We are in the business of cutting hot rolled or cold rolled coils into sheets. We are taking Cenvat Credit on inputs and paying duty on the final products. Our Central Excise authorities, who were earlier approving this, are now objecting to it.
What is the correct position?
Whether cutting or slitting of steel sheets to specific sizes amounts to ‘manufacture’ has been a subject matter of litigation. The Delhi High Court held in the case of Faridabad Iron and Steel Traders Association [2004 (178) ELT 1009 (Del)] that the said activity does not amount to manufacture. The Supreme Court maintained this decision [2005 (181) ELT A68 (SC)]. After the decision, many assessees cutting or slitting steel sheets have stopped paying duty, but some assessees have continued paying duty and taking Cenvat Credit.
Now, the Central Board for Excise and Customs (CBEC) has issued circular no. 911/1/2010-CX dated 14.1.2010 clarifying that in cases where the process undertaken by an assessee indisputably does not amount to manufacture (such as testing, repacking and relabelling of feeder cables, cutting of HR/CR coils into sheets or slitting into strips), the department should inform the assessee about the correct legal position and advise him not to pay duty and not to avail credit on inputs. However, if the assessee has already paid duty, and in a situation where there is no manufacture as held by the courts subsequently, and facts of the case are covered by the provisions of Section 5B of the Central Excise Act, 1944, the assessee is at liberty to approach the Central government for issue of appropriate notification for regularisation of the Cenvat credit availed.
With whom should we file our drawback claim on goods supplied to a Special Economic Zone (SEZ)?
As per CBEC Circular no. 43/2007-Cus dated 5.12.2007, where the SEZ unit or SEZ developer issues a disclaimer to the Domestic Tariff Area (DTA) supplier, the Commissionerate of Central Excise having jurisdiction over the DTA unit would sanction the drawback. So you may approach your jurisdictional Central Excise authorities for drawback.
As per Para 2.25.4 of the Foreign Trade Policy (FTP), export incentives need not be surrendered, if the Reserve Bank of India (RBI) allows a write-off based on a certificate from the Foreign mission of India concerned, about the fact of non-recovery of export proceeds from the buyer. Our bankers say that there is no such instruction from RBI. Is that the correct position?
RBI has issued AP (DIR) Circular no. 03 dated 22nd July 2010 on the above subject. But, you may note that as per this circular, the above relaxation is applicable to exports made with effect from August 27, 2009, under export promotion schemes of the Foreign Trade Policy. The drawback amount has to be recovered even if the claim is settled by the Export Credit Guarantee Corporation of India Limited (ECGC) or the write-off is allowed by the RBI, says the circular.
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