The Confederation of Indian Industry (CII) has urged the revenue department in the ministry of finance to withdraw the directives issued by the excise collectorates to the industry, instructing it not to avail of modvat credit.
The CII has taken up the issue with the revenue secretary, Central Board of Excise & Customs (CBEC) chairman and CBEC member (excise), seeking an end to the denial of modvat credit to the industry.
The chamber has requested the urgent intervention of the revenue secretary to allow the corporates to avail of modvat credit. A CII team led by vice-president Rajesh V Shah recently met the revenue secretary to appraise him of the difficulties faced by the industry.
Industries across the country, particularly in the western region, have complained about the highly coercive, arbitrary, threatening and intimidating practice adopted by the excise authorities in instructing corporates not to utilise modvat credit, and make requisite clearances from their factories only against personal ledger accounts. This has plunged many corporates into deep financial crisis, says a CII release.
The release states that industry is in dire straits and many corporates are buckling under severe financial pressure. The prospects of closure loom large for these entities if remedial measures are not taken immediately, says the industry chamber.
The CII has said that the drive of the excise collectorates continues unabated, especially in the western regional, in spite of several meetings and representations, and the chamber was being flooded with requests to help withdraw the directives immediately.
Citing tremendous strain on the finances of the companies, the release states that since excise duty on most goods was in the range of 13-18 per cent, and the modvat on input varied from 8 per cent to 14 per cent, the denial of modvat would mean an additional cash outflow of 8-14 per cent of the output.
The additional cash outflow to the industry could be to the tune of several hundred crores, says the release. According to the CIIs estimates, each company would suffer between Rs 8-12 crore per month depending on the sector.
According to the CII, the revenue department has apparently taken the step to meet the revenue collection target, which had become rather steep as a result of the sluggish customs revenue.
