Saying this in response to problems highlighted by excise assessees at the Post Budget Workshop on Central Excise and Customs here today, Member - Budget, Central Board of Excise and Customs, B.P. Verma said that the restriction was not permanent and that the motive of restricting Modvat was to generate additional revenue.

Members of the Confederation of Indian Industry (CII), which had organised the workshop, had contended that the restriction would result in cascading effect of excise duty on the final product due to five per cent cut at each stage of manufacture. Members recommended that 100 per cent Modvat credit be restored and instead a five per cent special excise duty could be levied.

Another immediate cause of concern to the industry was a proposal in the 1998 Finance Bill, which denies right to appeal to appellate tribunal in respect to Modvat credit on duty paid on excisable goods, which members felt was against norms of justice.

Responding that the proposal will not be implemented, Verma said that with the simplification of rules, the earlier scope of misinterpretation has been removed. He added that the intention had been to lighten the tribunal's burden, which had about 40,000 pending cases.

Other issues concerning excise procedures and duties, customs procedures and duties, service tax and Modvat were also highlighted before Verma as well as department officers including the Excise Commissioner Chandigarh-I, S.S. Jha and Excise Commissioner Chandigarh-II, I.R. Soni.Earlier, while stressing the importance of indirect taxes during his address, Verma mentioned that last year, the government had suffered a loss of Rs 12,000 crore from non-payment of excise duty and a loss of Rs 4,000 from non-payment of customs.

During the workshop, it was also brought out that the indirect tax proposals of the 1998-99 budget has been a mixed bag for the industry and the changes in the rules and regulations were being effected too frequently.

There was also a suggestion to reduce the customs as well as excise tariff slabs and move towards a value-added-tax system having a three four tier duty structure.