Annual Conference of Chief Commissioners and Directors General, 2011

SPEECH OF CHAIRMAN CBEC

Hon’ble Finance Minister, Shri Pranab Mukherjee saheb, Hon’ble Minister of State, Thiru S.S. Palanimanickam, Finance Secretary, Shri Sunil Mitra, my colleagues in the department, Ladies and Gentlemen.

On behalf of the Central Board of Excise & Customs, I extend a warm welcome to you all at the Annual Conference of Chief Commissioners and Directors General for the year 2011. The annual conference provides us with an opportunity to take stock of our performance in the year gone by, and to analyze the reasons for deficiencies and failures. In a Conference such as this, we capitalize on our strengths; we deliberate on issues that warrant close attention; and with the collective wisdom in hand we set out goals for action, both in the short term and the long term. Even as our core competency continues to be revenue collection, we are aware of our commitment to delivery of services to the taxpayers.

On the revenue front, we have done rather well in the last fiscal. The total revenue collection has gone well past the Budgetary Estimates as well as the enhanced Revised Estimates. It has actually registered a growth of over 40% which is a record of sorts, at least in the last ten years. We are extremely grateful to the Hon’ble Finance Minister who has conveyed his facilitations to the Apratyakshakar Parivar, Indirect Tax family for such outstanding performance on the revenue front. I have forwarded Finance Minister’s letter to each of you. I am sure, you would have in turn forwarded it to our officers at the cutting edge level.

Sir, we are all aware how hard you work. Your thirst for more and more work has inspired us no end. Our officers can not but work harder and improve their performance when their leader is almost on 24x7 mode, and the results are for everyone to see. The performance on revenue front is only one of them. I would come to other achievements shortly.

Sir, for various factors – domestic as well as international – of which you are well aware, the current Financial Year is going to be a challenging one. Besides our dependence on growth in Manufacturing and Service sectors, the impact of increased base effect will make our achieving the target of Rs.3.98 lakh crores a difficult one. Yet, let me tell you Sir, your support and encouragement has spurred the field formations into accomplishing an even better performance during the current fiscal by plugging all revenue leakages. In fact they have already started putting their best foot forward in their efforts to achieve the revenue target which, as I said, is rather a stiff one under the current circumstances. Kindly permit us to review it after a few months to see if any mid course revision in the target is required.

For this year’s Conference, we have thoughtfully planned our subjects for deliberations and brainstorming by four breakaway groups. While not losing sight of our core action areas which have a direct bearing on revenue collection, and the much expected introduction of the Goods and Service Tax, some of the breakaway groups would dwell upon certain larger issues like Change Management and the two way communication between the Board and field formations. I sincerely believe that the Board is not the sole repository of knowledge and wisdom. There are thousands of streams flowing down below in the Commissionerates that provide the sustenance to the Board. Therefore, one Breakaway Group has been especially assigned to deal with the subject of strengthening the process of interaction between the Board and field formations, and identifying the impediments in the free exchange of ideas and thoughts. We are confident that the reports of the breakaway groups would present practical suggestions for implementation and help the department in charting its growth trajectory.

Each year during the preparation of the Conference our Hon’ble Minister of State for Finance asks, what new things are you planning in this year’s Conference. This year Sir, we have decided to benefit from the address of two of our eminent personalities closely connected with the affairs of Finance Ministry. I am talking of Dr. Kaushik Basu and Dr. Nandan Nilekani, both great visionaries and wonderful speakers. Dr. Kaushik Basu will address on ‘India’s economic growth in past 20 years and role of fiscal policy in it’, while Dr. Nandan Nilekani will speak on ‘GST Net – the IT support system for CBEC. I am sure my colleagues will benefit immensely from their talks.

Sir, kindly allow me to seize this opportunity to recapitulate some of the major tasks accomplished by the department in the last year. On the Systems front, the CBEC has made rapid strides in adopting technology in discharge of its core functions and in facilitating the taxpayers as well. Directorate General of Systems has completed implementation of the much awaited IT consolidation project, the most significant IT initiative. The setting up of the National Data Center and Business Continuity Sites located in New Delhi and the Disaster Recovery Sites located in Chennai are now fully functional. Except for a very few locations facing certain specific implementation issues, over three thousand offices under CBEC now work on one e-platform which is connected to the National Data Center through WAN (Wide Area Network) and LAN (Local Area Network. On the Customs front, upgraded version of Customs EDI System ICES 1.5 has been hosted in a centralized environment and implemented at 119 Customs locations across the country. The applications such as ICES 1.5, ICE GATE, Risk Management System, Data Warehouse, Currency Declaration system and ACES, i.e. Automation of Central Excise & Service Tax have also been hosted in a new centralized environment. You would be happy to know, Sir, that officers, taxpayers and trading partners across the country are now able to access these applications 24x7 from anywhere, anytime. We have also set up over 750 ACES Certified Facilitation Centers run by professionals like Chartered Accountants and Cost Accountants in over 250 cities. Let me mention here Sir, ACES, with appropriate changes, would be capable of handling our GST applications and it would provide the necessary linkages in the GST environment. The IT projects of CBEC have received many awards during the last two years.

