Central Excise Raid On Lml Premises
The central excise department on Sunday raided the premises of LML as if in retaliation to the latter questioning the legality of the department's order not to utilise modvat credit till audit under the provision of section 14-AA of the Central Excise Act, 1994, is completed.
Industry sources said the first part of the order is not objectionable since the department has the right to order an audit. The discord is regarding the latter part of the order which says, "it is further directed that till such time as the scrutiny by the cost accountant is over and his report submitted to the department, you are not permitted to pay duty out of modvat credit with immediate effect.
However, you may be permitted to take credit in your account and not utilise it without obtaining clearance from the department." According to industry sources, this is illegal and the excise department has transgressed its authority.
The notice was served last week to several units including, Rajendra Steel, Lohia group of companies, Kanpur Plastipack, Pepsico India , Agra Beverages, Hindustan Lever, Orai, Nerolac Paints, Track Parts of India, Kanpur, Kothari Chemicals, Kanpur among others.
The industry's grouse is that the order will constrict the flow of funds at a time when there is already a resource crunch.
They will have to arrange capital to pay the duty which they cannot avail of themselves. This would mean loss to them, they said. There is no time frame prescribed for this action which could take a few months or more, they added. According to sources, LML wrote to the department asking under what law they were being stopped from using modvat credit. In response, the excise department launched a raid at the LML premises, which has about 20 officers. They are said to have taken away a few files. Unconfirmed reports said some of them misbehaved as well. The LML brass could not be contacted as most of them were away. However Kailash Sethi, commissioner, excise, while confirming the raid declined to comment on it since the matter is under investigation.
When asked whether it was in retaliation to the LML questioning the authority of the department, he said, "I do not have further time for you".
On the department order on audit, he said these have come from Delhi and the local office cannot say anything about it.
The raid on LML has had the desired effect of scaring the units' management. The management would prefer the industry chambers taking up the issue to intervention on their own.
The impact on the units is going to be diverse. LML uses modvat credit to the tune of Rs 5-6 crore a month, Kothari Chemicals about Rs 70 lakh, Lohia Starlinger about Rs 35 lakh and Kanpur Plasitpapack about Rs 15 lakh.
These units will have to pay the duty from their own pockets while failing to avail of the modvat credit which shall stay in the burgeoning personal account ledger.
While some of the units plans to move court to get a stay on the department order, the reasons for these tactics are entirely different, industry sources said.