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Excise evaders may lose Cenvat credit, monthly duty payment
November, 21st 2006

Excise evaders beware. The government is planning to withdraw facilities like availability of Central value-added tax (Cenvat) credit and monthly payment of duty from manufacturers who deliberately evade excise duty.

However, these measures would be taken only in those cases where the duty evasion is Rs 10 lakh or more. These penal provisions would be put in place from January 1, for which all necessary legislative changes will also be carried out.
The deterrents are expected to tackle the problem of planned and deliberate non-compliance by tax payers found guilty of evasion.

Excise duty collections grew by only 5.8% in April-October 06 at Rs 60,401 crore as against an over 60% growth in service tax collections. But in the same time, there has been a 26% jump in Cenvat credit availment.

As a part of its trade facilitation initiative, the Central Board of Excise and Customs (CBEC) had introduced measures like monthly payment of duties as compared to consignment-wise duty payment system, taking Cenvat credit for inputs, capital goods and input services used by manufacturers, payment of 80% refund or rebate on provisional basis within 15 days of filing of claim.

Excise duty evaders will not be able to avail of these facilities, sources said. The officials said it has been noticed that these measures had not resulted in the expected rise in the level of compliance and even now many cases were being booked, indicating that certain classes of assessees continued to evade excise duty in a planned manner.

According to a draft circular put up by the board to elicit public response, the offences which would attract this action include 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 the Cenvat credit without receipt of goods specified in the document or on invoices which are not genuine.

Besides, the issue of excise invoice without delivery of goods by a manufacturer or a dealer and claiming of refund or rebate-based on invoices which are not genuine would also invite such an action. For different categories of assessees manufacturers, dealers and exporters separate provisions would be invoked.

For manufacturers found violating the specified conditions, the facilities which would be withdrawn include monthly payment of duties for a specified period, besides non-utilisation of Cenvat credit for a specified period.

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