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Press note regarding duty evasion by various CPC (Copper Pthalocyanine Crude) Blue manufacturers DGCEI, Ahmedabad Zonal Unit
May, 18th 2013
     DIRECTORATE GENERAL OF CENTRAL EXCISE INTELLIGENCE,
            AHMEDABAD ZONAL UNIT, AHMEDABAD.


                              PRESS NOTE


Directorate General of Central Excise Intelligence (DGCEI), Zonal Unit
Ahmedabad's Vapi Regional Unit has detected a major modus operandi
of Central Excise duty evasion and is investigating the same against
various CPC (Copper Pthalocyanine Crude) Blue manufacturers
operating from Ahmedabad, Vadodara, Ankleshwar and Vapi area. In
the major search operations conducted on 01.05.2013 and 03.05.2013,
DGCEI unearthed the modus operandi of diversion of agriculture grade
Urea, meant for use by farmers, for industrial purpose, mainly to
manufacturers of CPC Blue Pigments. The price of agriculture grade
Urea, which is most prominent amongst fertilizers used by the farmers
in India, is highly subsidised and attracts Central Excise duty @ 2%. Such
agriculture grade Urea is manufactured in the state of Gujarat by
various Urea manufacturers like Krishak Bharati Cooperative Limited
(KRIBHCO), Gujarat Narmada Valley Fertilizers Company Ltd. (GNFC),
Gujarat State Fertilizer & Chemicals Ltd. (GSFC), Indian Farmers
Fertiliser Cooperative Limited (IFFCO) etc.. However, the price of Urea,
which is also an essential ingredient to manufacture CPC Blue Pigment
meant for industrial use is not subsidised and attracts full rate of
Central Excise duty i.e. @ 12%. For example the rate of agriculture
grade Urea is around Rs. 5.36 per Kg. and the rate of technical grade
Urea (imported) is around Rs. 32 per Kg. Government is heavily
subsidizing UREA which can be seen from the rates as mentioned
above. According to the present duty structure, Central Excise duty on
agriculture grade Urea is 2% and on technical grade is 12% thus per Kg.
central Excise duty on agriculture grade Urea and technical grade Urea
comes to around Rs. 0.11 and Rs. 3.84, respectively. In such a situation
if agriculture grade Urea is used as technical grade Urea differential
duty which is not paid comes to Rs. 3.73 per Kg. Therefore certain CPC
Blue manufacturers in connivance with some dealers/traders of
industrial grade Urea and distributers of agriculture grade Urea have
indulged themselves in receipt and utilisation of such agriculture grade
Urea, illicitly, in the guise of technical grade Urea and/or any other
industrial chemical product like T-Salt, refined Salt, pure Salt, Silica,
Caustic Soda etc..
The search operation resulted in seizure of 2100 no.'s of diverted agriculture grade Urea bags from such manufacturers and recovery of large number of incriminating documents. Preliminary scrutiny of seized documents indicates that some dealers involved in the supply of technical grade Urea were also providing such diverted agriculture grade Urea to the CPC Blue manufacturers under the cover of bills issued from bogus trading firms showing supply of different chemical products(T-Salt, refined Salt, pure Salt, Silica, Caustic Soda etc.) instead of agriculture grade Urea. During the search operations at the premises of CPC Blue Pigment manufacturer's, officers also detected such diverted agriculture grade Urea being unloaded within the premises of CPC Blue manufacturers. The CPC Blue manufacturers involved in this racket of diversion of subsidised agriculture grade of Urea comprises M/s Meghmani Organics Ltd., Ankleshwar; M/s Asahi Songwon Color Ltd., Vadodara; M/s Narayan Industries, Ahmedabad ; M/s A-One Chemicals , Ankleshwar ; M/s Ishan Dyes, Ahmedabad; M/s Narayan Organics, Ankleshwa r; M/s Ramdev Chemicals, Ankleshwar ; M/s Pthalo Color, Vapi ; M/s Sarswati Pigments, Ankleshwar ; M/s Deep Chem, Ankleshwar; M/s Ganesh Pigments, Ankleshwar, amongst others. The search operation conducted by the DGCEI indicates massive and rampant misuse of government subsidy scheme as well as Central Excise Cenvat scheme. Preliminary investigations have suggested diversion of around one Lakh M.T. of agriculture grade Urea for industrial use during the last three years. Accordingly, the consequent loss to government exchequer by the said modus operandi is expected to be more than Rs. 30 crores.
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