Circular No. 178/12/96-CX
dated 28/2/96
F.No. 267/45/93-CX-8(pt.IV)

Government of India

Ministry of Finance

(Department of Revenue), New Delhi

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 fraudulently to 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 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 Central Excise 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 be taken 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 formation suitably.

Sd/-
(Mallika Arya)
Under Secretary to the Govt. of India

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