Chapter 7 - Indian Revenue Service Customs and Central Excise (IRSC and CE) | A Bouquet of Services by IPS Lohit Matani and IPS Vishal - UPSC PDF Download

Indian Revenue Service

Customs and Central Excise (IRS-C & CE)

Contributor: Mr. Shevare Dilip Vana, IRS (C&E) 2015 Batch

7.1 Structure and Overview

IRS-C&CE comes under the Central Board of Excise and Customs in the Department of Revenue, Ministry of Finance. The board is headed by a chairperson who is an ex-officio secretary to the Government of India. The board discharges various functions with the help of its field organizations like the Zones of Customs and Central Excise, Commissionerates of Customs and Central Excise, the Directorates and the Opium and Alkaloid factories under the Central Bureau of Narcotics.

7.2 Roles and Responsibilities

An IRS-C&CE officer performs a very significant role in the economic progress and development of the nation. The following are his/ her different responsibilities:

I.Customs Duty Related Functions:

An officer of IRS-C&CE is supposed to perform pure policing task while assessing and collecting customs duty for India. He/ she is at the forefront of revenue collection. He/ she is responsible for collecting customs revenue from all the goods entering the borders of India. He/ she has the power to check any person entering in India for the purpose of revenue collection. He/ she has all policing powers like search, seizure and arrest. Officers also man important positions in departments like Directorate of Revenue Intelligence and Enforcement Directorate for enhancing the collection of customs duty and preventing its evasion. Their role is significant in safeguarding the economic frontiers of India as they prevent the impact of anti-dumping and countervailing duties on Indian economy.

II.    Adjudicating Functions:

From the first profile as an Assistant Commissioner, the officers are required to perform quasi-judicial functions as a part of their daily work. They adjudicate disputes and cases relating to collection as well as evasion of customs duty, excise duty and service tax.

III.   Excise Duty Related Functions:

Under this filed, the officers visit different factories and industries to supervise the collection of excise duty. In this role, they verify whether the production units and inventory stocks in the factory match with the excise duty paid by the concerned factory. They work towards containing malpractices of misdeclaration and duty evasion. For this they study the price structure, marketing pattern and classification of commodities vulnerable to evasion of Central Excise duties. They also study the modus operandi of evasion of excise duties. While inspecting factories, they also check the health of machineries and take appropriate action against factories using outdated and unsafe machineries.

IV.   Narcotics Related Functions:

IRS-C&CE officers are instrumental in the implementation of the NDPS (Narcotic Drugs and Psychotropic Substances) act and preventing the use of narcotics and drugs trafficking. For this they have normal police related powers of raiding an area suspected of containing narcotic drugs. They then perform search and seizure and arrest the person suspected of being involved in drugs trafficking. They are instrumental in conducting secret operations to break the narcotics network and market in the country. They also investigate cases under NDPS act. Moreover, they take preventive measures to avoid smuggling of narcotics outside of India. Under the preventive measures, they issue license for cultivation of opium (in Uttar Pradesh, Rajasthan and Madhya Pradesh), control its supply and procurement of legal opium in India.

V. Service Tax Related Functions:

IRS-C&CE officers are responsible for assessment, collection and adjudication of service tax in India. In their respective jurisdictions, they are supposed to calculate the potential amount of service tax that should be paid in the region. Then they are responsible for collection of that tax from all the service providers in their jurisdiction. In this regard, they also perform intelligence and investigative functions to contain tax evasion. Finally, they adjudicate cases in matters of under or over collection of service tax, from any service provider, or any other service tax related disputes.

VI.   International Functions:

They are responsible for the implementation of international conventions like Rotterdam Convention (on international trade in certain hazardous chemicals and pesticides) and Convention on Biological Diversity. They also assist and advise CBEC in the implementation and monitoring of the working of the WTO Agreement on Customs valuation.

VII. Investigation Functions:

They investigate cases of Intellectual Property Rights (IPR) violations, narcotics and drugs trafficking, illegal arms trafficking, smuggling, misdeclaration of goods and tax evasion.

VIII. Policy Formulation  Functions:

Officers provide key policy advice on important issues like GST, new forms of indirect taxation, export incentive schemes, etc.

