While the government on one hand claims to ensure ease of doing business, the Budget proposal authorising customs officers to detain a person for verification in the interest of revenue or for preventing smuggling has serious scope for misuse.
Such persons would be required to undergo authentication and an enabling provision has been proposed in the Budget. They would be required to produce their Aadhaar or other relevant documents. Incorrect information or documents could invite penal actions such as holding of refund or suspension of registration given under the Customs Act.
“We want to tell the government that this provision could be misused and the small industry is not comfortable with it. This is not a good step,” said Animesh Saxena, President of the Federation of Indian Micro Small and Medium Enterprises (FISME).
In her Budget speech, Finance Minister Nirmala Sitharaman said that recent trends revealed that certain bogus entities were resorting to unfair practices to avail undue concessions and export incentives.
“While we have intensified our efforts against such nefarious activities, provisions are being incorporated in the Act for enhanced penalty and prosecution for such offences,” she said.
As per the proposed change in the Customs Act, misuse of duty-free scrips and drawback facility involving more than Rs 50 lakh will be a cognizable and non-bailable offence.
In recent times, there have been some cases where traders have cheated the government by hiding information or misclassifying a consignment, leading to revenue loss for the public exchequer. Fictitious bills were also generated to take export benefits.
In order to prevent such frauds, the Centre recently ordered manual checking of shipments and close verification of input tax credit (ITC) claim.
Tax experts said that the proposed change in the Customs Act was necessary given that currently custom officers lack the required authority to start prosecution.
“Some of the big companies have been found to have wrongly availed various benefits. This needed authentication and scrutiny and the Budget has provided for the enabling provision,” said a tax expert, who did not wish to be named.
He also said that customs officials would have to have reasonable basis for suspicion to detain a person.
However, some of the experts also felt that the proposed provision should be used sparingly fearing its misuse.
“It is very important that this provision is used very selectively and in appropriate circumstances. It should not be a tool to threaten businesses. That is how it should be. There is responsibility on both sides, but more on revenue officers because when they are given such wide-ranging powers, there should be some mechanism to monitor the exercise of power,” said Amit Bhagat, Partner (Indirect Tax Practice), Dhruva Advisors.
The new provisions have been inserted in the Finance Bill under chapter (XIIB) on Verification of Identity and Comliance.