Measures to avoid misuse of Modvat credit - Central Excise - 12/93-CX.8

Measures to avoid misuse of Modvat credit Circular No. 12/93-CX.8 Dated 2-11-1993 [From F. No. 267/45/93-CX.8] Government of India Central Board of Excise Customs New Delhi Subject : Measures to avoid misuse of Modvat credit. I am directed to state that the report of the C AG of India in the year ending 31-3-1992 (No. 4 of 1993) has commented adversely on fradulent availment of credits. It has been noticed that parties have taken modvat credit without furnishing the original duty-paying documents and the credit taken is a multiple of the amount mentioned in the gate passes. 2.(i) The Board had issued instructions vide Circular No. l8/86-CX.6, dated 28-5-1986 stating, inter alia, that all duty paying documents, in respect of which duty credit of more than Rs.10,000 in each Gate pass is taken, are to be got verified from the Range in which the duty was paid initially. A similar verification was also stipulated for 5% of the duty paying documents having a duty credit of less than Rs.10,000. It appears that Board's Circular 18/86-CX.6 is not being followed in practice in the field. (ii) I am directed to state that the above mentioned instructions are to be followed scrupulously. The Central Excise Officers should also verify all endorsed gate passes. In this context the time limits referred to in Circular No. 18/86 are to be strictly adhered to. (iii) DICCE should monitor this item of work. 3. (i) It is also noticed that no time limits exist for verification of declaration filed by the assesses under Rules 57G, 57F and 57H of the Central Excise Rules, 1944. A time limit of 3 months from the date of the receipt of declaration is being fixed. For cent - per - cent checks by the Superintendent of Central Excise and 20% of such declaration by the Assistant Collector of Central Excise. The Collector of Central Excise is to prescribe a suitable monthly report for his monitoring in this regard. (ii) DICCE is to monitor this item of work also. 4. I am directed to bring to your attention the provisions of Rule 57G(4) according to which a manufacturer of final product is to submit the original duty paying documents along with Part I and Part II of Form RG-23A every month and the Superintendent who after verifying the genuiness is to de-face such documents and return the same to the manufacturer. It has been noticed that the above mentioned provisions are not strictly complied with. It is, therefore, reiterated that the duty paying documents mentioned in Rule 57G(4) are to be de-faced immediately on their receipt. The Inspecting Officers/Audi should look into the aspect to the work and take serious view of the Central. Excise has not done so within atleast 3 months of receipt of such from documents only with the RT 12 with the, RG 23A. This should be attended form irrespective of the fact as to whether the assessment is being done provisionally or finally. 5. A special audit of units availing of Modvat Credit of Rs.10 lakhs above in a year should be conducted in all Collectorates, preferably combining the audit of such units with the periodicity of audit conducted by the Internal Audit Parties and the relevant Modvat declaration, documents etc., be endorsed, as taken for having checked. Similarly, the Anti-Evasion Staff should be geared up to ensure proper scrutiny of the factories availing of Modvat credit of Rs. 25 Lakhs or above and suitably endorse the relevant documents scrutinised. 6. Field formations may be instructed suitably. 7. Receipt of this letter may please be acknowledged.