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Drug and metal cos under lens, excise audits on cards
May, 03rd 2007

Pharma and metal manufacturing companies will soon come under the taxmans lens. The finance ministry is planning special excise audits on companies in these sectors following a dip in collections in 2006-07. The fall in excise collections came even as both the sectors witnessed robust growth. While the pharma sector recorded 16% growth, metal manufacturers clocked 23% growth last fiscal.

The special cost audits are aimed at finding out whether the dip in collections is because of evasions, a genuine fall in production or some other reason.

The Central Board of Excise and Customs is likely to ask field formations to intensify special audits in the two sectors. The audits would entail a cost-benefit analysis of units to ascertain the cost of goods manufactured. This would help the tax authorities ascertain the actual excise liabilities.

The excise department, which has been watchful of claims for Cenvat credit, will also track the claims made by pharma and metal manufacturing units. For every rupee of Cenvat paid by the industry, it earns a credit that can be used against paying tax on inputs. Audits would be taken up on these sectors to ascertain the reason behind the fall, an official said.

The government began charging excise duty on the maximum retail price of drugs in January 2005. While there was an increase in revenues in 2005-06, FY07 witnessed a fall in collections, the official said. Total excise mopup in 2006-07 stood at Rs 1,17,250 crore against the budget estimate of Rs 1,17,967 crore and revised estimate of Rs 1,16,233 crore. Pharmaceutical sectors contribution to the excise kitty was lower at Rs 1,456 crore in nine months of 2006-07 compared to Rs 2,265 crore in 2005-06.

The government has already tightened audit norms. With the Union Cabinet recently approving additional manpower, the department is looking at strengthening its audit workforce.

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