Depot sales can avail Cenvat

CHATROOM

We are manufacturers, clearing goods on payment of duty on the basis of valuation with reference to the retail sale price and selling the goods from a depot. We want to know whether we are eligible to take credit of service tax paid on transportation of goods up to such depots. Doubt has arisen because our goods are not charged duty on the basis of valuation under Section 4 of the Central Excise Act, 1944 and so, whether the definition of 'place of removal' given in that Section 4 would apply even in respect of valuation done on the basis of retail sale price, where the valuation is done on the basis of section 4A of Central Excise Act, 1944.

Under the Cenvat Credit Rules, 2004, the definition of 'input service' includes 'outward transportation up to the place of removal'. The expression 'place of removal' has not been defined in the Credit Rules and therefore in terms of rule 2 (t) of the said Rules, the said expression shall have the same meanings assigned to it in the Central Excise Act, 1944 or the Finance Act, 1944.

The expression 'place of removal' has been defined under Section 4 of the Central Excise Act, as per which it is (a) a factory (in case of factory gate sale); (b) a warehouse (in case goods permitted to be stored without payment of duty); or (c) a depot (in case of depot sale).

Therefore, in case excisable goods are sold from depot after their clearance from the factory, the manufacturer is eligible to take credit of service tax paid on transportation of goods up to such depot.

It must be noted that availing Cenvat credit, and valuation for payment of duty are two independent issues. Further, the provisions under rule 2 (t) of the Cenvat Credit Rules refers to definitions under the Central Excise Act, 1944, and the Finance Act, 1994, for uniform understanding of the words and phrases used in the Credit Rules.

Therefore, if an expression is not defined in the Credit Rules but is defined under a particular section of the Central Excise Act, it shall be applicable to all goods for purposes of the Credit Rules, irrespective of whether or not the said section is applicable for the purposes of working out the duty on such goods.

In view of the above, in case of depot sales, the credit of service tax paid on the transportation of goods up to such depot would be eligible, irrespective of the fact, whether the goods were chargeable to excise duty at specific rates or ad valorem rates on the basis of valuation under section 4 or 4A of the Central Excise Act.

In this connection, you may refer to CBEC letter no. 137/3/2006-CX.4 dated February 2, 2006, to the Commissioners of Central Excise and Customs.

We are filing brand rate applications for duty drawback with our central excise department. It takes too long for the fixation of brand rate. Can you please suggest suitable course of action?

If you fall under any of the following categories, you may avail of the revised simplified scheme for fixation of brand rates. (a) all exporters who have an export turnover (physical exports) of Rs 5 crore in the current or preceding financial year and having a good track record of three years of exports; (b) public sector undertakings; (c) star export houses; (d) manufacturer-exporters registered with Central Excise who have been exporting during the previous two financial years and have a minimum export of Rs 1 crore or more during the preceding financial year;

(e) manufacturer-exporters registered with Central Excise who have paid central excise duty of Rs 1 crore or more during the preceding financial year.

The essence of the scheme is that drawback rates are to be fixed without pre-verification of the data (which should be duly verified and certified by the applicant and chartered accountant/chartered engineer/cost accountant) and the exporter would be authorised by provisional brand rate letters to claim the drawback rate considered admissible from the concerned customs house(s).

The data submitted would be subject to post-facto checking by the department for its authenticity and the rates fixed are also subject to revision on the basis of such post-facto verification. If, after such post-verification, it is found that the data furnished in the applications are incorrect, the corresponding brand rate letters will be revoked. Besides, the concerned exporters will be debarred from availing the benefit of the revised simplified scheme for the next one year.

The CBEC has instructed that provisional brand rate letters under the revised simplified scheme or rejection letters must be issued within 15 days in respect of brand rate applications which are complete in all respects.