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Wednesday, Mar 12, 2003

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Cenvat will make textile sector competitive: CBEC

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THE Chairman of Central Board of Excise and Customs (CBEC), Mr M. K. Zutshi, has said that the `cenvat' chain completion attempted for the textile sector, through mandatory excise duty at fabric stage and removal of the deemed modvat credit, is not intended to derive any additional revenue but to make the textile manufacturing base quality-driven and cost competitive.

"In fact, the fiscal restructuring relating to the textile sector carried out this time will translate into revenue loss for the Government as the duty rates covering man-made fibre yarn, fabrics and garments have been brought down across the board. In the case of cotton knitted sector, the duty on both fabric/garment has been pegged lower at 8 per cent compared to other garments/fabrics which is at 10 per cent. The revenue loss in the case of polyester yarn where the excise rate has been brought down to 12 per cent from 16 per cent may be around Rs 2000 crore," the CBEC Chairman said.

Ultimately, one could see that the duty restructuring announced has been enunciated as a revenue neutralisation package for the textile industries which drives home the point that the whole exercise was not focused on revenue mop but to deliver competitiveness of the traditional manufacturing sector.

Mr Zutshi personally undertook a study-cum-grievance hearing visit to Tirupur and Coimbatore, on the post-Budget implications, especially to allay the fears on extending excise net on knitwear industries last week end.

Speaking to newsmen at the end of his visit, the CBEC chairman said the Excise department was fully aware of the sentiments of the industries that come into tax net for the first time.

His department would accept the self- declaration from the industries undertaking to render the accounts for duty compliance and it "will adopt their accounts as it is", irrespective of whether these units are run by the owners themselves or under the benami names.

In the knitwear and powerloom sector the fear so far largely seems to be on becoming accountable, but once the fear is removed the implementation of the excise regime would be smooth, he felt.

The CBEC chairman hinted that to start with the implementation of the central excise compliance in the powerloom and knitwear sectors would be handled at senior official levels considering the sensitivity of the issue.

The Excise authorities would also be going through the process of registering the knitwear/powerloom units — the master-weavers or the merchandisers who would undertake accountability for ordering the manufacture.

"The excise registration of the units in these weaving/knitting centers are expected to be completed by April-end. But there will be no bar on these units' production clearance due to registration and their working could go on," said Mr Zutshi.

But how the Excise department would ensure that all genuine units are covered into the excise records.

"Maybe we'll be ultimately doing a survey and the department after a year or so, could adopt its unit-auditing mechanism. The excise authorities would also be taking up redeployment of their manpower to cope with the additional responsibility."

On the extent of excise compliance among the Tirupur based knitwear, Mr Zutshi felt that his discussions with the knitwear producers largely pointed that they had realised that they could no more postpone joining the `cenvat' chain.

Being well entrenched in exports, most Tirupur exporters too employed the latest technology which could be usefully deployed for excise compliance as well.

In this backdrop, the claims of the knitwear sector that they are small and tiny and hence could not maintain excise accounts exclusively did not cut ice with the chairman of the CBEC.

"We'll constantly review the methodology for excise compliance and assure the industry that the garment producers would not be put into any difficulties by the Excise officials," Mr Zutshi maintained.

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