Circular No. 178/12/96-CX dated 28/2/96
Subject: Examination of the para 3.48 by the Public Account Committee
(1995-96) out of the Report of the C & AG of India for the year
ended 31.3.1992 (No. 4 of 1993) regarding fraudulent availment of
Modvat Credit by M/S. Sipani Automobiles Limited; Bangalore-
Regarding
During oral evidence before the Pubic Accounts Committee on Audit para 3.48/91-
92 on the Report of the C & AG of India for the year ending 31.3.1992 the matter
regarding fraudulent availment of Modvat Credit by M/S. Sipani Automobiles Ltd.,
Bangalore, a manufacturer of motor-cars who took Modvat Credit fraudently to the
tune of Rs. 76.84 lacs in excess of the duty paid on the inputs during the period
February, 1991 to March, 1992 and utilised the said excess, credit for discharge in the
duty liability on the final product came up. The said fraud could be perpetrated on
account of complete break-down in the Excise control and failure of proper monitoring
of the unit availing Modvat credit. The Public Accounts Committee under Para 87 of the
aforesaid report also noted inadequacies in the launching of prosecution as it was
felt that the assessees should have been prosecuted both under the Central Excise and
Salt Act, 1944 and the Indian Penal Code, 1860 wherein the concerned Commissionerate
has launched prosecution under the Central Excises and Salt Act, 1944 only.
2. The matter has been examined by the Board on the basis of the recommendations of
the Public Account Committee. It has been desired that stringent and strong action
betaken against unscrupulous assessees found indulging in dubious methods as adopted
by M/s. Sipani Automobiles Limited Bangalore. I am further directed to reiterate the
existing guidelines regarding launching prosecutions in such cases of fraudulent/naked
evasion of excise duty coming to light and the need for taking immediate action for
launching prosecution both under the Central Excise and Salt Act, 1944 and also,
wherever found feasible under the Indian Penal Code, 1860.
3. This may be brought to the notice of the field formations suitably.
Sd/-
(Mallika Arya)
Under Secretary to the Govt. of India
F.No. 267/45/93-CX-8(pt.IV)
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