During FY2012, the union government was unable to collect indirect taxes worth Rs63,000 crore due to reasons like injuction or appeal, often called as 'call book'
The Comptroller and Auditor General (CAG) has said that the Centre has been unable to collect more than Rs63,000 crore in indirect tax revenue in 2011-12 which were pending due to injunction or appeal among other reasons under a head called ‘call book’. The CAG while giving out this figure called for close monitoring of the process of review of call book items.
The CAG, in its report tabled in the Parliament, said, "Over 40,000 cases involving revenue of Rs63,191.14 crore-Rs 46,586 crore related to central excise and Rs16,605.14 crore from service tax-were pending in call book as of 31 March 2012."
A call book is a repository for those central excise and service tax cases where the demand could not be realised due to various reasons.
The number of such pendency has increased despite the Central Board of Excise and Customs (CBEC) emphasising on monthly review of call book cases.
“We tabulated the performance of the department in respect of call book clearance in central excise and service tax during recent years and noted that the pendency of call book cases is still very high indicating the need for close monitoring of the process of review of call book items. During FY 2011-12, the number of call book cases pending for over one year has crossed 20,000 in respect of central excise alone. The need for strengthening monitoring and review is also brought out through our observations raised during the course of compliance audit,” it said.
As many as 30,542 call book cases related to central excise were pending during fiscal 2012, of which 21,966 were pending for a year, 2,874 were six to 12 months old, 2,438 cases were three-six months old and 3,264 pending for over three months, the report said.
A total of 9,590 cases related to service tax were pending in call book during 2011-12. Of these, 3,780 were pending for more than two years, 3,322 were between one and two years old and 2,488 cases pending for up to one year, it said.
As per CBEC norms, cases which have reached a stage where no action can or need be taken to expedite their disposal for at least six months may be transferred to the call book with the approval of the competent authority.
Also, the cases in which the department had gone in appeal or injunction has been issued by the Supreme Court, High Court or Tribunal, cases where audit objections are contested and where CBEC has specifically ordered the same to be kept pending are entered into the call book.
These call book pendency were in addition to about Rs1.27 lakh crore central excise and service tax revenue stuck due to appeals and litigations pending before various authorities during 2011-12. Of the total of Rs1.27 lakh crore pending demand, Rs73,274.74 crore was for service tax and Rs54,172.65 crore for excise duty, it said.
During August 2013, liquid funds reported inflows of Rs321billion even as income funds observed outflows for the third successive month of Rs84 billion, Morgan Stanley in its research note on domestic mutual funds
During August 2013, equity funds saw marginal inflows of Rs4 billion after reporting outflows of Rs19 billion in the previous month. Similarly, fixed income funds reported inflows of Rs237 billion versus outflows of Rs479 billion in July 2013. This is according to a Morgan Stanley in its research note on domestic mutual funds.
During August 2013, according to Morgan Stanley, liquid funds reported inflows of Rs321 billion even as income funds observed outflows for the third successive month of Rs84 billion. At the aggregate level, the mutual fund industry saw inflows of Rs242 billion.
The trend in equity fund flows is given in the following chart:
At the end of August 2013, the domestic mutual fund industry assets remained at Rs7.6trillion, added the research note.
The fixed income assets under management rose 2% month-on-month to Rs6 trillion in August 2013.
On sector trends, according to Morgan Stanley, in July 2013, as per SEBI, assets under management for Technology continued to see the most month-on-month increase, while assets under management of Financials declined the most. At the end of July 2013, Financials sector continues to enjoy the largest weight in the domestic MF assets under management (at 22.8%) followed by Technology sector (at 13.1%).