7.3 Normal Growth Profile

We will be discussing about the various career opportunities an IRS-C&CE Officer has in a separate topic. However, this topic only deals with various ranks an Officer holds during his professional life. These ranks are held when he/ she is working in his/ her main line department. Each zone in this department is headed by a Principal Chief Commissioner.

7.4 Recruitment

The recruitment into IRS-C&CE happens through two channels:

1. People are inducted into IRS-C&CE after qualifying in the Civil Services Exam conducted by UPSC.
2. The Group officers in different zones are promoted to the IRS-C&CE grade after 20-25 years of service (50%).

7.5 Training

The training structure of the IRS-C&CE is divided in to the phases as mentioned below.

• Mid-Career Training: The service also conducts Mid Career Training in the form of Phase 3 (after 8-12 years of service), Phase 4 (after 16-18 years) and phase 5 (after 24-28 years).The training of IRS-C&CE is very rich and diverse. In the period of one and a half year of basic training, officer trainees hardly stay in their parent academy. They visit several institutions like National Police Academy (NPA), National Industrial Security Academy (NISA), Wildlife Institute of India, Indian Institute of Foreign Trade (IIFT), National Academy of Legal Studies and Research (NALSAR), Indo-Tibetan Border Police (ITBP), Border Security Force (BSF), Coast Guard, Indian Army, Navy. They also have a foreign attachment with the customs and excise academies of foreign countries.
• In-Service Training: Apart from the above formal training structure, various in service courses are conducted by NACEN in order to impart expertise in certain emerging fields like Cyber Security, Digital Evidence, IPR, GST, Green Customs, money laundering, drugs law enforcement, TRIPs/ IPRs, etc.

7.6 Variety of Opportunities for IRS-C&CE Officers

Apart from the usual work profile in the State government, IRS-C&CE Officers have ample opportunities to serve in organizations of State, national as well international level.

7.7 Perks, Privileges and Advantages for an IRS- C&CE Officer

1. This service is a uniformed service which provides a distinct sense of dignity among the public.
2. Officers have a lot of power in border areas. The number of subordinate staff is also higher in these regions.
3. Officers get a firsthand experience of the functioning of economy by visiting several factories and industrial units.
4. Service will gain importance after the roll out of GST regime. Officers will play a nodal role in the implementation of GST.
5. It is one of the few services which provide an opportunity to play a magisterial role along with executive roles.
6. The officers behave as a generalist (handling tax administration) as well as a specialist (in niche economic and technical areas).
7. Officers lie at the cutting edge of the interaction between trade and government. Every action of them has a huge bearing on the dynamics of trade and economy as well as public perception towards the government.
8. Officers act as agents of economic development by aiding in trade facilitation and ease of doing business.
9. By guarding the economic frontiers, the service plays an important role in safeguarding the security of the country.
10. Officers get a sense of satisfaction in the fact that every single penny collected by them leads to social and economic development of the country.
11. The government is planning to provide deputation to the officers in State Governments (like All India Services). This will give a new horizon to the service.
12. The job of IRS-C&CE provides sufficient time for maintaining work life balance and developing their interests and hobbies.
13. It provides sufficient opportunities for IRS-C&CE spouses to shift to the place where their better halves are working (if he/ she is in another government service).
14. Postings are normally in major cities.
15. For the above reasons, it is known as a female friendly service.
16. Political interference and pressure is very less in this job.

As seen in the previous topic, the number of national and international deputation opportunities is very high in this job. The officers wear multiple hats during their service period.

7.8 Occupational Hazards

This job has less public interface. The officers are shifted from one field to another- from customs, to excise to narcotics and service tax. Thus they become like a rolling stone, who gets no mosses. In the adjudication work, they face various problems due to lack of adequate legal and judicial training. They are also sometimes severely scolded by the higher courts on account of erroneous judgments. This quasi-judicial role adds to their work pressure.

7.9   Case Studies Indicating the Work, Challenges and Dilemmas Faced by an IRS-C&CE Officer

7.9.1 Role during Indo-Nepal Dispute

Mr. Savinash Bhadda was posted as Deputy Commissioner of Raxaul, a zone lying at the Indo-Nepal border. When the Indian government decided to act against the maoist government of Nepal, he was suddenly entrusted with a big responsibility. This action of Indian government was in response to the then Nepalese government’s decision to give no rights to the Madhesis. In this regard, the Indian Government decided to impose economic blockade and ban the movement of goods across the Indo-Nepal border.

