Reliance Industries Ltd’s (RIL) Hazira manufacturing unit in Gujarat has come under the scanner of central revenue authorities for alleged excise duty evasion of at least Rs 25 crore.
The Directorate General of Central Excise Intelligence (DGCEI) here has started a probe in the case and sought certain clarification from RIL, official sources said.
The case relates to alleged wrong classification of mixed xylene — a chemical obtained through cracking of Naphtha — produced by it and sold to paint factories, they said.
The company was allegedly paying 12.5 per cent duty on it by declaring the product as organic chemical instead it should have been declared as mineral oil which attracts 14 per cent levy, the sources said.
A RIL spokesperson said they have complied with all the rules and their operations are regularly audited by various government agencies.
“We have complied with all the rules and regulations. Our operations are regularly audited by various government agencies.
“In any case the duty paid is modvatable by our customers irrespective of its classification,” Reliance Industries spokesperson said.
The term modvatable or ‘modvat’ is Modified Value Added Tax. It allows a manufacturer of excisable goods to avail credit of duty paid, on the inputs received and used in manufacturing final products, towards its excise duty liability on removal of final goods. The purpose of modvat is to avoid double taxation.
Sources said the alleged evasion by the firm is of at least Rs 25 crore. The exact quantum of alleged evasion would be known after conclusion of the probe, they said.
The firm has been manufacturing mixed xylene (solvent grade) at its Hazira factory for more than 10 years. This stream is obtained during Naphtha cracking.