Approach excise help centres

CHATROOM

Excise will have to be paid on goods for which payment is received in Indian Rupees.

We are a SSI unit and are already registered with Central Excise as well as having form UT-1 Letter of Undertaking for removal of excisable goods for export without payment of duty for supplies to Nepal and Bhutan.

Earlier, as per the normal practice, excise duty was being charged for the supplies made to Nepal/Bhutan against payment in Indian Rupees. In the recent past, keeping in view the guide lines as per R K Jain's Central Excise Law Manual with service tax guide 41st Edition 2006-07, as per notification under Central Excise Rule 19 on page 4.103 S.no.2 as well as suggestion by our excise consultant no excise duty is to be applicable for export to Nepal/Bhutan against payment in Indian Rupees/foreign exchange.

The matter was also discussed with the superintendent Central Excise and it has verbally been given to understand that excise duty is not applicable for export against the supply of AVC to Nepal/Bhutan against payment in Indian Rupees as well as foreign exchange but he is reluctant to give any such clarification in writing. From the above, it will be seen that there appears some confusion as to whether excise duty is applicable for exporting the equipment to Nepal/Bhutan against :- i) payment in Indian Rupees. ii) payment in Foreign Exchange. Kindly clarify.

Please note that you can approach the help centres in your central excise commissionerate, set up specifically to guide small exporters in terms of CBEC Circular no. 815/12/2005-CX dated 13.05.2005.

You have referred to sub-para 2 of Para 1 (conditions and safeguards) of notification no. 45/200-CE(NT) dated 26.06.2001, which applies only to supply of capital goods (the scope of the term 'capital goods' is given in the explanation to the said sub-para) against any global tender invited by His Majesty's Government of Nepal.

The conditions that you have to fulfil include furnishing a bond in the form prescribed as Annexure-I to the notification and furnishing a certificate from the bank in the form prescribed as annexure-II to the notification showing that full payment for the goods has been duly received in Indian currency.

You also have to follow the 'Special Nepal Invoice' (Annexure IV) procedure detailed in the notification and submit the necessary documents to get your bond discharged. The UT1 procedure you have referred will not work as the said sub-para specifically prescribes a bond.

You will be able to remove the goods without duty payment as per the said sub-para 2 only if all the conditions stipulated in the said sub-para 2 are fulfiled and you follow the procedures prescribed in Para 2 and 3 of the notification. Otherwise, for payments received in Indian Rupees, you will have to pay excise duty and clear the goods under notification no. 20/2004-CE (NT) dated 06.09.2004. This has always been the position.

We have a doubt about availment of Cenvat credit of 4 per cent additional duty (special CVD) of Customs paid on capital goods under section 3 ( 5 ) of the Customs Tariff Act, 1975, available in one lot installment, which was levied on all goods in the Union Budget 2006- 07.

Credit of this duty can be taken by the manufacturers for payment of excise duty on their final products. In case of capital goods, the Cenvat credits of duty paid thereon can be taken in installments i.e. 50 per cent in the year of receipt and the balance 50 per cent in the subsequent financial year.

However, it appears from the related clause in Rule 4(2)(a) second proviso of the Cenvat Credit Rules, 2004, inserted vide Notification No.13/2005-C.E. (N.T.), dated 01.03.2005, and the Cenvat credit of the said 4 per cent additional duty leviable on capital goods is allowable immediately on receipt of capital goods in the factory of the manufacturer.

In his Budget 2006-07 speech, the finance minister mentioned "Full credit of this duty will be allowed to manufacturers of excisable goods."

Our jurisdictional assistant commissioner is insisting for reversal of 50 per cent additional duty 4 per cent availed by us, with interest immediately, stating that we are not eligible for full credit in one installment.

Please tell us whether Cenvat credit of said 4 per cent special additional duty in respect of capital goods will be available to us in one installment or not. Is there any clarification issued by CBEC in this regard?

I have no doubt that you can take full credit of 4 per cent additional duty paid on imported capital goods in the first year itself. The second proviso you have referred to is clearly an exception to the 50 per cent credit rule.

There is no CBEC Circular on this point but in my opinion the said second proviso leaves no room for any doubt.

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