However, as this is an open border, many challenges were faced in imposing this ban. The whole burden of executing this blockade came to Mr. Bhadda. He used to work continuously in stopping pilferage, smuggling, unrest among the public, agitation, destruction of public property, traffic management, and fake currency trafficking. Along with this, he was also responsible for ensuring proper trade functioning in his area of jurisdiction.

His work gave him an unparalleled exposure in the district of Raxaul having convergence from district administration, law enforcement and tax administration. During his tasks, he often used to analyze the impact of his work. He realized that strict implementation of government orders is leading to economic suffering of the local people of Raxaul and increasingly impoverishing them, as the economy of the district and Nepal are highly intertwined.

Q. What ethical dilemmas did the officers faced while executing his duties? Should he strictly follow the government orders or should he find a middle path? What would have been your strategy in this situation?

7.9.2 Tax Evasion Operations

IRS-C&CE officers get a sense of satisfaction in preventing huge amounts of tax evasion done by big multinational corporate. Their hard work results in increasing revenue for government which can aid in the socio-economic development of the country.

Mr. Pankaj Kumar played a similar role in unearthing tax evasion by a reputed electrical and electronic goods manufacturing company of India. The goods produced by the company are sold both in India and abroad. The company used to under-invoice their production i.e. they would produce higher number of goods but show less production on papers. This used to decrease the excise duty on their production. However, the illegal non-taxed products were smuggled and sold internally in black market. The company was colluding with politicians and bureaucrats to support their nefarious activities.

Pankaj was posted as an Assistant Commissioner in the Anti-Tax Evasion Unit of a Zone where many of the factories of the company were located. He was smart enough to understand the foul play being played by the company. He decided to act against the company. He analyzed the excise duty data of the company for last many years, and understood the pattern of tax paid by them. He also monitored the annual returns filed by the company. He frequently visited the factories and monitored their production. On this basis, he found a huge discrepancy in the total production in actual and that shown on papers. He decided to make a report with detailed data clearly showing the amount of tax evasion done by the company.

However, he faced many hindrances. The owners of the factories used to carry weapons and restricted his free access to various industrial units. He faced political pressure from various quarters to stop his investigation. On one side he got an offer of large amount of money to stop his investigations, on the other side, he faced a life threat from anti-social elements employed by the company.

Q. What are the options with Pankaj? What ethical dilemmas is he facing? How should he overcome these challenges?

7.9.3 Interpretation of Service Tax- Bashing by Higher Courts

Service Tax is a new field of taxation in India. Many areas of service tax are left to the interpretation of officers and many of them have no precedence. Officers have to apply their discretion according to the spirit of the service tax laws and in the interests of the general public. The responsibility and authority in this regard is immense. However, sometimes the interpretation done by the officer may become risky, although it may be in good faith. On many occasions the higher courts have criticized the bona fide actions of the officers while interpreting the provisions of service tax.

For payment of service tax, service providers have to fill a Service Tax form. Then according to it, they have to file returns every six months. The service tax paid by the various service providers is actively monitored online, as well as physically, by the Assistant Commissioner of Service Tax.

Mr. Sachin Gupta was posted as Assistant Commissioner of Service Tax in a zone where there were many educational service providers as well as many coaching centers. He saw a pattern in these coaching institutions. There were many schools that used to impart school education in the morning but operated as training centers for the IIT-JEE examination in the evening. The teachers were different in morning and evening; however, students undergoing school education and IIT-JEE coaching were the same. The school did not used to pay any service tax on the school education as well as on coaching the students.

However, Sachin Gupta realized that these schools are evading service tax on the coaching service they are providing. Although school education does not come under the service tax net but coaching service providers are required to pay the same. Sachin analyzed the total service tax evaded by the schools and directed them to pay it. However, the schools appealed against the order of Sachin in High Court. In the High Court, schools were able to show that they do not charge separate fees for the morning and evening classes and it was part of school education. Therefore, Sachin’s decision was also criticized by the High Court.

However, Sachin decided to appeal in the Supreme Court as he could easily understand the nexus of the schools and coaching classes in evading service tax.

Q. Being in the place of Sachin, what would be your strategy in this situation? What challenges did Sachin face? How can you build your resilience in such situations when your bona fide actions are criticized by higher authorities and courts?