Excise Duty evasion by Petroleum refineries – DGCEI alerts!
DGCEI , is the High-Profile Directorate General, Central Excise Intelligence and they have received intelligence that a major refinery was not paying excise duty correctly. The condemned refinery had a bad practice of clearing its products through pipelines and for short distance pipelines of less than 100 kilometres , the refinery was paying duty on the basis of quantity received at the terminals, not the quantity cleared from the refinery.
And this, according to the DGCEI , has resulted in loss of Revenue of Rs. 10 Crores. The worried DGCEI wants the practice in other refineries to be checked and the results reported to the DG in due course.
How can this be loss of Revenue? At worst, it can be a postponement of duty payment.
Just look at the situation: In the refinery, the oil is stored in a tank and there is a pipeline from the tank to the delivery point, of course within the refinery. You don't ask them to pay the duty once the goods are stored in the tank; you collect duty only when the tanker lorry leaves the refinery. Now, if the pipeline is a hundred kilometers long; it still starts at the tank in the refinery. Is the pipeline not a part of the factory? Will it cease to become part of the factory just because it is hundred kilometres long? Will a 200 metres pipeline be considered part of the factory and a 100 kilometres pipeline be considered outside the factory?
What is wrong with paying duty on the quantity received at the other end of the pipeline?
The Oil Refineries are good milking cows for the Central Excise Department. Whenever they want Revenue, the Oil Companies are ready and obliging. Any Commissionerate with an Oil refinery will reach its target, because on the last day of March, the Oil Company is made to pay by mistake a few Crores of rupees (which by a strange coincidence happens to be the amount by which the Commissionerate is short of its target ) and in the first week of April, the mistake is “detected” and the Oil Company is refunded the excess amount paid and the FM is made to believe that the Commissioner has reached his target.
The modus operandi adopted by Commissionerates to achieve their targets will put the worst tax evaders to shame for sheer ingenuity.
Now the DGCEI has given yet another clue. Many of the oil pipelines will be seized in the next couple of months and oil companies will get away by paying huge amounts of excise duty and a happy FM will announce incentives to the Department for surpassing the target!