os. in the matter of assessment and investigation, there should not be more than 8 to 10 Sales Tax Officer under one Inspecting Assistant Commissioner (Para 7.36).

The practice of the departmental member on the Appellate Tribunal reverting to the Department should be discontinued. The rank of the departmental member should be raised to that of joint Commissioner (Para 7.41).

The Committee endorses the present quota of 25 percent for direct recruitment to vacancies of S.T.Os. In order that this does not affect the promotion prospects of officers in subordinate ranks, direct recruitment at the level of A.S.T.Os. / S.T.Is. may be discontinued. (Para 7.57).

The following modifications may be made in the present scheme of training:

(i) There should be refresher courses for officers who are in the field for more than 5 years at a stretch. The course should be of a duration of 3 to 4 weeks. The number of trainees in each batch should be so fixed as to ensure that all officers in the Department would have undergone such a course within the next three to four years.

(ii) There should be arrangement for specialized courses at the training institute such as for appellate work, recovery and prosecution.

(iii) Both in the case of officers who go in for foundational training as well as refresher trainees, there should be a compulsory test at the end of the course. To encourage officers to take active interest in the training, some incentive should be given in the form of an advance increment to those who secure more than, say, 60 per cent marks.

(iv) Some training should be given also to officers below the level of ASTO / STI through a condensed course. For these trainees too, suitable rewards for good performance in the tests may be offered.

(v) To improve the quality of teaching, it would be useful to invite guest speakers from the Bar as also practicing accountants.

(vi) To assist the Deputy Commissioner (Law) in the training matter, there should be separate section in his officers headed by a Sales Tax Officer. Full time services of one Assistant Commissioner and two Sales Tax Officers may be made available (Para 7.67).

The annual coverage of audit should be 100 per cent for assessments with turnover of Rs.1 lakh and above and 331/3 per cent for cases with turnover of less than Rs.1 lakh (Para 7.72 & 7.73).

In order to reduce old arrears, the following further measures should be taken:

(i) Last of defaulters should be published and those with holding payment without valid reasons penalized.

(ii) Information helping recovery of arrears should be rewarded. This practice is in vogue in Maharashtra.

(iii) Cases where the demand is stayed by Court order should be brought to the notice of the Courts and attempt should be made to get the stay order vacated.

Powers to write off tax arrears should be modified in such a way that the Board should be competent to write off amount up to Rs. 10,000 the D.C. up to Rs. 2,500 and the I.A.C. up to Rs.500. (Para 7.79 to 7.81).

Adequate steps must be taken to prevent misuse of registration on the following lines:

(i) The certificate of registration should specify the goods or class of goods which are traded in by the dealer.

(ii) The declaration form on the strength of which intermediate sales are exempted or are taxed at concessional rates should be security printed and supplied to the dealers only on specific request. Suitable forms should be prescribed for the purpose.

(iii) Under the K.G.S.T. Act, the law should authorize the officers, granting registration to ask for security at the pre-registration stage, where they consider it necessary.

(iv) Similarly, security should be insisted for the proper custody and use of declaration forms, where considered necessary.

(v) Circumstances under which the certificate of registration may be amended should be specified, e.g. change in the name of ownership or place of business, opening of a new place of business, addition or modification in the description of the goods etc. Where such amendment or cancellation is made at the instance of the dealer, he should furnish all relevant particulars in the prescribed form. When application is made for cancellation of registration on account of discontinuance of business, the dealer should be obliged to submit his application at least one month in advance. Circumstances under which cancellation may be ordered should also be spelt out. Specific reference needs to be made to discontinuance and transfer of business in this context.

(vi) There should be stringent penalty for furnishing wrong particulars in the application for registration or cancellation and also for furnishing false declarations. (Para 8.7).

The system of provisional assessment should be abolished, and all assesses other than those assessed by the system of easy assessment should file monthly return showing their total turnover and taxable turnover for the previous month and pay the tax accordingly. (Para 8.8)

There should be a time limit for completing a final assessment. In the case of regular assessment, the time limit should be three years from the end of the year in respect of which the tax is assessable, and two years in the case of assessment reopened because of escapement. (Para 8.10).

While the law allows the assessing (as well as appellate) authorities to summon and enforce the attendance of any person and examining him on oath or affirmation and compelling the production of any document, there is no provision authorizing issue of commissions for examination of witnesses. Powers to issue commission are concomitant to the powers to issue summons and should be provided in the statute. Also, the authorities should have the power to impound books of accounts and other documents where considered necessary for any proceedings under the Act and retain them for a period preferably for sixty days, and also beyond sixty days with permission from next higher authority. (Para 8.15)

Punishment for criminal offences should be imprisonment or fine or both, and in the case of a continuing offence fine of up to Rs.100 per day should be imposed. The range of punishable offence should also be widened. (Para 8.20).

The minimum compounding fee should be Rs.50 or equal to the tax sought to be evaded, whichever is higher. (Para 8.21).

Where a declaration given by the buyer while buying component parts at a concessional rate is found to be false, he should be required to pay the tax and be subject to penalty. (Para 8.22).

In regard to default of tax payment, there should be an additional provision for levy of penalty beyond one year without valid reasons which may extend to 100 per cent of the tax or any other amount outstanding. (Para 8.23).

The provision in the law authorizing the S.T.O. to require a third party owing any money to the defaulting dealer to pay the debt due to the dealer directly to the Government should cover individuals, courts, corporations and banks. (Para 8.24).

Transfer of assets often impedes the collection of taxes. To counter attempt to evade tax in this way, the law should provide that transfer to defraud revenue during pendency of any proceeding under the K.G.S.T. Act is void. (Para 8.26).

Names of persons guilty of offences involving mens rea and those withholding payment of tax above Rs.20, 000 should be published. The statutory provision for the purpose should contain sufficient safeguard against premature publicity (Para 8.27).
The existing provision in the law conferring on the Board powers of superintendence have been interpreted to include powers to issue clarifications about disputed questions only. They do not provide any opportunity for the assesses to present his case. A provision should be introduced to this effect on the lines in vogue in Maharashtra and Delhi. (Para 8.29).

The tax accounts of the Department must be computerized. As a first step to eventual computerization, of tax accounts code numbers for G.S.T. registration should be introduced. (Para 8.33)

Changes are also called for in the Statements furnished in the Annual Administration Report. (Para 8.35)

(XI) By the Amendment Act of 1978, some of the recommendations of Prof. I.S. Gulati Committee were implemented. The Kerala Additional Sales Tax Act, 1978(Act 20 of 1978) came into force on 1.4.1978 enabling the levy of Additional Sales Tax at the rate of 10% of the tax due. Act 19 of 1983 enhanced the rate of Additional Sales Tax enhanced from 10% to 15% with effect from 1.4.1983. In 1984, Government of Kerala appointed a Commission for restructuring the Sales Tax law in the State, as per G.O.MS.73/84/TD dated, 2.4.1984 with Justice George Abraham Vadakkel(Rtd.) as Chairman and the Members are

Click Here to Continue Next Page