CAG recommends vigilance probe over taxmen’s candy confusion

LUCKNOW: The state government appears to have lost a large chunk of tax revenue as its officers made ‘typographical errors’, mistaking Candyman and Eclairs to be ‘lemonchoos’ (a kind of lozenge) and lollipops and hence applied the wrong tax rate on them, according to a CAG report tabled in the state assembly on Monday.

Taking strong exception to such mistakes, the Comptroller and Auditor General (CAG) has recommended, “Commercial tax department (CTD) should consider instituting an inquiry from the vigilance angle in cases where typographic errors have been stated as the reasons for application of incorrect rate of tax.”

Giving specific details of the typographical errors mentioned in the tax assessment orders, CAG on Monday referred to a case of Kasganj.

It observed ,“Sale of toffee was shown in the assessment order (taxed) at 5 per cent. As per the audit, this commodity should have been taxed at 13.5 per cent.”

The department, in its reply, however, observed, “The commissioner judgement under 59 candy (toffee) contain 70 per cent sugar will fall under schedule II such as lemonchoos and lollipop

etc.” The CAG, in its rebuttal, observed the department’s reply was not acceptable “as the dealer is engaged in selling of ITC Ltd products such as Candyman, Eclairs, Jelimals etc.

Those branded toffees contain sugar less than 70 percent. Only those toffees which contain minimum 70 per cent sugar, 25 per cent liquid glucose and five per cent essence colour combination will fall under the said schedule such as lemonchoos, lollipop. Sale of Candyman Eclairs, Jelimals etc is taxable at 13.5 per cent as per UPVAT Act.”

CAG referred to another case from Kanpur where toffee was assessed for 5 per cent tax against 14 per cent applicable.

“The reply is not acceptable “as the dealer is engaged in selling Perfetti Brand toffee such as Mentos and Alpenliebe etc. These branded toffees contain

sugar less than 70 per cent…… Sale of Perfetti Brands toffee is, therefore, taxable at 14 percent as per the UP VAT Act,” CAG observed.

Besides typos, the department’s officers also mistook food supplements with spices and custard in Lucknow, fire extinguishers with PVC pipe and hose pipe in Agra.

“In 20 cases, the department did not accept the audit observation. The main contention of the department in 10 of the 20 cases not accepted by them was that the concerned AAs while passing the assessment orders, had made typographical errors in their initial orders, which they subsequently corrected when audit observations were received by them.

Audit urges the department to fix responsibility,” CAG observed.