Show-Cause Notice Issued Against New Tobacco

The Directorate General of Anti-Evasion (Excise) has issued a show-cause notice of Rs 36.16 crore to New Tobacco Company, the Calcutta-based cigarette company for clandestine removal of cigarette from its factory at Agarpara in West Bengal. The notice was issued to the company on April 23, 1997.

Manufacturers of well known cigarette brands like No 10 Filter and Regent King, New Tobacco Company's Agarpara factory is run on lease by RDB Industries after the Calcutta high court put up the ailing company for management change.

The tobacco manufacturing company was investigated by the Anti-Evasion Directorate for short levy and non-levy of excise duty on cigarettes manufactured by it for the period from October 1994 to October 1996.

According to the Directorate, the excise duty evasion by the company involved clandestine removal of cigarettes and smoking mixtures manufactured in the factory without proper accountal from raw materials procured by them..

The goods, on being clandestinely removed from the factory, used to be brought to a hidden godown at Howrah belonging to M/S CIGMAT Distributors, their carrying and forwarding agent. They used to be then distributed to the different dealers.

The investigation into New Tobacco Company started with searches being conducted at various premises on October 24, 1996. The search led to the recovery of huge incriminating documents and seizure of excisable goods valued at Rs 73 lakh -- involving central excise duty of Rs 53 lakh -- clandestinely removed from the factory. Following these searches, four company executives were arrested including S L Dugar, chairman & managing director, his son Vinod Dugar, S N Ganguly, chief executive and R K Pillai, vice president.

Cigarette is the only item which is under physical control of the excise department, with central excise officers being physically present in the factories. Signatures of these officers are required in the clearance documents before goods can be removed from the factory for distribution. A similar case of clandestine removal of cigarettes by Shri Chandra Tobacco, a Hyderabad-based franchisee unit of GTC, was investigated by the Anti-Evasion Directorate which resulted in the suspension of 44 central excise officers.

New Tobacco Company, which was earlier a part of Duncan agro, has two factories -- one at Agarpara in West Bengal and the other at Biccabolu in Andhra Pradesh.

A separate excise evasion case amounting to Rs 5 crore has already been registered against the Biccabolu unit of the company. The company had been facing financial constraints for the last couple of years, consequent to which the Calcutta high court appointed a liquidator for the ailing company.

Instead of winding up the company, the high court later decided to give it up for management change.

The Agarpara factory was taken up on lease by RDB Industries, which was issued the show cause notice by the directorate.