The ICE GATE project received Gold award for the year 2010-11 at the 14^th National E-Governance Conference 2011. It is a matter of pride for the Department that the World Customs Organizations, WCO has circulated a Best Practice Paper on the Indian Automated Recordation & Targeting System (ARTS) of IPR i.e. Intellectual Property Rights.

Sir, in keeping with your announcement in this year’s Budget Speech, we have initiated steps for the introduction of Self Assessment in Customs. This will bring in a paradigm shift on the trade facilitation front. It will certainly reduce the dwell time for clearance of cargo and also cut down attendant transaction cost for the assessees.

In order to clear the long pending drawback claims, we have declared the months of May, June and July as Drawback Clearance Months. We are receiving positive reports in this regard. In order to cut down transaction cost in export of goods, we have taken several measures. One particular measure worth mentioning is a procedural simplification because of which an exporter can now avail the facility of a single running bond for all imports made through any port of the country.

On the international Customs front, as you are aware Sir, India was elected to the Policy Commission from Asia Pacific Region for the two year term 2010-2012. The Indian Customs has been playing a pro-active role in evolving the future agenda and strategic direction of the WCO, so as to reflect the aspirations of the developing countries and to ensure that the developments within the WCO do take account of the requirements of Asia Pacific Region. In this context I would particularly like to mention the role that Indian Customs has been playing in realizing the vision of WCO in Globally Networked Customs, popularly known as GNC. GNC envisages creation of an international E-Customs Network that will ensure seamless real time and paperless flow of information and connectivity. You will be happy to know that India was selected as one of the members of the Adhoc Group set up by WCO to bring the vision of GNC to reality. This apart, Indian Customs has been keenly working towards Customs Mutual Assistance Agreements that provide a basis for exchange of information with other Customs administrations. Indian Customs has also been playing a vital role in the negotiations of FTAs and PTAs and CEPA i.e. Free Trade Agreements, Preferential Trade Agreements and Comprehensive Economic Partnership Agreements. Indian Customs has also been actively contributing to the Customs capacity building and technical assistance initiatives in various developing countries in Asia and Africa. Sir, you will be pleased to know that the WCO has shown keen interest in including the valuation data base as developed by Indian Customs in the ‘revenue package’ which is a set of tools to assist Customs administrations in Developing Countries and Least Developed Countries so as to safeguard their revenue.

Now, back home, the rationalization of Cenvat Credit Rules and the introduction of Point of Taxation Rules this year will streamline the availment of Cenvat Credit and bring about greater clarity to the incidence of chargeability of Service Tax. These measures will also contribute significantly in reducing areas of disputes with the trade, and would indirectly contribute to reduced litigation which has been your consistent desire. Penal provisions have been simplified and redrafted making them more pragmatic and assessee friendly so that a person committing bonafide lapse is not made to suffer the same rigours as perpetuation of a deliberate fraud.

The Department is also continuously strengthening its enforcement capabilities. The trend of smuggling of high quality Fake Indian Currency Notes (FICN) into India through various routes is continuing. Only two days back the Directorate of Revenue Intelligence has made a record seizure of FICN worth around Rs.1.54 crore in a single case of smuggling from Bangladesh. This week DRI has also seized more than one tone of Ketamine, a party drug, in one single case. On the Central Excise enforcement side, Directorate General of Central Excise Intelligence has been detecting a number of cases of duty evasion through novel modus operandi. The figures show that detection of evasion of Service Tax is much more than that of Central Excise. We need to give more attention on enforcement on the Service Tax side. Just to give an idea about our anti-smuggling and anti-evasion efforts, last year the Department has booked over 14,000 cases involving over Rs.16,000 crores covering Customs, Central Excise and Service Tax. In these cases more than 600 persons were also arrested. While we extend trade facilitation and taxpayer services to the bonafide trade, we do not hesitate to take action against the delinquent ones.

