Intelligence Raids Reveals Alang Remains a Fake Document Factory

Press Release

Intelligence Raids Reveals Alang Remains a Fake Document Factory

Dilution of Central Excise Intelligence Opposed

Import of hazardous substances, a Global Threat

New Delhi 7/1/2011: ToxicsWatch Alliance (TWA) welcomes the notification of Director General of Central Excise Intelligence (DGCEI), Union Ministry of Finance seeking change in system of invoicing by ship breakers at Alang, Gujarat to ensure more transparency. This Public Notice No. 01/2010 dated on 26/7/2010 vindicates TWA’s allegations about non-transparency in Alang. The document is attached.

Notably, Directorate of Revenue Intelligence functions under the Central Board of Excise and Customs in the Ministry of Finance, Department of Revenue has taken note of "problems such as import of hazardous substances that will occupy centre stage in the future as the emerging global threats." In such a context, the notification assumes huge significance as it will end up helping systematic quantification of material flow and help detect and segregate goods of hazardous nature.

On 23rd December, 2010, Mr Raju, Commissioner, Central Excise, Bhavnagar issued a Press Note (attached) referring to “ a number of cases of Revenue leakage in Alang against Ship Breakers of Alang, who fraudulently passed on Cenvat Credit worth crores of Rupees. They were also not showing production, clearance, transportation and Service Tax related information in their statutory records. The investigations are going on and some notices have been issued by ADG (CEI). In order to curb these malpractices, the Public Notice No. 02/2010 was issued on 13.12.2010 by the Central Excise Commissionerate, Bhavnagar. The public notice requires them to maintain certain records which would make it difficult for those who choose to evade duties by clandestine clearances.” The Press Note says that “ around 100-150 persons came to Central Excise, Head Quarters office, Bhavnagar and informed that they were from the Alang Ship Breaking Association”, “they continued shouting slogans and fearing damage to public property, and a as matter of abundant precaution, police force was called to ensure peace and security of the Government office”.

In such a backdrop, TWA has learnt that under pressure due to strike, now DGCEI decided to put the notification seeking change in system of invoicing by the ship breakers for transparency, in abeyance for one month after the intervention of Chief Commissioner, Ahmedabad. The TWA opposes any amendment in the notification and demands that the notification of 13.12.2010 be enforced rigorously both in letter and spirit because it is in compliance of the Supreme Court’s order in the hazardous wastes/shipbreaking case. Most ship breakers who are law abiding support this notification. The case is listed for hearing on 21st January, 2011.

It is noteworthy that Office of the Commissioner of Central Excise & Service Tax, Bhavnagar, Department of Revenue, Union Ministry of Finance issued on 26/7/2010, a Public Notice No. 01/2010 saying, “It has been brought to the notice of this Commissionerate that the Ship Breaking Units situated in Alang, Sosiya and other areas falling within its jurisdiction are not issuing their Central Excise invoices by declaring correct value and description of the scrap, plates etc generated as a result of their manufacturing activities. Investigations recently initiated by Director General of Central Excise Intelligence, Ahmedabad Zonal Unit revealed that the documentation and procedures followed by the ship breaking units are suffering from several infirmities resulting in substantial loss of Government Revenue.” As per power conferred under Central Excise Rules, 2002, it said, “All ship breaking units are directed to discontinue their present system of mentioning general description of ship breaking materials in their invoices. They should declare the correct and full description of the goods...”

For the first time since 14th October, 2003, in compliance of the Supreme Court order, this Public Notice seeks proper inventory saying, “Ship breaking units are also directed that as soon as they complete dismantling and clearance of materials obtained from each imported ship, vessel or any other floating structure, they should submit a statement to the jurisdictional Range Superintendent indicating the LDT of the imported ship, nature of the imported ship [cargo, passenger, tanker etc], total quantity of scrap of each metal obtained and cleared, total quantity of plates of each metal and different sizes [thickness] obtained and cleared, total quantity of each item of non-excisable goods obtained and cleared [wood, furniture, old engine, machinery, stores etc.], and the percentage difference of total weight of goods and materials obtained and cleared vis-a-vis the LDT of the imported ship etc.”

