The ministry has begun consultations with the law ministry to decide if the scope of the set offs given in the Budget 2003-04 can be modified, through the issue of a notification or will have to await the next Budget.
Budget 2003-04 had liberalised the conditions, under which companies could seek credit for tax paid on use of sugar, textiles and tobacco as intermediate products against their final products, under Cenvat rules.
These amendments were brought about in the Budget by amending clauses 143 and 144 of the Central Excise Act, 1944 and notifications issued under the Additional Duties of Excise (Goods of Special Importance Act), 1957.
Through these amendments, the finance ministry had allowed companies to claim even retrospective refunds under the Cenvat rules. The ministry has estimated that it lost about Rs 250 crore from just the tyre manufacturers, who use certain textiles for the finished product.
Similarly, the aerated water industry uses a large quantity of sugar as an intermediate. The government sources said they had not anticipated that the scale of the revenue loss would be so large.
The problem had arisen because it was envisaged under the amendments, that the companies could take the benefit with effect from July 2000, when the Eleventh Finance Commission gave its award.
