Central excise issues show-case to Ceat

MUMBAI, MAY 1: The Directorate of Anti-Evasion, Central Excise, Mumbai zone, has issued a show-cause notice to Ceat Ltd, with a duty deman...

MUMBAI, MAY 1: The Directorate of Anti-Evasion, Central Excise, Mumbai zone, has issued a show-cause notice to Ceat Ltd, with a duty demand of Rs 102 crore. The investigation of the directorate revealed that the company had allegedly clandestinely cleared dipped tyre cord fabric DTCF, an ingredient of the tyre, from its Bhandup unit without paying excise duty.

The investigation, covering manufacturing operations since 1995 also revealed that the company8217;s claim that the Nashik unit was getting DTCF from the Bhandup unit on a job-work basis was not true.

While the Bhandup unit allegedly evaded duty on clearances of the DTCF, the Nashik plant, on its part, allegedly wrongfully claimed MODVAT credit on the input 8212; nylon tyre cord fabric 8212; which they claimed to have bought to supply to the Bhandup plant for the job-work. In fact, the Nashik plant had not bought the input at all, the Bhandup plant having bought it at its own end.

The case is one of the 235 cases detected by the zonal unit of the directorate this year, identifying total duty evasion of Rs 610 cr. Last year, the zone had booked cases involving duty evasion of Rs 344 cr. Most of the cases are evasion by way of undervaluation, misdeclaration, clandestine removal of goods and misuse of MODVAT credit.

The other major set of cases detected by the directorate was against manufacturers of polyester texturised yarn PTY who allegedly sold goods through depots and godowns of transporters, while showing clearances from their factory gates on invoices which had fictitious names. The actual sales were taking place from their transporters and godown keepers, in Bhiwandi and other places, at higher rates.

The SCN which totally raise a duty demand of about Rs 150 crore have been issued to over 60 PTY manufacturers, including some big names like Parasrampuria Industries Pvt Ltd, JBF Industries, Blue Blends Ltd, Bhilosa Synthetics Pvt Ltd, and Siyaram Silk Mills Ltd.

In the CEAT case, the department8217;s probe revealed that the Bhandup plant was manufacturing the DTCF for both itself and the Nashik plant and supplied to the latter on stock transfer basis.

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But to avail of the benefits of rule 57-F of the Central Excise Rules, the Bhandup plant was showing the manufacture for the Nashik plant on a job-work basis from inputs purportedly received from the Nashik plant. While the Bhandup plant made payments for the inputs nylon fabric, the Annexure-II challan was made by the Bhandup factory to show as if the raw material had been supplied by the Nashik factory. The Nashik factory, on receiving a photocopy of the annexure-II challan would make an entry in the annexure IV register, to misrepresent that the material had been sent from the Nashik factory to the Bhandup factory under excise rules.

In fact, while the Nashik unit could have claimed MODVAT on the DTCF cleared from Bhandup if central excise had been paid, the Nashik unit would have lost out on the AED additional excise duty component, since tyres are AED exempt. It seems that the company decided to use the job-work facade so as to be able to claim that part also. Despite several phone calls to Ceat8217;s vice president, marketing, R K Dhawan, no response from the company could be elicited.