‘Failed to levy Rs 1200 crore on petroleum products’

Exemption allowed on sale of petroleum products in the absence of prescribed certificates evidences resulted in non-levy of tax of Rs 1,247 crore, it revealed.

In addition, the absence of provision to levy tax at second point-of-sale in respect of petrol and diesel resulted in dealer’s commission not being subjected to levy of tax. 

The inclusion of such a provision would have given an additional revenue of Rs 645 crore, said the report. The levy of VAT on petroleum products contribute significantly to the state’s revenue from tax on sale of goods. 

The audit was conducted to ascertain whether the existing system for assessment, levy and collection of tax on the sale of petroleum products was sufficient. 

The audit findings further said with regard to levy collections of VAT and CST, the common issues include exemption on the sale turnover among oil companies that were allowed without verification, absence of provision to levy tax at second point-of sale, and non-inclusion of private oil sector companies in explanation III to the second schedule.

It was also noticed several issues to each petroleum products such aviation turbine fuel (ATF), liquefied petroleum gas (LPG) and superior kerosene oil, light diesel oil, high speed diesel oil and furnace oil. 

In the case of ATF, the tax that was not levied in the absence of certificates and documents worked out to Rs 599.53 crore. In addition, the incorrect allowance of reduced rate of tax on the turnover of Rs 880.64 crore resulted in short levy of tax of Rs 211.35 crore. Similarly, in the case of LPG, the audit report revealed that 129 LPG dealers in 90 assessment circles had effected the purchase of commercial LPG cylinders for Rs 23.82 crore. 

“The tax and penalty leviable on the turnover is worked out to Rs 5.18 crore,” the report said. Similarly, short levy tax was also noticed in high speed diesel oil to the tune of Rs 5.38 crore, following which the audit authorities from CAG issued notices to the officials and dealers. Further reports were awaited, it noted. 

The failure to properly pursue cases pending in appeal resulted in blocking of arrears of Rs 1,119 crore in Commercial Taxes Department, revealed the audit into collection of taxes by the Comptroller and Auditor General (CAG).

In addition, the process of recovery of arrears under the Revenue Recovery Act suffered from deficiencies on account of non-initiation of revenue recovery proceedings, delay in initiation of action for attachment of property and failure to conduct auction of the attached of property, which resulted in arrears of Rs 720.59 crore remaining uncollected. The revenue arrears of the state predominantly comprise of that pertaining to Sales Tax and Value Added Tax. 

The arrears of principal heads of revenue of state at the end of March 2017 was Rs 31,048.57 crore, of which arrears of Sales Tax, Value Added Tax of Commercial Taxes Department was Rs 27,320.65 crore – a whopping 88 per cent. The audit scrutiny of records revealed deficiencies including not following up, noncompliance or delay in non-pursuance of the court and other judicial orders. This led to protracted legal proceedings, resulting in delay in collection of arrears. The report added that the absence of system to monitor disposal of cases pending with various appellate and judicial fora resulted in failure to undertake timely follow up action to ensure early realisation of revenue to the tune of Rs 786.71 crore in four assessment circle. The audit authorities found deficiencies in maintenance of demand register and incorrect entries found in ‘L’ register. 

In the register in Thudiyallur circle, officials noticed that the penalty of Rs 6.88 crore was raised against a dealer. However, the entry was done for just Rs 68.76 lakhs. Similar wrong entries were found in the L register in Bodinayakanur  and Tiruvallikeni circles to the tune of several lakhs. In the recovery of arrears under the Revenue Recovery Act, the audit report noticed that though there was default in payment of arrears of Rs 527 crore by dealers in 26 cases, no action was initiated to recover the money. The CAG also found several violations in internal control mechanism of the department like preparation of consolidated arrear position and follow up mechanism of collection of arrears.