Excise exemption subject to NO-CENVAT condition cannot be availed of by importer : SRF (SC) nullified partially

CIRCULAR NO.1005/12/2015-CX, DATED 21-7-2015

It may recalled that the Hon’ble Supreme Court, in the case of M/s SRF Ltd. v. Commissioner of Customs, Chennai [2015] 56 taxmann.com 407 (SC) and M/s ITC Ltd. v. Commissioner of Customs (I&G), New Delhi relating to CVD exemption, has held that the benefit of excise duty exemption [available to final products manufactured by the domestic manufacturer, subject to the condition of non-availment of CENVAT credit of duty on inputs or capital goods used by such manufacturer for manufacture of such final products] will also be available to the importers of such final products for the purposes of CVD on the ground that the importer was not availing the credit of duty on inputs or capital goods.

2. The implication of the Hon’ble Supreme Court judgment was that all such final products when imported by manufacturer importer would have attracted concessional excise duty as CVD, while the domestic manufacturer of such final products had to forgo input tax credit to be eligible for such concessional rate. This would put the domestic manufacturers at a disadvantage vis-a-vis imports and would adversely impact the Make in India Policy of the Government.

3. The Judgment of the Hon’ble Supreme Court was examined in CBEC and it was found that there were certain errors apparent on record/interpretational issues and, with the concurrence of the Ld. Attorney General, a Review Petition/Revision Application has been filed against the same.

4. However, keeping in view the adverse implications of the aforesaid judgment on the domestic industry, legal opinion was sought from the Ministry of Law & Justice as to whether pending the aforesaid Review Petition/Revision Application, such conditions in the relevant notifications be suitably amended so as to make the intention abundantly clear (that these conditions are to be satisfied by the manufacturers of such goods and not the buyer/importer of such goods).

5. In this context, opinion of the Ministry of Law & Justice was also sought. With the concurrence of the Ld. Attorney General, notifications No.34/2015-CE, No.35/2015-CE and No.36/2015-CE all dated 17-7-2015 were issued amending the conditions in notifications No.30/2004-CE dated 9-7-2004, No.l/2011-CE dated 1-3-2011 and No.l2/2012-CE dated 17-3-2012. respectively.

6. In the above context, apprehensions have been raised about the use of the phrase of “appropriate duty”. In this regard, Explanations have been inserted in the notifications No.30/2004-CE, dated 9-7-2004. No.1/2011-CE, dated 1-3-2011 and No.12/2012-CE, dated 17-3-2012 so as to clarify that the appropriate duty or appropriate additional duty or appropriate service tax for the purposes of the said notifications/entries includes nil duty or tax or concessional duty or tax whether or not read with any relevant exemption notification for the time being in force.

7. It may therefore, be noted that the domestically manufactured goods covered under these notifications/entries continue to be exempt from excise duty or subject to concessional rate of excise duty, as the case may be, as they were prior to 17th July, 2015.

8. Trade Notice/Public Notice may be issued to the field formations and taxpayers.

9. Difficulties faced, if any, in implementation of this Circular may be brought to the notice of the Board.

THE FOLLOWING SIX NOTIFICATIONS HAVE BEEN ISSUED :

1. AMENDMENT IN NOTIFICATION NO. 30/2004-CE

1A. NOTIFICATION NO.34/2015-C.E., DATED 17-7-2015

In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Government being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No 30/2004-Central Excise, dated the 9th July, 2004, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 421(E), dated the 9th July, 2004, namely :—

In the said notification, in the opening paragraph, for the proviso, the following proviso shall be substituted, namely:—

“Provided that the said excisable goods are manufactured from inputs on which appropriate duty of excise leviable under the First Schedule to the Central Excise Tariff Act or additional duty of customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) has been paid and no credit of such excise duty or additional duty of customs on inputs has been taken by the manufacturer of such goods (and not the buyer of such goods), under the provisions of the CENVAT Credit Rules, 2004.”.

1B. NOTIFICATION NO.37/2015-C.E., DATED 21-7-2015

In exercise of the powers conferred by sub-section (1) and sub-section (2A) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Government being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No 30/2004-Central Excise, dated the 9th July, 2004, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i), vide number G.S.R. 421(E), dated the 9th July, 2004, namely :—

In the said notification, in the opening paragraph, after the proviso, the following Explanation shall be inserted, namely:—

Explanation.— For the purposes of this notification, appropriate duty or appropriate additional duty includes nil duty or concessional duty, whether or not read with any relevant exemption notification for the time being in force.”.

2. AMENDMENT IN NOTIFICATION NO. 1/2011-CE

2A. NOTIFICATION NO.35/2015-C.E., DATED 17-7-2015

In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 1/2011-Central Excise, dated the 1st March, 2011 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 116(E), dated the 1st March, 2011, namely:—

In the said notification, in the opening paragraph, for the proviso, the following proviso shall be substituted, namely:—

“Provided that the said excisable goods are manufactured from inputs or by utilising input services on which appropriate duty of excise leviable under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) or additional duty of customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) or service tax under section 66 of the Finance Act, 1994 (32 of 1994) has been paid and no credit of such excise duty or additional duty of customs on inputs or service tax on input services has been taken by the manufacturer of such goods (and not the buyer of such goods), under the provisions of the CENVAT Credit Rules, 2004.”.

