Had the Central Excise and Customs department been vigilant, the Satyam Computer fraud could have been unearthed in 2007 itself. The Comptroller and Auditor General (CAG) of India in its report on Indirect Taxes Central Excise, Service Tax and Customs, filed before the Parliament, has revealed that Satyam had taken wrong credit on health insurance services obtained for its employees. The amount, which was to be paid to the Central Excise and Customs Department, was part of Cenvat (Central Value Added Tax).
The CAG has mentioned in the report, 2009-2010, that Satyam Computer Services Ltd, in Hyderabad II Commissionerate, engaged in rendering of consulting engineers services, manpower recruitment agency services, etc, took credit of Rs 4.15 crore during the period between February 2006 and July 2007, of the service tax paid on health insurance services obtained from insurance companies for the welfare of their employees.
It further states that the internal audit wing of the department objected to these wrong credits in August/October 2007 and in pursuance of these objections, the assessee (Satyam) reversed the entire credit on 31st August 2007. However, the interest payable on these incorrect credits from the date of taking credit to the date of reversal, amounting to Rs 46.37 lakh, was neither paid by the assessee nor was it demanded by the department. A CAG official, on condition of anonymity, said, It is major irregularity under Rule 14 of the Cenvat Credit Rules 2004, which says that where cenvat credit on any input services has been taken or utilised wrongly by a service provider, the same along with interest should be recovered.