NEW DELHI, NOV 6: In its bid to check evasion of excise duties as well as shore up its tax recoveries, the Finance Ministry has decided to conduct a special audit of around 100 large and medium corporate houses spread across the country to verify valuation and Modvat credit claim. It has directed all the seven excise commissionerates -- Delhi, Mumbai, Calcutta, Chennai, Hyderabad, Kanpur and Baroda -- to conduct special audit of firms suspected of wrongful valuation and credit availment.

While the provision for special audit was introduced about two years ago, this is the first time the government is exercising this option. The commissionerates had already identified around 30 large and medium corporations for the exercise to be conducted by ``independent'' cost accountants recommended by the Institute of Cost Accountants. Of these, 15 big companies, including a fast-moving consumer goods major and an Ayurvedic products firm and a battery manufacturer, have been shortlisted by the Calcutta Commissionerate alone.

The excise officials in Mumbai, Baroda, Chennai and Hyderabad are expected to shortlist the suspect manufacturers in the next two weeks. The Delhi commissionerate is yet to make up its mind as most of the big companies have either been closed down or are in the process of shifting out of the city. Ministry sources said the decision to conduct the exercise was taken after a large number of firms were found guilty of excise duty evasion. In fact, senior officials of the Central Board of Excise and Customs (CBEC) have often voiced their concern over sporadic misuse of the Modvat scheme.

The exercise, which is being conducted under Section 14 A and 14 AA of the Excise Act, is aimed at improving the tax recoveries -- the excise collection this year has been way below target due to the industrial slowdown. The audit is expected to be completed by December-end. Under Section 14 A, a special audit is conducted only if any Central Excise Officer (not below the rank of an Assistant Commissioner) is of the opinion that the value has not been correctly declared/determined by a manufacturer or any person.However, Section 14AA deals with wrongful availment/utilisation of credit of duty by a manufacturer of excisable goods through fraud, collusion or any other wilful mis-statement or suppression of facts. While audit to ascertain the declared value requires prior approval of the Chief Commissioner (Central Excise), it is the Commissioner who has the powers to direct the manufacturer to get accounts audited by a cost accountant (nominated by him) to verify Modvat claim. The companies will have to bear the cost of the exercise.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.