MUMBAI, MAY 2: Of the 235 cases detected by the Mumbai zone of the directorate of anti-evasion, central excise, this year, several cases reveal the misuse of Modvat credit facility.Modvat credit is given on excisable goods when duty is already paid on inputs that go into the manufacture of the final goods. So, for instance, the department found that registered dealers of iron and steel products had been issuing fake invoices, for a premium of course, where goods had actually not been supplied. The consignees, in fact, got only the modvatable invoices while the goods were, in fact, sold in the open market for cash.Further, investigations also revealed that registered dealers had issued modvatable invoices for iron and steel coils, but the goods received by the consumer manufacturers were in fact, sheets and not coils. The coils were being made into sheets by slitters/cutters, who were operating sometimes from the premises of these registered dealers.Not only had these slitters/ cutters not taken excise registration, (the process is manufacturing), the description in the invoices was different from that of goods delivered. The sheets would attract different rates of duty from the coils. SCN involving duty demand of over Rs 170 crore have been issued in these cases also.In one case, involving M/s Core Health Care Ltd, the company allegedly misclassified products which were meant for exports. Though these products did not attract excise duty, the company paid duty on these clearances, allegedly to enable them to claim export benefits. The same duty was not paid when goods were cleared for domestic consumption.To use Modvat, which they would not otherwise be able to utilise, (since the final product was not dutiable), they made exports under the rebate procedure by paying the duty. This duty was paid out of the Modvat credit, and then a refund was taken. The Modvat thus allegedly wrongly claimed is to the tune of Rs 21 crore.M/s Milton and M/s Cello, makers of plastic/thermoware products, had allegedly wrongly claimed Modvat to the tune of Rs four crore, by procuring duty paying documents of high value steel though they were using a lower grade steel in their final products. These two are also facing show cause notices.
