REPORT OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA FOR THE YEAR ENDED 31 MARCH 2011 (REVENUE RECEIPTS) GOVERNMENT OF MAHARASHTRA www.cag.gov.in TABLE OF CONTENTS PARAGRAPH HEADINGS PARA PAGE Preface v Overview vii - xvi CHAPTER I GENERAL Trend of revenue receipts 1.1 1 Response of the Departments/Government towards 1.2 6 audit observations Failure of senior officials to enforce accountability 1.2.1 6 and protect the interest of the State Government Departmental audit committee meetings 1.2.2 7 Non-production of records to Audit for scrutiny 1.2.3 8 Response of the Departments to draft audit 1.2.4 9 paragraphs Follow-up on Audit Reports-summarised position 1.2.5 9 Compliance to the earlier Audit Reports 1.2.6 11 Analysis of the mechanism for dealing with the 1.3 11 issues raised by Audit Position of Inspection Reports 1.3.1 11 Recovery of accepted cases 1.3.2 12 Audit Planning 1.4 12 Results of Audit 1.5 13 Position of local audit conducted during the year 1.5.1 13 This Report 1.5.2 13 CHAPTER II SALES TAX Introduction 2.1 14 Tax revenue administration 2.1.1 14 Trend of receipts 2.1.2 14 Analysis of arrears of revenue 2.1.3 15 Arrears in assessment 2.1.4 15 Returns filed under VAT 2.1.4.1 16 Assessee Profile 2.1.5 17 (i) Audit Report (Revenue Receipts) for the year ended 31 March 2011 PARAGRAPH HEADINGS PARA PAGE Cost of collection 2.1.6 17 Analysis of collection 2.1.7 17 Impact of Audit Reports 2.1.8 18 Results of audit 2.1.9 19 "Cross verification of Declaration forms used in 2.2 20 Inter-State Trade" (A Performance Audit) Other audit observations 2.3 38 Non-observance of the provisions of Acts/Rules 2.4 38 Excess grant of set-off under MVAT Act 2.4.1 38 Non-levy of interest u/s 30(4) of the MVAT Act 2.4.2 39 Irregular grant of exemption from payment of tax 2.4.3 40 against form 'H' Incorrect grant of set-off under the BST Act 2.4.4 41 Short levy of sales tax due to incorrect determination 2.4.5 43 of taxable turnover Acceptance of invalid declaration for stock transfer 2.4.6 43 Loss of revenue due to non-finalisation of 2.4.7 44 assessment within prescribed time limit Short levy of sales tax due to suppression of sales 2.4.8 45 Incorrect grant of exemption from payment of tax on 2.4.9 46 intra-State sales Incorrect/excess grant on interest on refund 2.4.10 47 Short levy of interest 2.4.11 48 CHAPTER III STAMP DUTY AND REGISTRATION FEES Introduction 3.1 49 Tax administration 3.1.1 49 Trend of receipts 3.1.2 49 Cost of collection 3.1.3 49 Impact of Audit Reports 3.1.4 50 Results of audit 3.1.5 51 Audit observations 3.2 52 Non-compliance of provisions of Acts/Rules 3.3 52 Short levy of stamp duty due to under valuation of 3.3.1 52 property (ii) Table of Contents PARAGRAPH HEADINGS PARA PAGE Short levy of stamp duty due to non-consideration of 3.3.2 54 value of movable property Short levy of stamp duty due to misclassification of 3.3.3 54 instrument Irregular remission of stamp duty 3.3.4 55 Short levy due to non-follow of the Departmental 3.3.5 56 instructions Incorrect grant of exemption of stamp duty 3.3.6 56 Short levy of stamp duty due to incorrect 3.3.7 57 classification of instrument CHAPTER IV LAND REVENUE Introduction 4.1 58 Tax administration 4.1.1 58 Trend of receipts 4.1.2 58 Impact of Audit Reports 4.1.3 58 Results of audit 4.1.4 59 "Sale/Allotment of land and levy and collection of 4.2 60 conversion charges" ( A Performance Audit) Development of Hill Station at Lavasa, Pune 4.3 90 Audit observations 4.4 108 Non-observance of provisions of Acts/Rules 4.5 108 Short levy of unearned income 4.5.1 108 CHAPTER V TAXES ON MOTOR VEHICLES Introduction 5.1 110 Tax revenue administration 5.1.1 110 Trend of revenue 5.1.2 110 Cost of collection 5.1.3 110 Impact of Audit Reports 5.1.4 111 Results of audit 5.1.5 112 "Computerisation in the Motor Vehicle 5.2 113 Department" (A Performance Audit) Audit observations 5.3 143 Non-compliance of the provisions of the Acts/Rules 5.4 143 (iii) Audit Report (Revenue Receipts) for the year ended 31 March 2011 PARAGRAPH HEADINGS PARA PAGE Non-recovery of motor vehicle tax and One Time 5.4.1 143 Tax (OTT) Non-recovery of motor vehicle tax 5.4.1.1 143 Short levy of One Time Tax (OTT) on imported 5.4.1.2 144 vehicle CHAPTER VI STATE EXCISE Results of Audit 