Cement industry: CBR devises new system to check sales tax and CED evasion

ISLAMABAD (April 19 2003) : To plug extraordinary evasion of central excise duty (CED) on cement industry, the Central Board of Revenue (CBR) has devised new mechanism to ensure audit of cement factories once a year.

The CBR has ordered collectorates to immediately constitute joint teams comprising both sales tax and central excise officials to conduct audit of cement industry under the broader audit parameters and checklist.

The CBR would first go for those manufacturers, which have deposited less CED as compared to previous fiscal year. The overall clearance of cement from the factories would also be taken into account.

The excise authorities have given free hand to the auditors to confiscate goods and slap five times the principal amount of CED as penalty, in case of contravention or violation, under Rule 210 of the Central Excise Rules.

Furthermore, auditors would levy ten times the amount of duty leviable on cement industry under Rule 185.

As per new audit standards, the auditors would investigate records using questionnaire framed by the CBR to check accounts, daily production, clearance and, above all, price verification.

The answers would be in yes/no, giving a clear picture to the auditors for ascertaining tax evasion.

Sources told Business Recorder here on Friday that the CBR has initiated review of CED gathered from cement industry, which indicated that despite overall growth in central excise duty, some of cement manufacturers showed decline in revenue collection.

Since 2002-03 budget, the excise inspectors have been removed from the cement manufacturing units, as they are no more operating under the supervised clearance system by switching to self-clearance mechanism.

It is necessary to streamline the audit methodology for cement industry to implement revised audit parameters ensuring once a year audit, sources said.

CBR observed that over the time it has been felt that central excise audits have been left for Revenue Receipt Audit, Directorate of Intelligence and Investigation and Directorate of Internal Audit, making the expertise of collectorates extinct and under-utilised.

The collectorates would carry out detailed audit of these units after evaluating their revenue collection and clearance as compared to last year.

As the commodity of cement is liable to both sales tax and CED, joint teams would be organised to conduct meaningful audit–without harassment.

The audit would pay special attention to input-output ratio, wastage etc in consultation with the industrial notes, CBR added.

According to the new audit parameters, the auditors would require the following record of cement factory: Daily production report of excisable goods; application for removal of excisable goods on payment of duty; application for removal of excisable goods for export under bond claim of rebate; register of production, clearance and balance of excisable goods; account current ledger for excise duty; treasury challans, register of excisable goods for export under bond; register of excisable goods used without payment of duty for special industrial purpose and for commodities manufactured therefrom; register for removal/receipt of non-duty paid excisable goods for processing and export or for further manufacture under bond; monthly returns for payment of CED on goods and purchase sale register of raw material and finished goods and other sales tax record.

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