News APP

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  gplay

Rediff.com  » Business » A tale of two services

A tale of two services

By Ashok V Desai
February 18, 2003 13:48 IST
Get Rediff News in your Inbox:

It was clever of Vijay Kelkar to produce revised reports of his task forces on direct and indirect taxes. Everyone who jumped and trampled on the interim reports thought that there could be little new in the final ones.

So, just as quickly as the debate had flared up with the publication of the interim reports, it died down with the publication of the final ones. The only person I know who has read both versions is Sukumar Mukhopadhyay, that indefatigable devourer of official verbiage. And I, who do it to chastise my soul.

When I was in the government, I noticed curious differences between the various services. The members of the Indian Administrative Service were generally focused, selfish, quick, confident, clever and arrogant. They were usually ignorant and proud of it.

I recently met a member of the tribe who had left the service. He told me that knowledge management in the government was an oxymoron. If an officer, on leaving his post, tried to convey to others what he had learnt, they thought he was being cocky and showing off.

And his successor thought he had innate genius and could learn nothing from his predecessor. I would not have put it so strongly, but coming as it does from the horse's -- or should I say the clever dog's -- mouth, the observation should be given due weight.

Officers of the Central Board of Direct Taxes were generally quiet, sober, reasonable. Some may think that this is unduly complimentary.

People have told me horrific stories about them -- they joined with zest in the political vendetta against Shankar Sharma, for instance. But by and large, this revenue service consists of middle-class characters who bring a packed lunch and who go back to their wives when they leave office.

Members and officers of the Central Board of Excise and Customs were quiet, very quiet. But some of them were hard, unscrupulous, sometimes extremely dishonest. One officer published a book, put some outrageous price on it -- say, Rs 1500 for a hundred-page pamphlet -- and got his subordinates to sell thousands of copies to hapless taxpayers.

Another had a lawyer wife; the higher he went, the more her practice flourished. A third got an expensive flat in Mumbai on retirement as a present from an admirer in industry. A taxpayer once rang me up.

He exported expensive garments, made of silk and beautifully tailored, to expensive stores abroad like Harrods. The customs accused him of overinvoicing: how could a shirt be worth Rs 1000? They took the shirt to a salesgirl in Cottage Industries Emporium, and asked her to value it.

She gave them the answer they wanted. The officer who allowed explosives to be smuggled in for the Mumbai blasts of 1993 exonerated himself by saying he thought it was only gold -- and his claim was supported by the fact that the bribe was appropriate to gold.

There is a striking contrast between Kelkar's two reports. The one on direct taxes does not give much space to tax administration; it is really focused on the tax structure -- the rates and the concessions. It more or less assumes that the CBDT works fairly well, and gets quickly down to the job of the taxes.

The report on indirect taxes, on the other hand, is mostly about tax administration. To a cynical mind like mine, it gave the impression that plenty was wrong with excise and customs, and much needed to be done to fix them. But the remedies it gave were, to my mind, inadequate and poorly thought out.

It may be that Kelkar was more interested in direct taxes than in indirect taxes; we all are as income taxpayers. We have to pay income tax every quarter, whereas we might pay customs duty a couple of times in our lifetime, and we may never have to deal with an excise officer.

Or it may be that Kelkar had better economists on his direct taxes team: he had Urjit Patel and Omkar Goswami (Ashok Lahiri was on both the teams, and cannot be held responsible for either).

But most likely, excise and customs are a more unfair, arbitrary, oppressive service, and Kelkar got more complaints about them. One learns quite a bit about their quaint practices from the report on indirect taxes.

For instance, firms have to pay in excise every fortnight. If they pay less than their usual amount, they start getting phone calls from excise officers: why have you paid less? In other words, if you are producing something, you are not allowed to do badly in business.

And if you do, the excise men will still insist that you pay up as if you are doing well.

Another practice that Kelkar lauds and I find most shady is that they do not tax you on the price you actually get. They make you print a Maximum Retail Price on the carton, and charge you excise on it, whether you got it or not.

Thus they convert an ad valorem duty into a specific one. If you are doing well, you pay a certain excise duty; if you do badly, you pay the same. Business is risky enough; excise makes it more risky.

I never knew that customs collect import duty in cash. I would have thought that with their revenue of a few thousand crores, they would find cheques more convenient. But cheques can bounce.

Cash never bounces; and as it pours in, some sticks. Some years ago the CBI raided Delhi airport customs, and collected a few lakhs from the drawers of the customs officers' tables -- just a few hours' take.

I have earlier written about the Unjust Enrichment Act. Thanks to it, all an excise officer has to do is to tell an industrialist, "I am going to overcharge you. You can go to court, but you will never get your money back.

Instead of that, why not just give me a million and settle it quietly?" But even if the Unjust Enrichment Act is repealed, customs have a better business.

A customs officer disputes the valuation of an imported item, and sends the case to the Special Valuation Branch; meanwhile the importer has to deposit advance duty on whatever value the customs officer sets. SVB will keep calling the importer and asking for lots of documents.

If it miraculously settles the case in his favour, then he has to start chasing the refund. Much better to persuade the customs officer not to be contrary.

If you want to learn more tricks of excise and customs, read Kelkar. But even he only skims the surface.

Get Rediff News in your Inbox:
Ashok V Desai
 

Moneywiz Live!