6.1 145 "Levy and collection of State Excise Duty, 6.2 146 Licence Fees, Fines etc." (A Performance Audit) CHAPTER VII OTHER TAX AND NON TAX RECEIPTS Results of audit 7.1 175 SECTION A ENTERTAINMENTS DUTY Audit observations 7.2 176 Non/short recovery of entertainment duty 7.3 176 Non-recovery of entertainment duty from cable 7.3.1 176 operators SECTION B ELECTRICITY DUTY Electricity Duty 7.4 178 Non-levy of interest on delayed remittance of 7.4.1 178 electricity duty Non-remittance of electricity duty 7.4.2 179 Tax on sale of electricity 7.5 179 Non-levy of interest on delayed remittance of tax on 7.5.1 179 sale of electricity Non-recovery of inspection fees 7.6 180 (iv) PREFACE This Report for the year ended 31 March 2011 has been prepared for submission to the Governor under Article 151(2) of the Constitution. The audit of revenue receipts of the State Government is conducted under Section 16 of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971. This Report presents the results of audit of receipts comprising Sales Tax, State Excise, Land Revenue, Taxes on Motor Vehicles, Stamp Duty and Registration Fees, Other Tax and Non-Tax Receipts of the State. The cases mentioned in this Report are among those which came to notice in the course of test audit of records during the year 2010-11 as well as those noticed in earlier years, which could not be included in previous reports. (v) OVERVIEW This Report contains 31 paragraphs including four Performance Audits relating to non/short levy of taxes, duties, interest and penalty, etc., involving ` 399.64 crore. Some of the major findings are mentioned below: I. General x The total receipts of the State during the year 2010-11 were ` 1,05,855.87 crore, of which the revenue raised by the State Government was ` 83,240.19 crore and receipts from the Government of India were ` 22,615.68 crore. The revenue raised constituted 79 per cent of the total net receipts of the State. The receipts from the Government of India included ` 11,419.79 crore on account of the State’s share of divisible Union taxes which registered an increase of 38.45 per cent over the previous year and ` 11,195.89 crore received as grants-in-aid. (Paragraph 1.1.1) x At the end of June 2011, 10,293 inspection report paragraphs involving ` 1,722.20 crore relating to 4,682 inspection reports issued upto 31 December 2010 remained outstanding. (Paragraph 1.2.1) x 680 tax records of dealers for the period 2002-03 and 2004-05 to 2010- 11, pertaining to the Sales Tax Department were not made available to us during those years. Of these in respect of 455 cases, tax involved was ` 98.62 crore and in the remaining 225 cases the tax effect was not available in the Departmental records. (Paragraph 1.2.3) x During the period 2001-02 to 2009-10, the Department/Government accepted audit observations involving ` 3,451.40 crore, out of which an amount of ` 1,085.13 crore was recovered till 31 March 2011. (Paragraph 1.2.6) x Test check of the records of 1,216 units of Sales Tax, Stamp Duty and Registration Fees, Land Revenue, Motor Vehicles Tax, State Excise, Forest Receipts and other tax and non-tax receipts conducted during 2010-11 revealed under assessments/short levy/loss of revenue amounting to `ȱ909.52 crore in 6,655 cases. During the course of the year, the Departments accepted under-assessments, short levy, etc., of `ȱ274.44 crore in 2,372 cases of which 334 cases involving `ȱ93.09 lakh were pointed out in 2010-11 and rest in earlier years. Of these, the Departments recovered `ȱ261.79 crore during 2010-11. (Paragraph 1.5.1) II. VAT/Sales tax A Performance Audit on “Cross verification of Declaration forms used in Inter-State Trade” revealed as under: x We noticed that though the Department cancelled 20,542 Declaration forms during the period 2005-06 to 2009-10, these cancelled forms were not forwarded to the Record Section for cancellations and for notifying in the official Gazette, to prevent their misuse. (Paragraph 2.2.8.4) (vii) Audit Report (Revenue Receipts) for the year ended 31 March 2011 x We observed that the Department did not keep a sample of the colour, design and format of the forms prevailing in different States for comparison in order to identify the fake or forged Declaration forms.