'Rajnigandha' pan masala maker face alleged tax evasion probe

The makers of 'Rajnigandha' pan masala and 'Catch' brand spices are being probed by central excise department for allegedly misusing cenvat credit facility totalling Rs 90 crore and one of the business group's directors has been arrested.
The business group is alleged to have misused cenvat, a type of tax benefit, by fraudulent purchases of raw materials through non-existing firms.
Acting on inputs, officials of Directorate General of Central Excise Intelligence (DGCEI) recently conducted searches at more than 25 premises of M/s DSL (Dharampal Satyapal Group Ltd) across Uttar Pradesh, Uttarakhand, Madhya Pradesh and Delhi, official sources said today.
During the course of investigation, the DGCEI has detected a novel modus operandi, where bogus invoices of declared goods as "sandalwood compound or oil" were issued to M/s DSL through a number of dummy factories located in Haridwar-Roorkee area, Kanpur and Lucknow, they said.

The proprietors of these dummy supplier firms, in their voluntary statements, have admitted that they were only issuing bills to M/s DSL on commission basis, without any manufacturing activity at their factory's premises and without any clearance of the declared goods from the factory, the sources said.
In this way the group has allegedly evaded tax by claiming inadmissible cenvat credit to the amount of Rs 90 crore. They have also allegedly shown fake purchase of around Rs 700 crore, which would have resulted in generation of black money, they said.

The company spokesperson could not be contacted for comments despite repeated attempts.

As per rules, a manufacturer can claim cenvat credit (at the rate of 12.5 per cent) on amount spent on purchase of raw material for manufacturing or production of goods which he can later utilise for payment of central excise duty.
The company has also deposited Rs 17 crore as central excise duty voluntarily. Further verifications have revealed that brokers, supposedly providing the goods, are non-existent and transporters have confirmed that no goods were ever transported to the M/s DSL, the sources said.
One of the Directors of M/s DSL was arrested yesterday by the DGCEI officials. He was produced before a court here where his bail application was rejected and he has been remanded to 14 days of judicial custody.

M/s DSL is manufacturer and brand owner of Rajnigandha pan masala, Catch spices and food products like Tulsi and Baba.
The investigation may open a pandora's box unearthing serious violations of other statues of tax implications and money laundering. The case is under investigation and DGCEI may soon share details with other agencies like Enforcement Directorate and Income Tax for covering other violations, the sources said.