RIL’s Hazira plant under lens for alleged excise duty evasion

Reliance Industries Ltd’s (RIL) Hazira manufacturing unit in Gujarat has come under the scanner of central revenue authorities for alleged excise duty evasion of at least Rs 25 crore.

The Directorate General of Central Excise Intelligence (DGCEI) here has started a probe in the case and sought certain clarification from RIL, official sources said.

The case relates to alleged wrong classification of mixed xylene — a chemical obtained through cracking of Naphtha — produced by it and sold to paint factories, they said.

The company was allegedly paying 12.5 per cent duty on it by declaring the product as organic chemical instead it should have been declared as mineral oil which attracts 14 per cent levy, the sources said.

A RIL spokesperson said they have complied with all the rules and their operations are regularly audited by various government agencies.

“We have complied with all the rules and regulations. Our operations are regularly audited by various government agencies.

“In any case the duty paid is modvatable by our customers irrespective of its classification,” Reliance Industries spokesperson said in response to PTI’s query.

The term modvatable or ‘modvat’ is Modified Value Added Tax. It allows a manufacturer of excisable goods to avail credit of duty paid, on the inputs received and used in manufacturing final products, towards its excise duty liability on removal of final goods. The purpose of modvat is to avoid double taxation.

Sources said the alleged evasion by the firm is of at least Rs 25 crore. The exact quantum of alleged evasion would be known after conclusion of the probe, they said.

The firm has been manufacturing mixed xylene (solvent grade) at its Hazira factory for more than 10 years. This stream is obtained during Naphtha cracking.

The Hazira manufacturing division is located near Surat, in Gujarat. It comprises of a Naphtha cracker feeding downstream fibre intermediates, plastics and polyester plants.

The DGCEI officials have also visited company’s offices to get certain documents and has asked its senior officials to appear before it for clarification, the sources said.

The revenue officials have also got details of a communication made by one of the firm’s Chartered Accountants citing the alleged wrong classification, they claimed.

The DGCEI’s case that the mixed xylene should be classified under ‘Chapter 27’ of Central Excise Tariff Act, 1985 is based on a judgement of a tribunal, the sources said.

Meanwhile, the RIL is understood to have sought views from Mumbai-based Institute of Chemical Technology in support of its claim. The report will be submitted to the DGCEI by the company, they said.