Pac at odds with Finance Ministry on funds

By G. Srinivasan

The alacrity with which the Ministry of Finance has come out with a clarification on the recent findings of the Public Accounts Committee (PAC) that the former has disbursed Rs 37,365 crore in interest on excess tax refund without proper authorization from Parliament is astounding at the best and confounding at the worst.
Normally PAC takes up matters raised by the Comptroller and Auditor General of India (CAG) when it smells a rat in the implementation of policies by the administration. It did so when the audit (CAG Report for 2011-12, pertaining to “Expenditure incurred on interest on refunds of taxes”) detected that “expenditure on interest on refunds of taxes amounting to Rs 10,499 crore was incurred by the Central Board of Direct Taxes in the year 2011-12 without the authorization of Parliament”. The CAG went on to highlight “a total expenditure of Rs 37,365 crore on interest payments was incurred over a period of five years from  2006-07 to 2010-11 without obtaining the necessary approval.” Thus the humongous amount of Rs 37,365 crore on interest expenditure on excess tax is not attributable to the PAC as the Parliamentary Committee was only citing CAG figures.
An interesting facet to the clarification from the Ministry of Finance (MoF) is that it is not the first time that it got stung by the PAC report that it had to rush with its view on a weekend to the media. In fact, the latest PAC report was only the “follow-up one on the action taken replies submitted by the Government on the observations/recommendations contained in their 66th report on “Expenditure incurred on Interest Refunds of Taxes” tabled in Parliament on February 26, 2013. So all along these months, the MoF did not bother to articulate its position on the issue other than exchanging letters and letting its top honchos depose before the PAC. So when the PAC was not convinced about the stance of the MoF, it came out with the follow-up report early this month, which made the Finance Ministry to concede that “the PAC  recommendations and observations will receive due consideration and responded to within six months of presentation as per requirement”.   This meant for the second time the MoF conveniently ducked the issue of how its action is tantamount to contravention of constitutional provisions as the PAC so titled its follow-up report!  The PAC is not amused by the ploys of the MoF!
After the CAG detected the lapse, the PAC headed by Dr. Murli  Manohar Joshi presented two reports on the same issue within a year but the obduracy of the MoF in not accepting the supremacy of Parliament over executive decision in treating  expenditure on interest on refunds without due  imprimatur from the legislature only smacks of its supercilious  stubbornness. How else one should construe when confronted by the PAC and was asked as to whether the rules/sub-rules of the department could over-ride the Constitutional provisions, the Secretary, Department of Legal Affairs admitted during evidence that “the Constitution was supreme”?
The PAC report further noted that the Law Secretary also deposed that the matter was referred by them to the Attorney General (AG) for the second time ‘because the Ministry of Finance at the level of the Finance Minister wanted reconsideration’ of the opinion that had been tendered earlier by the AG underpinning the CAG observation. In his first opinion on September 25, 2012 to the PAC, the AG said “the objection taken by the CAG with regard to the practice followed in relation to payment of interest on refunds of excess tax is completely justified. The proper procedure would be to clearly indicate the tax collection as a receipt and estimate the interest payable on refund of taxes as expenditure.  I agree with the view of the CAG that the reason given with regard to administrative difficulties is not tenable”.
Not the one to be satisfied with the revised and different stand of the AG to its follow-up study, the PAC took evidence of the AG on September 2, 2013 to ascertain the reasons for “completely reversing” his earlier opinion . The AG opinion for the second time incorporated in the latest follow-up PAC report quoting the AG as having said thus: “The only reason why I reconsidered was because I felt that if ultimately the facts are going to be placed before Parliament, even the Income Tax Act has been made by Parliament, statutory refunds have been provided for in the Income Tax Act and interest on refunds is also provided for, I did not feel that there was anything which could be done without reference to Parliament. I would only say this”.
The AG submitted that “an opinion ultimately is an opinion and it is for the Committee to decide what the correct procedure is”, leaving Parliament to set the rules! In fact when asked as to whether any difficulty by the bureaucracy can surpass or circumvent the provisions of the Constitution, the answer of the learned AG was a vehement ‘No’, the PAC report added. Prodded further by the Committee that if the administrative problem of estimating interest on refund was insurmountable then the government could consider amending the Constitution, the AG was “categorical that he would not recommend any amendment to the Constitution in this regard”. PAC found “no material evidence for change of opinion” by the AG and indicted the Revenue Department of the MoF for not doing proper groundwork in seeking the reconsideration of the AG view.
When asked about the legal position with respect to the principles of Parliamentary control over public purse as enshrined in Articles 112(1), 114(3), 115, 117, 118(2), 119 and 266(3), the AG conceded “I feel that Article 114 is paramount and has to be complied with and nothing should be done which in any way dilutes the authority and supremacy of Parliament”.  The AG has reversed his reconsidered stance, leaving the MoF in the lurch.
Even as the MoF through an official of the Press Information Bureau (PIB) issued clarifications on its stated position with a sense of injured innocence, the PAC has trenchantly exhorted the Ministry of Finance to “scrupulously abide by the Constitutional provisions”. It also cautioned the MoF to “desist from taking precipitous action which even remotely tinkers with, dilutes or negates Parliamentary control over public purse in any manner”. The moot question is whether the Finance Minister who wears the hat of a lawyer too out of office and who took oath of office as a Minister in the Union Government pledging allegiance to the Constitution should respond to the issues raised by the PAC? (IPA Service)