NEW DELHI, NOV 25: With indirect tax collections looking gloomy, the Department of Revenue is considering a proposal to recast the excise duty exemption norms for small-scale industries (SSIs) to check largescale duty evasion. Not only does it plan to rein in the small-scale units (with an annual turnover below Rs 30 lakh) by making filing of quarterly returns mandatory but it wants them to maintain proper consumption and output records. Presently, such units are not required to file returns or maintain records.

Sources said the changes, proposed by the Delhi Commissionerate, will help check supression of output/turnover by SSIs to evade excise duty. While only SSIs with an annual turnover below Rs 30 lakhs are exempt from excise duty, thousands of firms (with an annual turnover between Rs 30 lakh and Rs 3 crore) supress raw material consumption/output to avoid excise. In fact, the duty evasion by SSIs is suspected to be between Rs 800-1000 crore, according to conservative estimates made by excise authorities. No firm estimates are available in the absence of any reliable data on consumption/output of SSIs.

For instance, out of nearly 126,000 small-scale sector units in Delhi, only about 10,000 firms are registered with the Excise Department. The remaining take shelter under the duty exemption scheme for unit with turnover below Rs 30 lakh -- it exempts the small-scale units from registration, maintain any consumption/output records, filing return and submitting price list to the excise authorities. Worse, the excise officer are not permitted to visit/question such units without written permission from the assistant commissioner. In the last six months alone, excise authorities detected supression of output by nearly three dozen firms -- most of the firms had an annual turnover of over Rs 1 crore but supressed their output to take advantage of the duty exemption scheme.

To overcome this problem, the Department of Revenue is also contemplating to restrict duty exemption to "manufacturers of excisable goods by the labour of themselves and members of their family without hiring of any employee for the manufacture of goods, maintenance of of accounts and sale or purchase of raw materials and finished goods and having an annual output of less than Rs 7.5 lakh."