Tight controls on excise exempt units on cards

Close on the heels of the government considering action against excise evaders in the manufacturing sector, the Central Board of Excise and Customs (CBEC) is mulling strengthening checks on industries utilising area based excise exemptions in states like Uttaranchal, Himachal Pradesh and North Eastern states.

"We are considering tightening controls on units which locate themselves in areas like Uttranchal or the North-east merely to enjoy excise duty exemptions without undertaking actual production," a CBEC official said.

Officials said the board was considering several options including getting units located in these areas to compulsorily file their excise returns even if they do not have to pay any excise duty.

"Introduction of mandatory filing of returns will help the revenue department have an idea about the number of units located in these areas," an official said. Another option being considered is to look at the value addition norms to ensure that units which shift to these excise exempt areas actually undertake manufacturing activities.

"Very often it is found that the units manufacture the goods outside and in order to take advantage of the excise benefits, just set up a unit which merely undertakes packaging or labelling of the items," an official said.

Officials admit that though some studies have been conducted by agencies like the National Institute of Public Finance and Policy (NIPFP), the department does not have accurate data on the total number of units located in the excise exempt regions.

According to a NIPFP study in 2004-05, the government had to forego revenue of around Rs 1,502 crore on account of area based exemptions in regions like North-east, Jammu and Kashmir, Himachal Pradesh and Kutch.

The CBEC had earlier this week issued a draft circular seeking to put in place deterrent provisions to discourage evasion of excise duty by manufacturing units.

Removal of goods without documents and without payment of duty, undervaluation of goods where portion of sale proceeds, in excess of the invoice price, is received separately and remains unaccounted, taking of CENVAT credit without receipt of goods specified in the document, taking of CENVAT credit on invoices which are not genuine or issue of excise invoice without delivery of goods (by a manufacturer or a dealer) are some of the actions which could attract penalty.