Chapter - III
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| Period | Cases | Percentage increase/decrease |
||
| No. | Amount | No. | Amount | |
| Upto 2000-01 | 21925 | 8841.01 | -- | -- |
| Upto 2001-02 (Position as on 30.09.2002) | 29251 | 12313.74 | 33 | 39 |
From the table above it is evident that during the period 2001-02 there was a large increase of 33 per cent in terms of number and 39 per cent in terms of amount compared to the pendency upto 2000-01.
The age wise pendency of the cases in the call book in respect of 55 Commissionerates was as under :-
| No. | Amount | |
| More than 10 years old | 1028 | 194.32 |
| Between 6 and 10 years | 3197 | 855.06 |
| Between 3 and 6 years | 8622 | 2891.33 |
| Less than 3 years old | 16404 | 8373.03 |
| Total | 29251 | 12313.74 |
The cases pending in the call book for more than 3 years was 44 per cent in terms of number and 32 per cent in terms of value.
The number of demand cases transferred by the Department to call book being large, an effort was made in audit to identify the factors responsible for the pendency through a test check of the records of selected divisions.
The Board vide their instructions dated 14 December 1995 specified the category of cases which could be transferred to the call book. From a test check of records, it was revealed that 540 cases involving demand of Rs.413.58 crore in 68 divisions/adjudication cells in 55 Commissionerates had been kept in the call book, even though they did not fall under any of the categories specified for this purpose. The details are as under: -
| Sl. no. | Period | Ordered by the courts for denovo adjudication | Pending for want of chemical examiner’s report | Pending with settlement commissioner | Transferred to call book without specific approval of Commissioner/Board | Provisional assessment cases | |||||
| No. | Amount | No. | Amount | No. | Amount | No. | Amount | No. | Amount | ||
| 1. | Cases more than 5 years old | 59 | 12.06 | 8 | 0.16 | -- | -- | 91 | 10.23 | 7 | 97.89 |
| 2. | More than 2 years old | 24 | 2.84 | 3 | 1.15 | -- | -- | 121 | 98.16 | 1 | 24.95 |
| 3. | Less than 2 years old | 25 | 1.74 | 19 | 1.08 | 10 | 2.87 | 168 | 152.61 | 4 | 7.84 |
| Total | 108 | 16.64 | 30 | 2.39 | 10 | 2.87 | 380 | 261.00 | 12 | 130.68 | |
| Grand Total | 540 | 413.58 | |||||||||
Unauthorised transfer of these cases to the call book had resulted in locking up of large amount of potential revenue.
Some illustrative cases are given below :-
3.6.1 Nine cases involving revenue of Rs.3.80 crore in respect of M/s. Chittaranjan Locomotives, Asansol in Bolpur Commissionerate of Central Excise, were transferred to call book even though they were remanded by CEGAT and the Commissioner of Central Excise (Appeal) for denovo adjudication in 1991 and 1994 respectively. No action was taken by the Department to remove the cases from the call book and adjudicate the same for over 10 years.
On this being pointed out (September 2002), the Commissionerate replied (March 2003) that the cases had now been removed from call book and denovo adjudication done.
3.6.2 In Surat I Commissionerate of Central Excise, a case involving revenue of Rs.12.85 crore on account of wrong availment of Modvat credit on false documents against M/s. Rama Newsprint and Paper Limited Surat was irregularly transferred to call book in July 1999 without approval of the Commissioner because it was also being investigated by the CBI.
3.6.3 A provisional assessment order involving an amount of Rs.24.95 crore in respect of M/s. VICCO Laboratories was issued by Goa Commissionerate in September 1997. The case was transferred to call book in 1999. Despite the amendment in Central Excise Rules with effect from 1 July 2001, requiring the competent authority to finalise the assessment within six months, the case continued to be kept in call book. Thus, potential revenue of Rs.24.95 crore remained blocked due to unauthorised transfer of provisional assessment case to call book.
3.6.4 Demand notices involving excise duty of Rs.18.12 crore were issued to M/s. Indian Oil Corporation and M/s. Hindustan Petroleum Corporation in April 2000 and June 2000 respectively in Delhi I Commissionerate of Central Excise, at the instance of central excise intelligence. After a period of more than a year, the Board vide their orders dated 8 June 2001 assigned these cases to the Commissioner of Central Excise (Adjudication), Delhi by name for adjudication. Despite the appointment of adjudicating authority by the Board, the Commissioner of Central Excise, Delhi I, wrote to Director General, Central Excise Intelligence, Delhi in November 2001 requesting him to take up the matter with the Board for appointing an appropriate adjudicating authority, as he could not adjudicate due to jurisdictional problem. The case was unauthorisedly transferred to call book by the Delhi I Commissionerate thereby locking up potential revenue of Rs.18.12 crore.