The year also witnessed the fructification of the Government’s initiative of Sevottam, launched in four key offices having a large public interface. The three Commissionerates of Central Excise Delhi-I, Service Tax, Delhi and Customs (Imp & Gen) Delhi in addition to the office of DGI were awarded the prestigious Sevottam certification by the Bureau of Indian Standards. The department has initiated an ambitious programme for the roll out of Sevottam in twenty other formations across the country and we are hopeful that all these formations would be able to seek the required certification before the end of the financial year.

A compendium of some of our best practices, named ‘Innovations’ was released by Hon’ble Finance Minister during the year for the benefit of field formations and replication thereof in other similarly placed locations. I am happy to state that the measure has been well received and field formations have evinced considerable interest in this attempt at knowledge – sharing and promoting excellence. This Compendium would be regularly updated.

The strength of an organization stems from the able management of its human resource. To provide for an efficient and motivated cadre, the CBEC undertook timely exercise of DPCs at different levels. DPC for 42 posts of Chief Commissioner has also been concluded last month. Similar action was also initiated by the field formations in respect of cadres under their administrative control. Sir, in pursuance of your directions at the conference last year for expeditious conduct of vigilance trials, a series of steps were taken. As a result, the number of final orders grew by over 41% in 2010.

The long overdue cadre-restructuring exercise in the department is currently under active consideration. After getting the proposal cleared from the Department of Expenditure, it is now on way to Department of Personnel. Our Secretary has been supportive of many of our initiatives. I must particularly acknowledge the unstinted support being given by him in getting the Cadre Restructuring proposal through. Sir, we are optimistic that with your kind blessings the Government will accept the proposals and the officers and staff of the department shall stand to gain in the shortest timespan possible.

We revenue officers are by nature publicity–shy. But with changing time we have felt the need to project our performance and promote compliance. The Directorate of Publicity and Public Relations has conducted regular campaigns in Print and Electronic media. It has also made a documentary film on “Central Excise - the Engine of Economic growth” – which has already been televised.

Sir, you have taken the initiative to break the stalemate in the negotiations with the States for ushering in GST, by introducing the Constitution Amendment Bill in the Budget Session of 2011. While the Bill has been referred to the Parliamentary Standing Committee on Finance, we in the CBEC have been continuing with our backend preparatory work. The Task Force on GST headed by Shri Gautam Ray, Consultant has submitted its interim report on the business processes relating to GST. This is now being deliberated upon amongst the officers in CBEC. The work on GST Net – the IT initiative for GST is progressing well in collaboration with NSDL. A pilot project for creating a single window portal capable of registration, payment of tax and submission of reports has been finalized in consultation with some of the States. The user testing of the registration module thereof, as well as development of other modules is in progress. Single format for each of three aforesaid functions are being worked out. As mentioned earlier, we propose to deliberate on the implementational challenges of GST in this Conference.

Sir, the post independence organizational focus was revenue centric and its role was primarily regulatory, as it was the requirement of the day. We witnessed economic liberalization, reduction of tariff and gradual dismantling of licence raaj after 1991. Post 1991 the Indian economy started expanding and today it is the 10^th largest in the world by nominal GDP and 4^th largest by purchasing power parity. Since 2008, India has established itself as word’s second fastest growing economy. In this environment, there are indeed quite a few challenges before the CBEC. We have to cope up with the rapidly changing scenario.

Having visited our major achievements, I would also like to point out that we are aware of our weak links in the system as well. There is a large pendency of adjudication cases, number of refunds pending for three months have also grown, arrears of revenue pending realization or liquidation is well past Rs.30,000 crores. These are only illustrative. There are certain more areas of challenges. While continuing with our revenue collection efforts coupled with enforcement measures, we also have to pay equal attention to trade facilitation and taxpayer services. This would be a real tight rope walking. During the two day Conference our officers will deliberate upon each of the challenges before us. I assure you Sir, that during the year special drives will be undertaken to address each of these areas of challenge and we shall strive best to make the life of taxpayer a tad more comfortable and hassle free, than in the past. We would treat our achievements during the year only as ‘work in progress’ and we shall constantly endeavour to improve upon them. We shall view the challenges as opportunities to redefine ourselves. I assure you Sir, we in the CBEC will do our best to support you in your vision of nation building.

Thank you for your kind attention.

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