Finally, the overall picture for the domestic mutual funds industry is given in the following table:
The new Companies Act has enhanced scope of auditors by mandating internal audit for such class of companies as may be specified, while by imposing civil liability on the auditors, the Act requires auditors to be more cautious and careful while auditing
Following the trend in the US, which replaced its 37 year old Companies Act in 2006, India is also replacing its nearly six decades old law (Companies Act, 1956) with the new Companies Act, 2013 (the Act). The New Act has already been assented by Lok Sabha and Rajya Sabha on 18 December 2012 and 8 August 2013, respectively. It received the nod from the President on 29 August 2013. The Companies Bill, which was in pipeline since five years, has now been enacted as Act no: 18 of 2013 that will replace the 1956 Act.
The 1956 Act had some 658 sections and 14 schedules and the new Act has 470 sections and 7 schedules. This does not mean that the Act has now been made smaller or simpler. The words ‘as may be prescribed’ is appearing at 416 places in the Act, which means a huge amount of law will be enacted by way of rules to be issued by the government in process.
As the Act has already got the assent of the President last month, the Ministry of Corporate Affairs (MCA) has placed on its portal, the draft rules for public comments on 6 September 2013 (Draft Rules) inviting comments till 8 October 2013.
Here are some conflicting provisions in the Draft Rules and the Act relating to rotation of auditors in listed and in certain class of companies to be specified.
Provision under the Act
Among others, one of the major changes, which the new Act is proposing, is that it has now put a restraint on the terms of the auditors. Under the 1956 Act, statutory auditors were to be appointed by companies annually. However, section 139 of the new Act now requires appointment (which has been defined by way of an explanation under sub-section (1) to include re-appointments also) of auditors at every sixth annual general meeting (AGM) and the appointment is to be ratified at every AGM.
On the sixth AGM, the auditor is eligible for reappointment, in terms of section 139 (9), subject, however, to the mandatory retirement provisions of sub-section (2) of the said section.
Additionally, in terms of sub-section (2), in case of listed companies or companies of a class to be notified, there is a bar on reappointment of an auditor, if he has already held: (a) one term of 5 years in case of an individual; or (b) two consecutive terms of 5 years in case of a firm. Once the bar on reappointment applies, there is a mandatory cooling-off period of 5 years.
On one hand, where the Act has enhanced the scope of auditors by mandating internal audit for such class of companies as may be specified, on the other hand, by imposing civil liability on the auditors, the Act now requires auditors to be more cautious and careful while auditing.
Provisions under the Companies Rules, 2013
After the new and strict provisions relating to audit and auditors in the Act, the Draft Rules seems to be another challenge for the chartered accountants. Rule 10 of the Draft Rules deals with provisions relating to audit and auditors.
Rule 10.4 (4) of the Draft Rules reads as:
“For the purpose of the rotation of auditors:
(i) In case of an auditor (whether an individual or audit firm), the period for which he or it has been holding office as auditor prior to the commencement of the Act shall be taken into account in calculating the period of five consecutive years or ten consecutive years, as the case may be.
(ii) The incoming auditor or audit firm shall not be eligible if such auditor or audit firm is associated with the outgoing auditor or audit firm under the same network of audit firms or is operating under the same trade mark or brand.”
Para (i) above says that for the purpose of rotation of auditors under section 139 (4) (applicable to listed and other to be specified class of companies), the existing term of auditors shall also be taken into account. This is clearly contrary to the language of section 139(2) of the Act, which refers to "one term of 5 years" or "two terms of 5 years each".
Prior to the commencement of the Act, there may be no appointment of auditor for a term of five years at all. Even if an auditor has been holding his office for 5 years under the 1956 Act, it is not one term of 5 years, but 5 terms of one year each. If an auditor gets reappointed, it does not mean the term is any longer than annual. However, under the Act, before issue of Draft Rules, it was predicted that the ‘term’ will be new term starting after notification of the Act. The Draft Rules have, though divergent with the Act, made it clear, the existing term under the 1956 Act will also be counted for calculating the 5 years or 10 years term. It would mean that if the tenure of appointment of auditors under the Act will effectively be 4 years or 9 years and all related conditions are to be read with such term only.
As the Draft Rules are open for public comments till 8 October 2013 only, the chartered accountants should raise objection/ concern over this particular point to MCA.
(The author can be contacted at [email protected])