Move to check SSI duty evasion

NEW DELHI, January 27: In a bid to check large-scale duty evasion by small-scale industries, the Finance Ministry is planning to conduct a nation-wide survey to rein in over 28 lakh small-scale units. The survey has been proposed to identify small units for registration with the excise deparment. The exercise will be conducted by the excise authorities in their respective zones.

According to sources, the exercise was already being conducted in Delhi and Haryana to identify duty evaders. The move is expected to be the first step towards making filing of quarterly returns mandatory for all SSIs. The excise authorities suspect that a large number of units suppress their output/turnover to take advantage of the relaxations given to smaller units (with an annual turnover/clearances upto Rs 30 lakhs) which are exempted from excise duty and filing of returns. For instance, excise authorities in Delhi recently caught a manufacturer of copper wire, who had an annual turnover of Rs 2 crore but misdeclared it to avail exemptions available to units with turnover upto Rs 30 lakhs. Interestingly, the same manufacturer had been caught for allegedly misdeclaring production/turnover in late 1996. He then closed the company as it had been identified and started a new unit to evade duty.

"We suspect that this modus operandi is being used by quite a large number of unscrupulous manufacturers. But we cannot do much because excise officers are not permitted to visit/question exempted units without written permission from the assistant commissioner," according to senior excise officials. Although no firm estimates are available, the duty evasion by SSIs is suspected to be between Rs 800-1000 crore.

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The Central Board of Excise and Customs (CBEC) is also considering a proposal to make filing of quarterly returns mandatory for small-scale units (with an annual turnover below Rs 30 lakh) and restrict duty exemption to "manufacturers of excisable goods by the labour of themselves and members of their family without hiring any employee for the manufacture of goods and having an output of less than Rs 7.5 lakh".

If the move is cleared, these units will have to maintain proper consumption and output records, thereby decreasing the risk for manipulation.

Predictably, the units are opposed to filing regular returns.