2B. NOTIFICATION NO.38/2015-C.E., DATED 21-7-2015

In exercise of the powers conferred by sub-section (1) and sub-section (2A) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 1/2011-Central Excise, dated the 1st March, 2011, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 116(E), dated the 1st March, 2011, namely: —

In the said notification, in the opening paragraph,—

(A) in the proviso, for the word and figures “section 66”, the word, figures and letter “section 66B” shall be substituted.
(B) after the proviso, the following Explanation shall be inserted, namely:—
Explanation.— For the purposes of this notification, appropriate duty or appropriate additional duty or appropriate service tax includes nil duty or nil service tax or concessional duty or concessional service tax, whether or not read with any relevant exemption notification for the time being in force.”.

3. AMENDMENT IN NOTIFICATION NO. 12/2012-CE

3A. NOTIFICATION NO.36/2015-C.E., DATED 17-7-2015

In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2012-Central Excise, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 163(E), dated the 17th March, 2012, namely:—

In the said notification, in the ANNEXURE,—

(a) for condition No. 16, and the entries relating thereto, the following shall be substituted, namely:—
“16. If the said excisable goods are manufactured from inputs or capital goods on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff Act or additional duty of customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) has been paid and no credit of such excise duty or additional duty of customs on inputs or capital goods has been taken by the manufacturer of such goods (and not the buyer of such goods) under rule 3 or rule 13 of the CENVAT Credit Rules, 2004.”;
(b) in Condition No. 20, in clause (a), for the existing entry the following entry shall be substituted namely:—
“the said excisable goods are manufactured from inputs on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff Act or additional duty of customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) has been paid and no credit of such excise duty or additional duty of customs on inputs has been taken by the manufacturer of such goods (and not the buyer of such goods), under rule 3 or rule 13 of the CENVAT Credit Rules, 2004;”;
(c) for condition No. 25, and the entries relating thereto, the following shall be substituted, namely:—
“25. If the said excisable goods are manufactured from inputs or by utilising input services on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff Act or additional duty of customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) or service tax under section 66 of the Finance Act, 1994 (32 of 1994) has been paid and no credit of such excise duty or additional duty of customs on inputs or service tax on input services has been taken by the manufacturer of such goods (and not the buyer of such goods), under rule 3 or rule 13 of the CENVAT Credit Rules, 2004.” ;
(d) for condition No. 52A, and the entries relating thereto, the following shall be substituted, namely:—
“52A. If the said excisable goods are manufactured from inputs or capital goods or by utilising input services on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff Act or additional duty of customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) or service tax under section 66 of the Finance Act, 1994 (32 of 1994) has been paid and no credit of such excise duty or additional duty of customs on inputs or capital goods or service tax on input services has been taken by the manufacturer of such goods (and not the buyer of such goods), under rule 3 or rule 13 of the CENVAT Credit Rules, 2004.”.

3B. NOTIFICATION NO.39/2015-C.E., DATED 21-7-2015

In exercise of the powers conferred by sub-section (1) and sub-section (2A) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2012-Central Excise, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i), vide number G.S.R. 163(E), dated the 17th March, 2012, namely:—

In the said notification, in the ANNEXURE,—

(a) in Condition No. 16, under the heading “Conditions”, after the entries, the following Explanation shall be inserted, namely:—
Explanation.— For the purposes of this condition, appropriate duty or appropriate additional duty includes nil duty or concessional duty, whether or not read with any relevant exemption notification for the time being in force.”;
(b) in Condition No. 20, under the heading “Conditions”, after the proviso, the following Explanation shall be inserted, namely:—
Explanation.— For the purposes of this condition, appropriate duty or appropriate additional duty includes nil duty or concessional duty, whether or not read with any relevant exemption notification for the time being in force.”;
(c) in Condition No. 25, under the heading “Conditions”,—
(i) for the word and figures “section 66”, the word, figures and letter “section 66B” shall be substituted;
(iii) after the entries, the following Explanation shall be inserted, namely:—
Explanation.— For the purposes of this condition, appropriate duty or appropriate additional duty or appropriate service tax includes nil duty or nil service tax or concessional duty or concessional service tax, whether or not read with any relevant exemption notification for the time being in force.”;
(d) in Condition No. 52A, , under the heading “Conditions”,—
(i) for the word and figures “section 66”, the word, figures and letter “section 66B” shall be substituted;
(ii) after the entries, the following Explanation shall be inserted, namely:—
Explanation.— For the purposes of this condition appropriate duty or appropriate additional duty or appropriate service tax includes nil duty or nil service tax or concessional duty or concessional service tax, whether or not read with any relevant exemption notification for the time being in force.”.

RELATED STORY : CBEC : Excise & Customs CVD : Only Indian Manufacturers Can Enjoy 2% Concessional Duty Regime, not importers

Leave a Reply