Page 128 - ELT_15th May 2020_VOL 372_Part 4th

518 EXCISE LAW TIMES [ Vol. 372

refund of cash paid portion of duty and eligibility of credit the entire amount of
duty to the buyers of such excisable goods had prompted certain unscrupulous
manufacturers to indulge in different types of tax evasion tactics. It was revealed
on analysis of cases booked by the Excise Department and even the representa-
tions received from the Industry Association about misuse of exemptions grant-
ed by the Government, which was meant to be available only for genuine manu-
facturers. It was noticed as under :
(i) Reporting of bogus production by mere issuance of sale invoices
without actual production of goods and supply/clearance of excis-
able goods. This would result in availment of Cenvat credit by buy-
ers of such excisable goods in other parts of the country without ac-
tual production being carried out and in absence of actual receipt of
goods.
(ii) Reporting of bogus production by such units in these areas where
actual production takes place elsewhere in the country.
(iii) Over valuation of goods resulting in availment of excess credit by
buyers.
(iv) Goods are supplied by manufacturers, importers to these units
without issuance of sales invoice and these are backed by bogus sale
invoices issued by traders who do not undertake actual supply of
goods. The actual supplier of these goods issue bogus duty paid in-
voices to other manufacturers who take credit based on such invoic-
es without receipt of goods.
Therefore, the Government came out with the impugned notifications/industrial
policies that the refund of excise duty shall be provided on actual and calculated
on the basis of actual value addition. On a fair reading of the earlier notifica-
tions/industrial policies, it is clear that the object of granting the refund was to
refund the excise duty paid on genuine manufacturing activities. The intention
would not have been that irrespective of actual manufacturing/manufacturing
activities and even if the goods are not actually manufactured, but are manufac-
tured on paper, there shall be refund of excise duty which are manufactured on
paper. Therefore, it can be said that the object of the subsequent notifica-
tions/industrial policies was the prevention of tax evasion. It can be said that by
the subsequent notifications/industrial policies, they only rationalizes the quan-
tum of exemption and proposing rate of refund on the total duty payable on the
genuine manufactured goods. At the time when the earlier notifications were
issued, the Government did not visualize that such a modus operandi would be
followed by the unscrupulous manufacturers who indulge in different types of
tax evasion tactics. It is only by experience and on analysis of cases detected the
Excise Department the Government came to know about such tax evasion tactics
being followed by the unscrupulous manufacturers which prompted the Gov-
ernment to come out with the subsequent notifications which, as observed here-
inabove, was to clarify the refund mechanism so as to provide that excise duty
refund would be allowed only to the extent of duty payable on actual value addi-
tion made by the manufacturer undertaking manufacturing activities in the con-
cerned areas. The entire genesis of the policy manifesting the intention of the
Government to grant excise duty exemption/refund of excise duty paid was to
provide such exemption only to actual value addition made in the respective ar-
eas. As it was found that there was misuse of excise duty exemption it was
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