MUMBAI, Feb 8: The central excise department in Mumbai is virtually embroiled in a war with assessees over attempts by the former to deny or delay modvat credit by unfair means. The department, according to assessees, has tried to withdraw RG 23 registers from several units in the city. Without the register the assesses cannot claim credit.Reeling under a revenue target shortfall of over Rs 1,000 crore, the chief commissioner excise in Mumbai has allegedly issued oral instructions to all field formations to withdraw the modvat credit facility to all units.
This is being done through the withdrawal of RG 23 registers (Part I and II) from the premises of assessees ostensibly for verification of entries.
These attempts are being resisted by assessees, and field level departmental staff say they are being threatened with the possibility of police complaints if they withdraw RG-23 registers forcibly. At least two such cases have come to light where businessmen have threatened departmental staff of launchingcriminal cases against them for "attempting to forcibly withdraw their modvat registers."
Assessees have been approaching various trade associations like the Bombay Chamber of Commerce for voicing their grievances. Their argument is that modvat credit is allowed to them under the provisions of Rules 57A and 57G of the central excise rules. These rules do not specify any ratio between the permanent ledger account (PLA) under which duty is paid in cash and the RG 23 (Part I and II) which entitles them to modvat credit.
Privately, revenue department sources admitted to The Financial Express that since the begining of the current fiscal, trade and industry had been facing recession, leading to an overall shortfall in revenue. But this is not what they are reporting in their respective quarterly reports. The reports submitted at all the excise commissionerates blame excessive utilisation of modvat credit as one of the major reasons for the shortfall in revenues below their respective sanctioned budgetaryallotments (SBA).
This reportedly forced the Central Board of Excise and Customs (CBEC) to issue instructions to all field formations through their respective chief commissioners that the (modvat) facility stands withdrawn till March 31, 1998. Under the law, there is no provision for withdrawing the facility. In many commissionerates, the field formations have, therefore, simply decided to withdraw the RG 23 (Part I and II) registers of the units concerned "for the purpose of verification."
This is being done despite the fact that duplicate copies of all registers are already available with the department since the same is furnished by the concerned assessees while filing their monthly statements. These statements are in turn endorsed by the respective offices of the department at the field level. While withdrawing the registers, the field formations have reportedly asked the units concerned to clear all finished products on the payment of excise duty.
Thus, while asking the units to pay tax, thedepartment is essentially forcing them to pay tax twice -- once on the raw material used in the finished products and again on the finished goods themselves. This is precisely the situation that modvat is supposed to avoid.
The situation has taken a serious turn as one of the assistant commissioners was reportedly gheraoed by businessmen at Tarapore while at other places representations are being made. The revenue department is not in a mood to relent at least till March 31. This means that all locally manufactured goods will be reaching the domestic market without modvat, which in turn will be recovered from consumers.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