The Public Accounts Committee in their 53rd Report (10th Lok Sabha) while discussing audit para 3.66 of Report of the Comptroller and Auditor General on Central Excise for the year 1990-91 expressed concern over the alarming situation of pendency of cases in the court and, cautioned both the Ministry of Finance and Law that ‘there should be no let up in securing early vacation of stay orders and collection of substantial revenue that have been blocked’.
A test check of records revealed that 2106 cases involving revenue of Rs.1052.17 crore in 34 Commissionerates, were kept in call book for more than one year as on 30 September 2002 due to non-vacation of stay orders by the courts. The age-wise pendency of these cases was as follows:-
| More than 10 years old | More than 5 years old | More than 3 years old | 1 to 3 years | Total | |||||
| No. | Amount | No. | Amount | No. | Amount | No. | Amount | No. | Amount |
| 215 | 45.06 | 375 | 417.92 | 850 | 258.02 | 666 | 331.17 | 2106 | 1052.17 |
Some illustrative cases are given below:
3.7.1 A show cause notice for Rs.10.60 crore for clearances between 1986 and 1989 was issued to M/s. Maruti Udyog Limited, Gurgaon in Delhi III Commissionerate in April 1990. The case was transferred to call book in 1991, when the assessee filed a writ petition in Delhi High Court and obtained stay orders in February 1991. Even after a lapse of more than 12 years, the stay has not been got vacated. On this being pointed out (September 2002), the Commissioner of Central Excise, Delhi III wrote to the central government standing counsel in September 2002 for taking necessary action for early listing of the case.
3.7.2 Demands for duty of Rs.3.02 crore and Rs.1.11 crore against M/s. Mayil Mark Nilayam Chennai I and M/s. Palanganatham Rice and Oil Mills, Madurai were issued by Chennai I and Madurai Commissionerates respectively on account of clearance of shikakai powder without payment of duty in 1998. The assessees filed a writ petition in Madras High Court and obtained stay orders in 1998, citing a judgement of Karnataka High Court that shikakai was not dutiable. However this judgement was struck down by the same High Court and classification of shikakai under chapter 33 upheld by the Supreme Court (January 2000). Despite judgements favourable to revenue and instructions by the Board (February 2002), the Department did not get the stay vacated.
3.7.3 Three show cause notices involving demand for Rs.4.64 crore for the period from April 1986 to June 1999 on account of dutiability of teleprinter rolls were issued to M/s Delhi Paper Products Co. (P) Limited, in Delhi I Commissionerate of Central Excise. The show cause notices were transferred to the call book on the plea that the assessee had obtained a stay in September 1982, in an earlier case. No efforts was made by the senior central government counsel to either seek an opinion from the legal department on the applicability of the earlier stay order to the present case or to get the stay vacated from the High Court. Even after the request by the concerned Deputy Commissioner, the anti evasion branch took no action to book a case or seize goods. The Department also failed to issue further demand notices for the period from July 1999 onwards. The non-issue of demand notices could result in the demands for the period after July 1999 becoming time barred.
3.7.4 M/s. Bajaj Auto Limited was served with 40 demand notices for Rs.2.25 crore during the period October 1986 to March 2002. The notices were transferred to the call book during the period from December 1987 to May 2002 based on a stay order from Mumbai High Court. A civil appeal was filed for vacation of stay. No follow up action was taken by the Department on two interim orders passed by High Court in December 1994. The case is pending for over 14 years.
A scrutiny of records revealed that 1512 cases out of 29251 cases pending as on 30 September 2002 involving demand for Rs.349.38 crore in 34 divisions/adjudication branches in 31 Commissionerates, were being kept in the call book despite existing judgements by courts in these cases/similar cases.
Some illustrative cases are given below :-
3.8.1 The validity of section 3A of the Central Excise Act, 1944 was challenged by iron and steel manufacturers in the case of Government of India vs. Supreme Steels Private Limited and others, before the Apex court. The Supreme Court passed interim orders in April 1998 barring the Department from taking penal or coercive measures. The Ministry of Law opined on 9 August 2000 that the Department could, however, adjudicate cases in respect of duty alone. The case was finally decided in favour of revenue and the Board issued instructions on 21 January 2002 to finalise all pending assessments.
Audit observed during test check of records that despite the above orders, 759 cases involving Rs.105.90 crore in 22 Commissionerates both on account of duty and penalty and interest, continued to be kept in the call book.
