Misuse of Modvat credit especially by using both original and duplicate copies of invoices, or by resorting to similar double credits against single consignment by falsification of documents by various methods - Instruction Regarding - Central Excise - 68/68/94-CX

Misuse of Modvat credit especially by using both original and duplicate copies of invoices, or by resorting to similar double credits against single consignment by falsification of documents by various methods - Instruction Regarding Circular No. 68/68/94-CX Dated 24-10-1994 [From F.No. 267/91/94-CX.8] Government of India Ministry of Finance (Department of Revenue) Central Board of Direct Taxes, New Delhi Subject : Misuse of Modvat credit especially by using both original and duplicate copies of invoices, or by resorting to similar double credits against single consignment by falsification of documents by various methods - Instruction Regarding . I am directed to refer to the provisions of Rule 52A providing that the duplicate copy of the invoice shall be used for taking credit under Rule 57G. By Notification No. 23/94-C.E.(NT), dated 28-5-1994 the Rule 57G was amended by inserting sub-clause 2 (A). This sub-rule providing that - "(2A) Notwithstanding anything contained in sub-rule (2) a manufacturer can take credit on the invoice received in the factory on the basis of original invoice if the duplicate copy of invoice has been lost in transit subject to the satisfaction of the Assistant Collector". 2. It has come to the notice of the Board that the assessees are availing the modvat credit both on the basis of original copy and subsequently on the basis of duplicate copy resulting in taking the credit twice, or by resorting to similar double credits against single consignment by falsification of documents by various methods. 3. As per provisions of rule 57G, manufacturers are required to take the Modvat credit only on receipt of duplicate copy of invoice issued under Rule 52A. Wherever such duplicate copies has been lost in transit, the Modvat credit shall be taken only after receipt of written permission from the Assistant Collector. The provisions of Rule 52A so far as the said provisions relate to the manner in way invoices are to be prepared have been applied mutatis-mutandis to the invoices issued by the registered persons under rule 57GG vide the Board's Circular No. 70/70/94-CX, dated 24-10-1994. (F.No. 267/91/94-CX-8), except that the content of the invoice shall be as per proforma prescribed under Rule 57GG read with the contents of the Board's Circular No. 49/49/94-CX-8, dated 18-8-1994 (F.No. 267/50/94-CX-8) and manufacturers who have availed the modvat credit. 4. The credit can be availed only on the duplicate invoices issued under rule 52A or Rule 57GG and the original invoices can be used for taking credit only where the duplicate invoice is lost in transit and that too after proper scrutiny and the satisfaction of the Assistant Collector. As such taking a credit against original instead of duplicate documents should be exceptional rather than general practice. It seems that this aspect is not properly verified due to routine inspection/verification by the Range Officer/Audit Parties and other senior officers. 5. It is necessary to impress that by adopting the practice of taking credit both on the original and duplicate copy of the invoice and by resorting to similar double credits against single consignment by falsification of documents by various methods, Government is defrauded of considerable amount of revenue and therefore the failure to detect such wrong credits and / or failure to take appropriate action for penalising erroneous wrong credits on the part of the officers will be viewed seriously. 6. In view of above the board desires that an immediate exercise should be conducted to verify where the credits have been taken on the original copy of the invoice and in case of double credit action should be taken against both the persons who pass on the credits and the person who receive and take credit, as per provisions of law. 7. A suitable instruction should be issued to field formations.