With the abundance of both coal and limestone and the close proximity of the international border, these mining activities have become very lucrative and have resulted in brisk business in the Jaintia Hills and also parts of Garo Hills regions of the State. This easy availability of raw products has also facilitated the setting up of numerous cement factories in the State which are reaping huge dividends in terms of profits.

When we conducted a survey, we found that cement is being sold at Rs.325 – 350 per bag in Meghalaya whereas the same cement made by the same manufacturer is available at Rs.250 per bag at Guwahati. This calls for an investigation by the concerned authorities. It may also be appropriate to mention here that the Government of India, in order to promote individual development in the North East Region of the country, is giving a series of benefits including 30% capital investment subsidy (non – refundable) and transport subsidy to carry raw materials from their source to the factories and also to carry the finished products from the factories to the markets. It has been repeatedly alleged that there are many loopholes in the transport subsidy scheme which are being taken advantage of and which are costing the Government crores of rupees on a regular basis.

This dealer sold 1.23 lakh MT of clinker between April 2005 and March 2011 valued at 29.36 crore and collected tax of Rs.3.67 crore (at 12.50 per cent) of which it retained Rs.3.63 crore as subsidy and remitted the remaining amount of Rs.0.04 crore to the Government.

There have also been some instances where the mining companies operating in the State have been pulled up by the authorities for lapses and irregularities. One such high profile instance was when Lafarge, the French cement giant had to stop its mining activities in the State after it was dragged to court for turning vast tracts of forest land into a rocky wasteland.

Constitutionally, the State Government is the owner of the minerals in a State and as such it receives rent and royalty accruing from grant of prospecting and mining rights to individuals and

firms. The Constitution of India, however, empowers the Parliament of India to make laws for regulation of mines and minerals. Under this power, the Central Government enacted the Mines and Minerals (Development and Regulation) (MMDR) Act, 1957 and the Mineral Concession (MC) Rules, 1960. Subsequently, the State Government introduced the Meghalaya Minerals Cess (MMC) Act 1988 to mobilise additional revenue. In Meghalaya, the royalty and cess on coal were Rs.165 and Rs.55 mer MT respectively, and royalty and cess on limestone were Rs.45 and Rs.20 respectively, with effect from 6th January 2009. The rate of royalty on coal was further revised to Rs.290 per MT with effect from 1st September 2009 while the cess was withdrawn. The rate of royalty on limestone was revised from Rs.45 to Rs.63 per MT from 13th August 2009.

In spite of the presence of measures such as these to generate revenue and also to regulate mining in the State, there have been many instances where the norms were not adhered to and loopholes were taken advantage of. This practice has reached such enormous proportions that, in its report for the year ended 31st March 2012, the CAG, with regard to mining receipts had stated that “During the last five years, (including the current year’s report) we have pointed out non/short realisation, underassessment / loss of revenue, incorrect rate of tax, incorrect computation, etc, with revenue implication of Rs.308.01. Of these, the Department / Government had accepted audit observations involving 53.11 crore and had since recovered 5.57 crore.

Such questionable practices by these cement companies are helped by the fact that there is an inherent lackadaisical attitude in the people who are supposed to maintain checks and balances with regard to the operation of these companies as has been highlighted by the findings of the office of the Comptroller and Auditor General (CAG) of India.

In Meghalaya, coal and limestone are exported out of the State on the strength of ‘P’ forms which authorises a dealer to transport 9 MT of coal or limestone per truck and which are issued by the Excise, Registration, Taxation and Stamps (ERTS) Department on payment of advance tax. Consequent upon the Supreme Court order in November 2005 which held that the maximum permissible load that trucks could carry is 9 MT, the ERTS Department notified the advance tax payable per ‘P’ form as Rs.1100 / Rs.350 for coal and limestone respectively. For trucks carrying coal / limestone in excess of 9 MT, advance tax in the form of additional security was to be levied and collected at the checkposts on payment of Rs.120/Rs.35 per MT of excess load carried.

Cross checking of records of the ERTS checkposts and the Mining and Geology Department (MGD) checkposts at Byrnihat and Umkiang revealed that during the period from 2010 – 2011 and 2011 - 2012, 2.39 lakh MT and 2.08 lakh MT of excess coal and limestone respectively was shown as passing through the MGD checkposts whereas during the same period, 2.26 lakh MT and 1.24 lakh MT of excess coal and limestone was shown as passing through the ERTS checkposts. As such, 0.13 lakh MT of coal and 0.84 lakh MT of limestone was allowed to pass through the ERTS checkposts without realising additional security of Rs.44.46 lakh leading to a huge loss of revenue for the State Government. Besides this, one must also take into account the amount of Rs.2.22 crores (five times the tax of Rs.44.46 lakh) which was leviable as penalty in the case.

In a system that is marred by loopholes and overrun by ineffective discharge of duties, these cement companies are running amok and are robbing the State blind.

Some of these cement companies have also been found to have brazenly ignored the rules and norms under which they are to operate. The CAG had found that one such cement manufacturer collected excess tax of Rs.17.17 crore which it was liable to forfeit besides paying a penalty of Rs.34.34 crore. For not submitting audited accounts, it was further liable to pay a penalty of Rs.0.74 crore. Besides this, two other cement manufacturers irregularly claimed subsidy of Rs.4.45 crore which they were liable to forfeit besides paying penalty of RS.8.90 crore.

