Recovering arrears, increasing revenue: FBR can examine Indian tax system provisions

The Enforcement Wing of the Federal Board of Revenue (FBR) has the option to examine strict enforcement provisions of the Indian tax system to recover arrears, increase number of filers of returns, and increase revenue, using ''draft arrears recovery manual for Central Excise, Customs and Service Tax'' issued by the tax department on India.
Tax experts told Business Recorder here on Saturday that the Indian tax authorities have circulated the draft recovery plan to the field formations. Under the plan, there is a concept of Recovery Cells in India to exclusively deal with the recovery of government dues in the manner prescribed in Handbook on Recovery of Arrears of Customs Revenue.
The plan said that the arrears of revenue have been piling up over the years due to which it has been felt necessary to compile a ''Hand Book'' of all legal provisions, including instructions on the subjects for guidance and use of the officers. The officers of the Customs and Central Excise have been empowered under Section 142 of Customs Act, 1962, Section 11 of Central Excise Act, 1944 and Service Tax officers are empowered under Section 87 of Finance Act, 1994 to recover the arrears of revenue of Customs, Central Excise & Service Tax. Indian tax department has issued the Hand Book of Recovery of Arrears of Customs, Central Excise & Service Tax to the field formations for comments.
According to tax experts, the arrears recovery plan (2009-10) of direct and indirect taxes of the Federal Board of Revenue had been dispatched to the LTUs and RTOs for the last on year. However, the Enforcement Wing of the FBR partially achieved the desired results due to limited compliance by the field offices.
Experts suggested that the FBR can study the Indian ''draft arrears recovery plan'' to study all enforcement laws using one compendium to improve recovery of arrears. The draft arrears recovery manual could be studied to have an update on all enforcement provisions of the Indian tax system for recovery of arrears. Particularly, detailed procedures have been highlighted for the attachment of movable and immovable properties in India. The recovery plan has clubbed all past instructions to the field formations for recovery of arrears.
The draft of the Indian recovery plan shows that different provisions of the Customs Act could be utilised for recovery of arrears. Under Indian Customs Act, 1962, the Assistant Commissioner of Customs may recover or may require any other officer of customs to recover the amount so payable by detaining and selling any goods belonging to such person.
The draft recovery plan has also referred to the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995. The section 28 of the Indian Customs Act, 1962 provides for recovery of any duty which has not been levied or has been short-levied or erroneously refunded. It is important that the demand should be served on the importer within the time limit under section 28 of the Customs Act as otherwise the demand shall become time barred and legally not recoverable.
Indian tax department has further clarified that under Finance Act, 1995, the powers have been delegated powers to customs officers under Section 142 of the Customs Act, 1962 for recovery of arrears. In terms of the amended section 142 of the customs Act, 1962, in addition to the existing modes of recovery of govt dues mentioned therein, a provision has been made to empower custom officers to attach and sell the moveable and/or immovable property of a defaulter as per the rules to be framed in this behalf by the Central Government. The plan has also referred to other provisions of the Customs Act for recovery of customs duty dues from importers.
In India, there is, in law, a distinction between movable & immovable property. The mode and procedure of attachment of the two categories of properties differ in significant respects. Hence, the standard format for the two types of property, which are being prescribed as distinct from each other. The standard format which should be used for ordering the attachment for the movable and immovable property has been given in the relevant law, recovery plan said.
If the defaulter does not pay the government dues within a period of 30 days together with the cost of detention of the property, the authorised officer should obtain the Commissioner''s order for realising the amount by sale of the defaulter''s property in public auction. The commissioners are competent to fix the reserve price in respect of any property of the defaulter to be sold in public auction and further order that any bid shall be accepted only on the condition that it is not less than such reserve price, tax experts added.
Tax analysts also pointed out that the procedure for sale of movable/immovable properties by Central Excise Officers for recovery of Central Excise dues. The law empowers Central Excise Officers to attach and sell movable and/or immovable properties of any person who has failed to pay any sum due to government.
The recovery plan has also specified the legal provisions of recovery of arrears of service tax. In case of failure to pay service tax, the penalty is not less than Rs 200 for every day during which failure continues, or @ 2 % of such tax per month, whichever is higher but shall not exceed the amount of service tax due.