The Hindu Business Line : `Take closer look at cenvat credit availment practices'

THE FINANCE MINISTER, Mr P. Chidambaram, flanked by the Revenue Secretary, Mr K.M. Chandrasekhar (left), and the Minister of State for Finance, Mr S.S. Palanimanickam, at the All India Conference of Chief Commissioners of Customs, Excise and Service Tax in the Capital on Thursday. — V. Sudershan

New Delhi , Aug. 31

The Union Finance Minister, Mr P. Chidambaram, on Thursday asked Chief Commissioners to take a "closer look" at cenvat credit availment practices of industry to ensure that no more cenvat is taken credit of than what a unit is entitled to.

While excise duty collections have grown by 8.8 per cent in April-July 2006 to Rs 33,074 crore (Rs 30,387 crore), cenvat credit availment in the same period grew by 26.1 per cent to Rs 41,592 crore (Rs 32,994 crore).

`Meet targets'

The Finance Minister has also asked the revenue department to make very effort to "reach" the 2006-07 budget target for central excise duty even while continuing with the good performance on the customs duty and service tax collections front.

"This year I have made it clear to the chief commissioners that every effort should be made to achieve the budget target on the excise duty front. It's very important that excise duty target is achieved. Even this year, cenvat credit availment is very high. So far there is no cause for alarm, but we should watch the cenvat credit growth carefully," Mr Chidambaram told reporters, after inaugurating the annual conference of Chief Commissioners of central excise, customs duty and service tax. Mr Chidambaram said that one possible explanation for the increase in cenvat credit availment could be the additional countervailing duty (CVD) of 4 per cent that was levied this year. The additional 4 per cent CVD, which is levied as a customs duty, is cenvatable and to that extent cenvat credit availment this year could be inflated, he said.

Good growth

Mr Chidambaram pointed out that excise duty target at Rs 1,17,967 crore accounted for a little over half of the budgeted indirect tax revenue collections of Rs 2,29,533 crore for 2006-07.

In fiscal 2005-06, the customs and service tax collections exceeded the budgeted figures. But the revenue department fell short of the targets on the excise duty front. One of the reasons attributed for the shortfall in excise duty collections was that the cenvat credit availment by industry was much higher than the level factored in by the Government. Stating that all the three indirect taxes — customs, excise and service tax — are showing good growth during the current fiscal, Mr Chidambaram said that the Central Coard of Excise and Customs (CBEC) was quite confident of achieving the budgeted targets.

Tackling issues

In April-July 2006, customs duty collections have grown by 33.5 per cent, excise duty by 8 per cent and service tax collections by 63 per cent. "In the first four months, we are ahead of the targets. However, you can't draw definitive conclusions based on three-four months' performance. One has to watch revenue collections very carefully," he said.

Besides announcing that 35 more customs locations would come under electronic data interchange system in 2007, Mr Chidambaram also said that the Government was working on a plan to tackle manpower shortage in the department. He said that the revenue department would require 17 persons for every SEZ set up in the country.