3.8.2 A case involving revenue of Rs.4.87 crore in respect of M/s. Bhushan Processors Private Limited in Ahmedabad I Commissionerate was transferred to call book in January 2000, as the assesseee filed special leave application in both Gujarat High Court and Supreme Court. Even though the case was dismissed by Gujarat High court on 22 February 2000 and Supreme Court on 31 October 2000, the same was not removed from the call book till the date of audit (December 2002).
A scrutiny of records in 56 Commissionerates revealed that 4820 cases involving an amount of Rs.2622.68 crore were kept pending under the category ‘for want of clarifications from the Board’. The age-wise pendency of the cases was as under:-
| Cases more than 5 years old | More than 3 years old | Less than 3 years old | Total | ||||
| No. | Amount | No. | Amount | No. | Amount | No. | Amount |
| 278 | 25.35 | 455 | 458.86 | 4087 | 2138.47 | 4820 | 2622.68 |
There was an alarming increase (40 per cent in terms of number and 106 per cent in terms of the amount) in this category during the year 2001-02, which is indicative of a reluctance by the Board to take a final view on issues ordered by it to be kept pending.
Some illustrative cases are given below :-
3.9.1 Twelve show cause notices for Rs.96.21 crore for the period from June 1996 to February 2002 on account of misclassification of bathing bars were issued to M/s. Hindustan Lever Limited in Pondicherry Commissionerate. Due to Board’s instructions dated 16 November 1999, the case was transferred to call book in 1999. The issue was kept pending for 6 years and in the call book for more than three years for want of a decision by the Board.
3.9.2 On a demand raised by Mumbai VI Commissionerate against M/s. Amardeo Plastics for Rs.52.82 crore, the assessee made a representation to the Board on 26 October 1998. The Board did not specifically order the case to be kept pending and the Commissioner of Central Excise intimated the Board that the case was under the process of adjudication. Despite this, the case was irregularly transferred to call book on 29 January 1999. Interestingly, there was no further communication from the Board. Thus adjudication in this case has been postponed and the case transferred to call book.
As per the orders of the Board dated 14 December 1995 only those cases relating to audit objections were to be transferred to call book which were contested by the Department. A scrutiny of records revealed that 1655 cases in 37 Commissionerates involving demands for Rs.1043.82 crore continued to be retained in the call book even though in these cases either the objections were already admitted by the Ministry or settled in audit on furnishing of necessary clarification by the Department. These cases being no longer in contest, ought to have been recalled from call book.
A few illustrative cases are given below :-
3.10.1 On an objection raised in audit in 1995, show cause notices involving an amount of Rs.3.80 crore were issued on account of mis-classification of carton boxes to M/s VFC Limited, Halol in Vadodara Commissionerate. All these cases were transferred to call book in 1996 pending decision of the Commissioner (Appeal), who in his orders dated 26 May 1998 decided the case in favour of revenue thus upholding the contention of audit. Since the objection was no longer in contest, the show cause notices ought to have been removed from call book and adjudicated upon.
3.10.2 Even after the objections raised by Audit were admitted by the government, the following cases continued to be kept in the call book.
|
Commissi-onerate |
Name of the assessee |
Audit para no. and period
|
Amount |
| Bolpur | IISCO, Burnpur | 2.17(iii)(b) of 1992-93 | 0.28 |
| Kolkata I | India Foils | 3.19 of 93-94 | 1.69 |
| Kolkata IV | Dankuni Coal Complex | 8.2 of 2001-02 | 3.57 |
| Kolkata II | Hindustan Lever Chemicals Limited | 8.11 of 2001-02 | 0.82 |
| Total | 6.36 | ||
A test check revealed that in 36 Commissionerates, 1106 units against whom demands for Rs.178.12 crore were kept pending in the call book were already closed as per details given below: -
| No. | Amount | |
| Units closed for more than 5 years | 721 | 104.68 |
| Units closed for more than 3 years | 154 | 41.76 |
| Units closed since less than 3 years | 231 | 31.68 |
| Total | 1106 | 178.12 |
The prospects for recovery in the event of finalisation of adjudications proceedings in these cases appear to be bleak.
A case is illustrated below: -
A demand case involving an amount of Rs.2.05 crore in respect of M/s. Ishar Alloy Steels Limited in Indore Commissionerate was unauthorisedly transferred to call book in November 1997 in violation of norms prescribed by the Board. While the unit was closed by the assessee in 2000, the case was not adjudicated as it had been transferred to the call book unauthorisedly.
