The Ministry of Finance has asked the Central Board of Excise and Customs (CBEC) to make up for the revenue loss on account of oil duties rejig through additional mop up from the service sector, which constitutes 60% of the gross domestic product and has a 20% share in indirect tax collection.
The CBEC has already activated its revenue intelligence arm the Directorate General of Central Excise Intelligence (DGCEI) that has launched a crackdown on some big ticket corporate tax evaders. In the first quarter of this fiscal, DGCEI has booked 80 cases against many of these corporate houses and also slapped a tax penalty demand of Rs 1,650 crore. DGCEI is the apex intelligence and investigating agency for combating evasion of Central Excise and Service tax. This fiscal, the DGCEI is giving special focus on service tax evasion at the behest of CBEC chairman Sumit Dutt Majumdar.
Last month, the government had scrapped 5% customs duty on crude and an equal percentage points on petrol and diesel, which came down to 2.5% to keep the price rise in check. It also reduced excise duty on oil products from 7.5% to 2.5%. The loss estimated by the finance ministry for nine months of this fiscal was Rs 39,000 crore of which Centre's share is likely to be in the range of Rs 24,000 crore.
Last year, the DGCEI had booked 117 cases of service tax evasion worth Rs 522 crore. In some of these cases, the amounts evaded are likely to increase as the investigations are in progress, said a senior finance ministry official. Some of the major detections of service tax evasion were in renting of immovable property service, business support service, telecom service, management, maintenance or repair and commercial or industrial construction services.
The most prevalent modus operandi adopted by evaders was providing the services in a clandestine manner without accounting for service tax such as suppressing the transactions from the department by not declaring the same in the periodical ST returns, incorrect availing of exemption notifications, collection of service tax but not deposing to the government exchequer, incorrect availing of CENVAT credit and undervaluation services.
On the Central excise side too, duty evasion detected by DGCEI during the first quarter of current fiscal is to around Rs 227 crore vis--vis detections of Rs 115 crore during the same period in the previous year, showing an increase of 98 %. An amount of Rs 205 crore has also been recovered from assesses towards unpaid Excise duty and Service Tax during the current quarter.