Excise directive threatens to halt business activities

With the excise target 50 per cent off the mark, a panicky excise department issued a circular – which even the officials admit will not stand in the court – asking manufacturing units to pay excise "in cash" through the excise personal ledger accounts (PLA) only and at the same time not to avail of Modvat (modified value added tax) credit. The accumulated credit is to be adjusted during the next fiscal, it says.

Put simply, this means the industry will be denied of Modvat credit to the tune of Rs 450 crore from Mumbai collectorate alone. It’s not only small units, evenbig ones like Mahindra & Mahindra, Videocon, Telco, Lloyds Steel, Reliance and Essar are also affected. M & M, for example, is being denied Modvat credit of nearly Rs 20 crore every month.

Many industry associations — especially small scale units, chemicals, plastics and so on — are up in arms against government move. "We are even ready to close down our units till March 31 to avoid harassment by the excise departments," says Dinesh Shah, president of Thane Belapur Industries Association. In fact, the excise department’s move has forced several units to close down operations. Bulk drugs despatches have come to a halt, thereby affecting the availability of lief saving drugs.

The circular has cited the acute financial crisis being faced by the country as the main reason for this drastic move. But industrialists say the government is sacrificing the next fiscal’s revenue to show better tax collections for the current year as a lot is at stake for the current finance minister and its officials. "It’s unfairon the part of the government to take such steps to boost the revenue collection. It will affect the cash flow," said R K Pitamber, director, Mahindra & Mahindra.

For one, whichever party forms the next government, it will face massive fiscal imbalance as almost zero revenue would be collected in the first quarter of the next year. "The move to collect excise through PLA is a deliberate attempt to create financial problems for the next government… The excise collectors are especially harsh in Maharashtra region where BJP-dominated government is in place," says a spokesperson of the Thane-Belapur Industries Association. "Besides, after the VDIS success, bureaucrats are bent on showing better indirect tax collections," he adds.

"The need of the hour is to provide some fiscal reliefs to all productive sectors to help them tide over the financial crisis," said Ram Gandhi,president, Indian Merchants Chamber.

"The freedom to investigate has been misused to such an extent that the industry has been harassedand humiliated. The methods adopted by the excise department have crossed the parameters of mental pressures, they are virtually adopting harsh methods which will eventually lead to the closure of units due to financial bankruptcy," warns Vijay Kalantri, President of All India Association of Industries.

In its zeal to meet Singh’s dictate, excise commissioners have started seizing the Modvat registers and other books of accounts of all the SSIs to compel businessmen to pay the amount from their personal ledger account. As all the representations to the excise officials and revenue secretary has failed, various Associations from the Maharashtra regions are moving the Delhi and Mumbai high courts for judicial intervention on Monday.

It may be noted that all excisable manufacturing units are allowed to avail of Modvat credit on their inputs after entry into the RG 23A part II registers. Excise duty is then payable by them on their finished goods after availing the Modvat credit.

The revenue department hasasked the industry that not to avail of the Modvat credit for the last quarter of the current fiscal year. This has increased the tax burden of all the manufacturing units. But it is the small sector units which are taking the maximum brunt as they are unable to pay a lumpsum amount as tax and at the same time meet other manufacturing cost.