An appraisal of the internal control mechanism conducted in audit revealed the following: -
3.12.1 Review at range/divisional offices
As per the Manual of Office Procedure for central government offices, the range officer/divisional officer is required to review the call book cases on a monthly basis so that the cases which have become ripe for action are removed from it before preparation of monthly technical report. It was noticed that in 65 test checked divisions/adjudication branches of 26 Commissionerates, no such review was undertaken.
3.12.2 Non-maintenance of call book register/non-preparation of monthly abstract
In 8 test checked divisions/adjudication branches, it was noticed that call book registers were not being maintained in the format as prescribed in the manual of office procedure. In 24 test checked divisions, call book registers were not found closed every month. No monthly abstract showing opening balance, receipt, disposal, closing balance etc. was drawn at the end of each month in these divisions.
3.12.3 Incorrect reporting in monthly technical report
It was noticed in 44 test checked divisions that no proper checks were exercised at the time of incorporation of the information in the monthly technical reports. This resulted in incorrect/suppressed data of pendency being reported therein.
Some of the cases of discrepancies are illustrated as follows: -
| Commisionerates/ Divisions | Period | Call book of
adjudication branch/division |
As per technical report of adjudication branch/ division |
Difference | |||
| No. of cases | Amount involved | No. | Amount | No. | Amount | ||
| Vadodara (Division IV) | 30.6.02 | 81 | 112.61 | 81 | 668.27 | -- | 555.66 |
| Delhi III (Gurgaon I) | 30.9.02 | 173 | 368.18 | 173 | 169.59 | -- | 198.60 |
| Vishakhapatnam | 30.9.02 | 74 | 145.62 | 65 | 284.20 | 9 | 138.58 |
| Delhi I (All divisions) | 30.9.02 | 174 | 303.71 | 165 | 425.69 | 9 | 121.98 |
| Delhi III (Gurgaon II) | 30.9.02 | 159 | 94.40 | 165 | 104.03 | 6 | 9.63 |
| Kolkata III (Adjudication Cell) | 30.9.02 | 65 | 106.36 | 54 | 99.22 | 11 | 7.14 |
| Bolpur (Adjudication Cell) | 30.9.02 | 92 | 258.10 | 221 | 264.92 | 129 | 6.82 |
| Delhi III (Ambala) | 30.9.02 | 245 | 39.24 | 175 | 33.90 | 70 | 5.35 |
| Guntur (All divisions) | 30.9.02 | 141 | 65.00 | 138 | 69.63 | 3 | 4.63 |
| Mumbai VI (Adjudication Cell) | 30.6.02 | 131 | 160.38 | 68 | 155.79 | 63 | 4.59 |
The fact that discrepancies existed in reporting was also highlighted by the Board which issued instructions on 23 May 2003 to all the Commissioners to take utmost care in compiling vital data.
3.12.4 Review at commissionerate level
The Board vide their letters dated 6 September 1990, 4 March 1992 and 30 March 1998 directed the Commissionerates to review the pending cases every month. Audit scrutiny revealed that in 30 test checked Commissionerates, the monthly technical reports received from divisions were compiled and furnished to the Chief Commissioners without proper review of the cases shown as pending in the call book.
On this being pointed out (February 2003), the Bolpur Commissionerate replied (March 2003) that due to frequent transfers at the level of the Commissioner/Additional Commissioner and Joint Commissioner, such review could not be done.
On audit pointing out irregular transfer of cases to the call book, 258 cases involving an amount of Rs.52.46 crore which were ripe for adjudication were removed from the call book.
A few illustrative cases are given below: -
3.13.1 The demand case involving Rs.4.18 crore relating to M/s. Richardson and Cruddas, Nagpur in Nagpur Commissionerate of Central Excise, was taken out of call book by the Department for adjudication (February 2003) when it was pointed out in audit (July 2002) that following a ruling of the Supreme Court in M/s. Elecon Engineering Company Limited Vs. Commissioner of Central Excise, Chandigarh, a similar case had been decided by the CEGAT in favour of revenue.
3.13.2 Three cases of provisional assessment involving demand for Rs.1.16 crore in respect of M/s. CIMMCO, Gwalior, in Indore Commissionerate of Central Excise were removed from call book in August 2002 on being pointed out by Audit that these cases were kept in the call book in violation of the prescribed norms.
In view of the increase in the number of demand cases transferred to call book, there is an urgent need for streamlining the monitoring system by effective monthly review both at divisional and Commissionerate level. Proper co-ordination between Commissioners and newly formed Directorate of Legal Affairs, Customs and Central Excise is required to cope with litigation cases effectively. Besides, it is recommended that time limit be stipulated for decision by the Board on cases transferred to call book on its specific orders.
The above observations were pointed out in August 2003; reply of the Ministry had not been received (February 2004).