The Comptroller and Auditor General (CAG) has detected failure on the part of the Excise department to notify norms for production of Indian Made Foreign Liquor (IMFL) from ENA, which led to the shortfall in the IMFL yield during production and resulted in a revenue loss of Rs. 57.83 crore.

ENA is the primary raw material for making alcoholic beverages such as whisky, vodka, gin, liqueur and alcoholic fruit beverages. It typically contains 95% alcohol by volume and is derived from sources such as sugarcane, molasses and grains.

The CAG report for the year ending March 31, 2020, was tabled in the autumn session of the Assembly.

The report said the records (June 2020) of one distillery (CMJ Breweries Pvt Ltd) and bottling plants of the same firm and four others – North East Bottling Plant, MDH Beverages Bottling Plant, Marwet Bottling Plant and Oaken Gold Bottling Plant – from 2015-16 to 2019-20 were audited to assess the correctness of excise duty collected based on data relating to production and stock.

The audit revealed that four of the five bottling plants utilised a total of Rs. 3.58 crore BL of the ENA during this period. Taking the 1% wastage norm (0.5% for blending and 0.5% for racking) into account, the bottling plants were expected to produce 90,96,457 cases of IMFL, the report said.

“However, four bottling plants disclosed production of 87,17,511 cases of IMFL. This resulted in the short-production of IMFL by 3,78,946 cases. These plants failed to maintain any records of ENA procured and consumed; nor were such reports submitted to the Excise authorities,” the report stated. The audit report observed that the rate of excise duty notified by the state Excise department during the review period was fixed at a uniform rate of Rs.810 per case. It noted that the rate of VAT (40%) fixed by the Taxation department varies from brand to brand ranging from Rs.716 to Rs.787.59 per case.

“The failure of the government to notify norms for production of IMFL from ENA, despite lacunae pointed out in the audit report for the year ended March 31, 2014, resulted in a shortfall of 3,78,946 cases during production, involving loss of revenue to the tune of Rs. 57.83 crore in the form of excise duty (Rs. 30.69 crore) and VAT (Rs. 27.13 crore) over a period of five years under scrutiny,” the CAG report said.

It further said the failure of the state government to notify norms for production of IMFL from ENA and norms for production of ENA from raw materials (grains) resulted in the loss of Rs. 57.83 crore in revenue. Besides, concealment of actual production and sale of IMFL cannot be ruled out, it added.

The CAG stated that the matter was reported to the state government in November 2021. “During the exit meeting in February 2022, the commissioner and secretary of Excise department assured that the norms for production of IMFL from ENA and norms for production of ENA from raw materials will be notified latest by May 2022,” it said.