Collection of third party information to check tax evasion

Posted on    01 October 2008

The Central Government has issued five notification nos. 38/2008 CE(NT) to 42/2008 CE(NT) all dated 29.9.2008 to facilitate collection of information from third party sources or from manufacturers themselves, in order to identify manufacturers with a propensity to evade taxes and to create an atmosphere of voluntary compliance.

An annual installed capacity statement namely ER-7 has been prescribed which is to be filed by all assessees, for declaring the annual production capacity of the factory, which is required to be filed by every assessee for a financial year by 30th April of the following financial year. The ER-7 for the year 2007-08 is to be filed by 31.10.2008. Further, the Declaration required to be filed by the units availing of exemption under the small scale exemption scheme has also been modified to include details relating to PAN No., VAT registration No. and information regarding electricity connection. The central excise field formations have also been advised to identify evasion prone commodities, and seek data relating to electricity consumption of such units from the distribution companies and verify the production details declared in the monthly excise returns.

The Central Government has also amended the criteria for filing of the ER-4, ER-5 and ER-6 returns making it mandatory for all assessees paying total duty (CENVAT credit + Cash) of more than Rs.1 crore in a financial year. ER-4 is an annual financial return filed by the assessees declaring the financial details regarding purchases, sales, other income etc. ER 5 and ER-6 are returns for furnishing information relating to the principal inputs used by the assessee and the monthly consumption of such inputs.

Regular analysis of the information from these sources is to be utilised to unearth evasion of taxes.

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