Raids on trailer-makers reveal trail of evasions of Rs 50 cr

The central excise duty evasion amounting to Rs 50 crore has been unearthed by the Directorate General of Central Excise Intelligence (Bangalore zone) following raids on 17 manufacturers of vehicles-carrier trailers across the country.

The raids have exposed how manufacturers evaded central excise duty by suppressing the production of trailers and also by fragmenting the value of the trailers to remain within the central excise exemption limits, said additional director general (Bangalore zone) Somesh Arora.

Carried out by the central excise intelligence officials last week, the raids were conducted in Bangalore, Gurgaon, Delhi, Goa, Chennai and Hyderabad "" the manufacturing hubs for trailers that are used to transport two-wheelers and four-wheelers from manufacturing plants to dealer showrooms.

Arora said the detection of evasion was preceded by information that over 6,000 such trailers have been manufactured in different parts of the country and the estimated demand for such trailers in the country is 2,000 per annum.

Following the detection, the annual excise duty collection is expected to increase anywhere from Rs 50 crore to Rs 100 crore, he said.

On the modus operandi of these trailer manufacturers, Central Excise public relations officer M N Thyagaraj explained: The manufacturers were only showing the cost of fabrication whereas the owner of the vehicle would supply some of the crucial parts like valves, bearings and hydraulics through his inventory. The parts added by the owners are usually of high value.

By doing so, the manufacturers (who are mostly small scale industrialists) would remain within their annual turnover of Rs 1.5 crore, which is the duty exemption limit set for small scale industries, he said.

This is contrary to the rules which mandate that the new product should also involve the cost of supply for calculation of duty at the rate of 16 per cent and the entire value of the product is to be calculated for the duty.

According to the Central Excise release, the detection was made largely through the efforts of deputy director T V Ravi and senior intelligence officer S Shyamsundar.

This is the second major evasion detected by the Central Excise officials of Bangalore zone in the recent days. Last week, Arora had announced the detection of service tax evasion to the tune of Rs 2,162 crore by two Coimbatore-based paper lottery distributors who operated across the country.

The distributors, who along with a few others control nearly 80 per cent of lottery sales in the country, had not paid service tax over the 14 per cent commission that they received from respective governments for sale of lotteries, Arora had said.