CAG pulls up revenue dept for poor follow up of VCES

Official auditor CAG has pulled up the revenue department for failure to take stringent action against assessees who took advantage of the immunity provisions under the service tax compliance scheme and again became non-filers.
In its performance audit report on Voluntary Compliance Encouragement Scheme (VCES), 2013, the Comptroller and Auditor General (CAG) said that such schemes should be followed by an extensive investigation drive to bring evaders under tax net.
This, CAG said, will "send a strong message to the defaulters who did not come clean despite the Scheme... (it will) have effective deterrent effect and also boost morale of regular tax payers".

The government had come out with amnesty scheme VCES for service tax evaders. It granted them immunity for truthful declaration of service tax dues and allowed a defaulter to pay dues without any penalty or late payment charges.
Deficient design of VCES application form and non- prescription of proper database by Board deprived department the benefit of having valuable data for post-scheme analysis and monitoring, CAG said.
"The department had failed to initiate stringent action against the stop filers/ non-filers, who had enjoyed the immunity provisions under the VCES and again reverted back to the habit of non-filing to returns," it said.

CAG said one time amnesty scheme like VCES can be a real one time solution for the problem it sought to redress only if the tax systems are strengthened and follow up mechanism is made stringent.

In 15 Commissionerates where data was made available to audit, we observed that only 62 per cent of the returns due for filing were actually filed post-VCES and no action was taken by the department against non-filers, it said.
CAG said the department did not initiate any action to recover the balance of the declared tax dues or to levy applicable interest and penalty in respect of 78 rejected cases involving an amount of Rs 23.02 crore.

"The scheme was introduced with undue haste as the department responded with 'lack of time' to several audit observations," it said.