Furthermore, section 3 (b) of the Meghalaya Industries (Tax Remission) Scheme, 2006 permits cement and clinker manufacturing units with an installed capacity of more than 600 MT per day to retain 96 per cent of tax collected as subsidy while the balance four per cent is to be deposited into the Government account. To be eligible for the subsidy, the industrial unit has to be first approved by the State’s Single Window Agency (SWA) which is chaired by the Chief Minister of the State and which was set up to facilitate speedy approval for setting up industrial units in the State. Following the obtaining of this approval, the industrial unit has to obtain an Eligibility Certificate from the Industries Department of the Government of Meghalaya and a Certificate of Entitlement from the ERTS Department of the Government of Meghalaya.

With regard to this subsidy, it has been found that an industrial unit, namely M/S Cement Manufacturing Company Limited, Lumshnong, Jaintia Hills permitted to manufacture cement and clinker was allowed to retain 96 per cent of tax collected as subsidy. The monthly tax returns submitted by the unit to the Superintendent of Taxes however, indicated that it collected tax on clinker at 12.50 per cent and 13.50 per cent instead of 4 per cent. Between April 2009 and March 2011, the unit sold Rs.209.38 crore of clinker and collected tax of Rs.26.27 (instead of 8.38 crore) out of which it retained Rs.25.22 crore as subsidy and remitted Rs.1.05 crore to the Government. For the collection of excess tax of Rs.17.89 crore, out of which it retained 17.17 crore as subsidy, the unit was liable to pay a penalty of Rs.34.34 crore besides forfeiting the subsidy of Rs.17.17 crore availed.

Furthermore, although the turnover of the unit exceeded Rs.40 lakh in 2008 – 09, 2009 -10 and 2010 – 11, it failed to furnish audited copies of its accounts for these years within the period as stipulated under the Meghalaya Value Added Tax (MVAT) Act on account of which a penalty equal to 0.1 per cent amounting to Rs.0.74 crore was leviable. The Superintendent of Taxes has referred the matter to the Commissioner of Taxes for a clarification which had, in January 2012 clarified that clinker was taxable at the rate of 4 per cent. However, further action on the part of the Superintendent of Taxes to recover the tax and penalty from the unit is awaited as on March 2103.

Another industrial unit M/S Meghalaya Cement Limited, Lumshnong, Jaintia Hills was granted approval by the SWA in August 2003 to manufacture 900 MT of cement per day and the EC was accordingly issued by the Industries Department in 2006. However, the COE issued by the ERTS Department in May 2006 allowed the unit to avail the benefit of subsidy on the production of cement as well as clinker. This unit started commercial production from April 2006 and during 2006 – 07, sold 18915.81 MT of clinker valuing Rs.6.78 crore and on which it collected tax of Rs.0.85 crore (at 12 per cent) on which it retained Rs.0.82 crore as subsidy and remitted the remaining amount of Rs.0.3 crore to the Government.

Since the unit was granted permission by the SWA to manufacture cement only, the inclusion of clinker in the COE issued by the ERTS was irregular and therefore the unit was not eligible for subsidy on the sale of clinker. Hence the unit was liable to forfeit the tax of 0.82 crore which it retained as subsidy and in addition, pay a penalty of Rs.1.64 crore.

Yet another cement manufacturing unit, namely M/S HM Cements Ltd, Byrnihat, Ri – Bhoi, registered with the Superintendent of Taxes, Nongpoh was granted approval by the SWA in June 1997 to manufacture 350 MT of cement per day and the EC was accordingly issued by the  Industries Department in November 2003. However, in a similar fashion, the ERTS also allowed this unit to avail the benefit of subsidy on the manufacture of clinker. This dealer sold 1.23 lakh MT of clinker between April 2005 and March 2011 valued at 29.36 crore and collected tax of Rs.3.67 crore (at 12.50 per cent) of which it retained Rs.3.63 crore as subsidy and remitted the remaining amount of Rs.0.04 crore to the Government. Similar to M/S Cement Manufacturing Company Limited and M/S Meghalaya Cement Limited, HM Cements Ltd availed of a subsidy which it was not entitled to and hence, the unit was liable to forfeit the tax of Rs.3.63 crore which it retained as subsidy as well as pay a penalty of Rs.7.26 crore.

However, considering the fact that the office of the CAG carries out only random checks as it cannot cover all the cement manufacturing units in the State, it can be surmised that this huge loss of revenue for the State of Meghalaya is just the tip of the iceberg. In a system that is marred by loopholes and overrun by ineffective discharge of duties, these cement companies are running amok and are robbing the State blind. If all these irregularities can be plugged, the State would not have to run to the Government of India for the funds it needs to run its developmental work. These findings of the office of the CAG paint a poignant picture of how, instead of becoming a boon for Meghalaya, these cement companies are bleeding the State dry besides causing irreparable damage what was once called ‘The Scotland of the East’.

D. Nampui