Excise raids hit local copper industry

The domestic copper reprocessing sector is reeling under intensified raids and searches by the excise department across the country, owing to alleged duty evasion.

In Maharashtra, the excise department has raided manufacturers of MS ingots and rerollers in Thane, Murbad, Nasik and Pune for the misuse of Cenvat. The copper units in the state have been allegedly clearing CTD bars, TNT bars and other products without paying excise duty.

"At least 25 raids and searches have been conducted across the country in the financial year so far. Hundreds of copper reprocessors, importers and traders have been called for explanations by the excise department. The department has threatened of arrest and used other methods to force copper reprocessors to admit to duty evasion," said an industry source monitoring the issue.

The excise department has been especially targeting metal reprocessors, who, the department alleged, transact a majority of their business in cash and evade duty. They have been accused of malpractices such as misdeclaration of goods and underinvoicing, which the reprocessors have rejected outright.

"They are digging out 3 to 5 years' way-in and way-out details even of those goods, which were diverted to other parts of the country, owing to various reasons, including clients' commitment and saving transport costs," the source added.

Duty on imported raw materials and value-added products are paid at the time of billing to consumers, which is directly deposited to the government's account immediately upon payment by clients. Therefore, there is hardly any room for duty evasion, added the source.

The raids have created panic among secondary copper players in the country, resulting in huge loss in daily volume of trade in the metals. Traders do not want to land into problems again and, therefore, they hesitate to deal in metals. We will not resume our business till the dust gets settled," said another trader.

Volume in the domestic market has touched a low, owing to falling copper prices on the London Metal Exchange (LME). Traders prefer to wait and watch if the prices will rebound on the LME, which they believe will happen very soon.

There are thousands of small, medium and large reprocessing units in Maharashtra, Gujarat and Delhi and many of them have been facing tremendous price pressure, when copper prices firmed up to $8,500 last year. Many units also closed down when prices remained stagnant for some time at above $7,000.

"This is a good time for the revival of the domestic copper industry. But, actions by the state machinery such as those of the excise department will hit the enthusiasm of the copper industry," an analyst said.

A smelter owner, who was raided recently, said goods transported by road for door delivery were also being checked for details despite all the evidence of duty paid through banks being produced. Door delivery is a system practised since ages as per mutual understanding and hence there is hardly any room of doubt there, he added.