Earlier, the four-day-long strike by ship breakers at Alang happened to protest this notification asking for a ship-wise break-up of material obtained from dismantled vessels. The notification was issued in July 2010 and ship-breakers were asked to periodically submit details of excisable and non-excisable items obtained from the ships they bring for scraping. Ship-breakers were told to maintain ship-to-ship stock register. At present, ship-breakers submit details goods-wise, and not ship-wise. The notification was issued after a multi-crore excise duty evasion ''racket'' at Alang came to light. The ship breakers were allegedly hiding value addition to scrap and were inflating the quantity of items exempted from excise duty. The strike ended on 31st December, 2010 evening after the representatives of ship-breakers met officials of central excise and other departments. The work at Alang yard was resumed on 1st January, 2011. Ship breaking at Alang came to a halt on December 21, 2010 remained suspended for four days in protest of the notification.

Earlier, the Inter-ministerial Committee (IMC) on Ship breaking, Union Ministry of Steel noted in the minutes of its meeting dated 17th September, 2010 that “The Coast Guard representative brought out some security concerns and incidents of communication sets from ships reportedly finding their way to the local fisherman. It was advised to the Ship recyclers to ensure that such equipment are immediately destroyed by the Customs as per the prescribed procedures. The Chairman also advised the Naval, Coast Guard and GMB to regularly interact as per the decisions taken in the earlier IMC meetings and to resolve the major security issues in the Coastal Security Committee meetings conducted at the State Level.”

In its minute dated 4th February 2009, the IMC noted the Security Concerns, saying, “Both the representative of the Coast Guard and the representative from Naval HQ raised concerns over the entry of ships carrying hazardous cargo to Alang for ship breaking and how no information is made available to them regarding the movement of ships to Alang. Besides this there was no information regarding whether the Alang Port is compliant with the International Ship and Port Facility Security (ISPS) Code. In the context of the present security concerns in the country, the Chairman advised the representative of the Ministry of Shipping, the GMB officials, the Coast Guard representative and the Naval HQs to address the issue expeditiously so that the security gaps are taken care of and also to verify whether the port at Alang has implemented the ISPS codes. The Coast Guard representative and the Naval HQ representative also expressed apprehensions that the vessels coming in for beaching sometimes ply very close to the oil rigs, which could be a potential for accidents.”

It also mentions that the Chairman of the IMC “directed that the Ministry of Shipping may organize a meeting on the matter with GMB, Naval HQ and Coast Guard HQ, Custom etc. immediately and ensure that gaps in the security frame-work issues are addressed immediately.” No action has been taken so far to plug the existing the loop holes.

On the issue of radioactive materials raised by TWA, it observes, “Regarding report of a huge quantity of Smoke Detectors containing radioactive material lying in the Plots at Alang, the AERB informed that due to large volume of non-radioactive materials contained in the smoke detectors, it is difficult for them to accept the material in the present shape for disposal at the BARC facility.” The issue remains unresolved so far.

Even as the Union Steel Ministry is seized with the issue of 58 page Draft Code on Regulations for Safe and Environmentally Sound Ship Recycling prepared in compliance of the Supreme Court's order dated September 6, 2007 to improve the situation, death toll of migrant workers from Bihar, UP, Jharkhand and Orissa in Alang underlines the fact of non-improvement on the Alang beach. In the year 2010 alone, some 20 workers have died while at work. Most of the workers are poor migrants work in a hazardous and toxic working environment. Meanwhile, the ongoing contamination of once pristine Alang beach is yet to see the sight of any effort to remediate the site and take the hazardous industrial activity off the beach, away from coastal environment. Alang is a litmus test for government’s sensitivity towards country’s environmental borders in which it has failed miserably so far.

While such state of affairs prevails, 348 ships were dismantled without complying with environmental and occupational health regulations and Supreme Court’s order in 2010. Since 1983, Alang has so far dismantled 5,200 ships. There are a total of 127 private ship-breaking plots at Alang. The theft of excise duty has been going on for a very long time.

For Details: Gopal Krishna, ToxicsWatch Alliance, Mb: 9818089660, E-mail: krishna2777@gmail.com, Web: imowatch.blogspot.com