A Parliamentary panel has pulled up the Finance Ministry for not taking approval of Parliament before incurring expenditure on interest of refunds worth Rs 37,365 crore between 2006-07 and 2010-11 (withdrawn from the Consolidated Fund of India, CFI) and even sought an explanation from the Attorney General G E Vahanvati as to why he changed his opinion on the matter after being approached by the North Block officials.
The Public Accounts Committee (PAC) which is led by BJP Member of Parliament Murli Manohar Joshi, in its report has said that the “Department of Revenue (of the Finance Ministry) has no option but to seek ex-ante or ex-post facto Parliamentary approval for interest payments on tax refunds. The Constitution leaves no doubt about the manner of authorisation of expenditure or withdrawal of money from and out of the CFI…”, and has asked the Government to apprise it on what corrective measures it plans to take to ensure that such contravention does not take place in future.
The PAC report (number 96th titled 'Contravention of Constitutional Provisions by Ministry of Finance: Expenditure incurred on interest on Refunds without Parliamentary Approval'), which is currently in possession of the Parliament (where it was presented during the recently concluded Winter session), has pointed out that according to its observation, the Finance Ministry had not obtained the approval of Parliament through necessary appropriations while incurring a total expenditure of Rs 37,365 crore on interest payments during a five-year period between 2006-07 and 2010-11. The money was withdrawn by the Finance Ministry from the CFI.
After the panel had in an earlier report (number 66 titled 'Expenditure incurred on interest on Refunds of Taxes') suggested to the Finance Ministry that “it cannot make a departure from the established financial procedure as enshrined in the Constitution”, it was noted that when the ministry again sought the Attorney General's opinion on the subject, he gave a suggestion which was in contradiction to his own opinion given earlier.
Owing to this, the panel again summoned Vahanvati to depose before it to know as to why he reversed his opinion to the Finance Ministry the second time round. It also summoned the North Block officials to examine the reasons that prompted them to seek the opinion from the Attorney General the second time round on the matter, when the ministry had already been asked by the Parliamentary panel to adhere to Constitutional procedure.
Vahanvati, when summoned to depose before the panel for the preparation of the 96th report, “conceded that Parliamentary supremacy in financial matters was the bedrock of Constitution and ultimately, the Finance Ministry could have to abide by the recommendation of the PAC”.
He further added that “I am clear in my mind that ultimately nothing can be done without the sanction of Parliament and that everything has to be placed before Parliament. For me it is a matter of faith that having regard to the historical development of Parliamentary powers, spending has to be authorised by Parliament”.
After considering the views of the Finance Ministry officials as well as Vahanvati on the issue of withdrawal of funds from CFI, the PAC noted that the ministry should “scrupulously abide by the Constitutional provisions and caution them to desist from taking precipitous action which even remotely tinkers with, dilutes or negates Parliamentary control over public purse in any manner”.
It further suggested that “no tax can be imposed or collected, save by the authority of law… In view of the same, any excess payment received by the State after the tax assessment is made, has to be refunded to the assessees. The amount received in excess of the tax liability, duly computed under the provisions of the Income Tax Act, is required to be refunded as per the procedure of the said Act along with the interest arising thereon”.