The CBEC notified on 5 October the procedures for large taxpayers to register with special units in the metro cities to get special facilities like transfer of excess CENVAT credit between units by way of simple in house transfer challan. Registration also allows large taxpayers to move intermediate goods between units for manufacture of final products without excise bond based on simple in-house movement challans. Large taxpayers are defined as those who pay excise duty or service tax above Rs five crores or income tax over Rs 10 crores.

An LTU will be headed by an officer of the rank of Chief Commissioner who will be drawn from Income Tax Office in the case of Mumbai and Delhi who together are expected to account for six out of every 10 LTU. The remaining LTUs at Kolkata, Chennai and Bangalore will be headed by officers from the Customs and Excise service. Officers of the rank of Additional Commissioner and below drawn from the excise department will assist the Chief Commissioners at all places. Besides, there is the concept of “client executive” who will be exclusively designated to liaise with a particular company.

Only Bangalore is live: As of now, only Bangalore LTU headed by an excise chief commissioner is operational from 3 October 2006 and is inviting applications for registration. It is believed that 30 or so applicants have asked for the facilities including the engineering giants ABB and Volvo. This is about one third of the Bangalore potential.

Chennai is expected to follow after seeing the Bangalore experience. The big ones at Mumbai and Delhi will be taken up last towards the middle of 2007. It is believed that there is an all India list of 1,000 entities who qualify for the LTU status. However, not all LTUs are comfortable with centralization of control their manufacturing and service tax affairs in the in the hands of the government. Registration as LTU is, as of now, voluntary. The rules also allow a registered LTU to opt out and deregister.

CBEC Circular promises: The CBEC says that the consent form as specified in the annexure to the excise notification 20/2006 dated 30 September will be verified within seven days and registration as LTU will be issued. The consent form asks for details of income tax, excise and service tax registration. In addition, it calls for detail of actual tax payments on the three heads of revenue from 04-05 onwards. Once the acceptance letter is received, excise returns will be filed only with the LTUs. Refunds and rebate claims will lie with the LTU. Audit of excise and service tax records will be centralized.

Show cause notices will be adjudicated at the LTU. Cases in which personal hearings are already concluded will be decided by the jurisdiction commissioner. All pending cases will be centralized and followed up with the respective quasi judicial and judicial authorities only by the LTU. Proof of export will be accepted only by the LTU.

The new procedure does not mess with duty payment. The centralization of this is not mandatory, the duty can be paid in the jurisdiction excise office also.

Trade facilitation measure may become another barrier: The ill conceived LTU measure is bound to turn into a nightmare for the department who may well see the well defined field formation lose their power overnight. The large excise duty payers are already very well known in the department and most of them follow the letter of the law. Any attempt at evasion is detected very easily by the experienced superintendents and inspectors, as much as two rupees of every ten evaded is distributed to informers and departmental officer by way of mercenary reward. The centralization of administration of far off places in the port city of Mumbai where most head offices are located will disorient the command and control structure of the excise commissioners which starts at the range in the area of the factory and goes up to the commissioner and then board with branches in adjudication, enforcement and intelligence. Now an income tax chief commissioner in Mumbai will co-ordinate with an excise commissioner located in Shillong to collect tax. Income tax and excise are as different as chalk and cheese, the first is a matter of accounting while the second is a related to complex production processes.

At another level, the slow poisoning of the excise field formation by the LTU is a good step. It will reduce the draconian powers enjoyed by the excise officers in the field and give some breathing space to the poor industry which continues to suffer the license permit raj even today. The other segments of the industry with an all India character should demand a similar one window service in a place like Delhi to get the government machinery off its back.

The facilitation of all India movement without excise bond and movement of credit between units is a welcome step. However, without a corresponding measure on the sales tax/VAT side and the continuation of the nuisance of CST, the invoice at the factory gate will not die as a document even though it may not be required in cases of transfer of goods.

Not much on income tax: On the income tax side, there is not much change since the returns of already being filed centrally at the registered office or head office and there is a single assessment being made. It is claimed that returns will be easier to file and refunds will be easier to claim with the adoption of the LTU concept. As it is, the special officers are already deputed for each big client; the new system cannot better the existing one in this respect. The Chartered Accountants would not like to disturb this system for no real advantage.