News Update

Unveil One Nation; One Debt Code; One Compliance Rule for Centre & StatesChina moves WTO against US tax subsidies for EVs & renewable energyMore on non-doms - The UK Spring Budget 2024 (See TII Edit)Notorious history-sheeter Mukhtar Ansari succumbs to cardiac arrest in UP jailTraining Program for Cambodian civil servants commences at MussoorieNY imposes USD 15 congestion taxCBIC revises tariff value of edible oils, gold & silver45 killed as bus races into ravine in South AfricaCBIC directs all Customs offices to remain open on Saturday & SundayBankman-Fried jailed for 25 yrs in FTX scamI-T- Once the citizen deposits the tax upon coming to know of his liability, it cannot be said that he has deliberately or willfully evaded the depositing of tax and interest in terms of Section 234A can be waived: HCHouthis attack continues in Red Sea; US military shoots down 4 dronesI-T- Secured creditor has priority charge over secured asset, over claims of I-T Department & other Departments; any excess amount recovered by Secured Creditor from auction of secured asset, over & above the dues payable to it, are to be remitted to the Departments: HCFederal Govt hands out USD 60 mn to rebuild collapsed bridge in BaltimoreI-T - Receipts of sale of scrap being part & parcel of activity and being proximate thereto would also be within ambit of gains derived from industrial undertaking for purpose of computing deduction u/s 80-IB: HCCanadian School Boards sue social media titans for 4 bn Canadian dollar in damagesI-T - Once assssee on year of reversal has paid taxes on excess provision and similar feature appeared in earlier years and assesee had payments for liquidated damages on delay of deliverables, no adverse inference can be drawn: HCFormer IPS officer Sanjiv Bhatt jailed for 20 yrs for planting drugs to frame lawyerST - Software development service & IT-enabled service provided by assessee was exempt from tax during relevant period, by virtue of CBEC's Notification & Circular; demands raised for such period not sustainable: CESTATUN says Households waste across world is now at least one billion meals a dayCus - Order rejecting exporter's request for conversion of Shipping Bills on grounds that the same has been made by exporter beyond period of three months from date of Let Export Order in terms of CBEC Circular No. 36/2010-Cus : CESTATIndia, China hold fresh dialogue for complete disengagement on Western borders: MEACus - No Cess is payable when Basic Customs Duty is found to be Nil: CESTATThakur says India is prepared for 2036 OlympicsCX - As per settled law, a right acquired as result of a statutory provision, cannot be taken away retrospectively unless said statutory provision so provides or by necessary implication has such effect: CESTAT
 
Notification No. 34/2015-CE causes mighty problems for Notfn. 30/2004-CE

JULY 21, 2015

By Keshav Maloo, CA

YARN and textile fabrics specified in Notification No. 30/04-CE were until now exempt from duty subject to the condition that no credit is taken on corresponding inputs. The proviso prescribing this condition is reproduced herebelow for the sake of ready reference:

"Provided that nothing contained in this notification shall apply to the goods in respect of which credit of duty on inputs has been taken under the provisions of the CENVAT Credit Rules, 2002"

The above said proviso has now been amended by Notification No. 34/2015-CE dated 17.07.2015 which reads as under:

"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.".

Accordingly, until 16.07.2015 exemption was available under Notification No. 30/04-CE subject to satisfying the condition that credit on inputs is not taken. It was not relevant whether inputs were duty paid, exempt or chargeable to nil rate of duty or whether purchased from trader.

However, with this amendment, one more additional condition has been added and now w.e.f. 17.07.2015, a manufacturer wishing to avail exemption under Notification No. 30/04-CE, as amended, would be required to additionally satisfy and establish that inputs used by him are those on which appropriate duty of excise has been paid.

It is a settled law that 'appropriate duty of excise has been paid' would not include those inputs which are exempt or chargeable to nil rate of duty. In other words, payment of appropriate duty requires to establish that duty has been paid on the inputs and that the same are not exempt nor chargeable to nil rate of duty.

The issue has been dealt in detail by Hon'ble S.C. in the case COLLECTOR OF C. EX., VADODARA Versus DHIREN CHEMICAL INDUSTRIES - 2002-TIOL-83-SC-CX-CB and it was held that "emphasis must be given to the words 'has already been paid' meaning thereby that where the raw material is not liable to excise duty or such duty in nil, no excise duty is, as a matter of fact, paid upon it- to goods made out of such material, the notification will not apply".

The crux of the judgment is reproduced hereinbelow:

Exemption (Central Excise) - Notification issued exempting the final products from duty when manufactured from raw material on which duty is already paid - Notification issued to give relief from cascading of excise duty - Provisions of Notification will not apply when raw material is not liable to excise duty or such duty is nil and no excise duty is paid - Usha Martin Industries case - 2002-TIOL-400-SC-CX-LB overruled. (Paras 5,6,7,8)

There is no cascading effect when no excise duty is payable upon the raw material and the hardship that the notification seeks to alleviate does not arise. (Para 8)

Further, after the declaration of above judgment by Hon'ble S.C., the C.B.E.C also modified its earlier stand and followed the judgement by issuing Circular No. 667/58/2002-CX., dated 26-9-2002 in which it was clarified that 'duty paid goods-expression "appropriate duty of excise" not to include nil duty'. Accordingly, now, in our opinion, the exemption under Notification No. 30/04-CE as amended, by Notification No. 34/2015-CE dated 17.07.2015 would be available only if following two conditions are satisfied:

1. The manufacturer receives inputs on payment of duty and further keeps in possession the duty paying documents issued by manufacturer of inputs. Further, the duty should not be exempt or nil.

In case, inputs are purchased from trader, in that case, traders are suggested to be registered in Central excise so that they can mention authentically the duty paid particulars of the manufacturer.

Further, this would apply to all the inputs.

2. No credit of such duty paid on inputs is taken.

Practically, the above amendment means that textile would come out of the optional duty regime and would be forced to come into duty chain.

Further, the Board's Circular No. 680/71/2002-CX, dated 10-12-2002 issued in the context of Notification No. 14/2002 and the judgement in the case of SUDITI INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., BELAPUR reported at - 2013-TIOL-1020-CESTAT-MUM also delivered in the context of Notification No. 14/2002-CE, would not apply to the present amendment in Notification because of the reason that the explanation II in Notification No. 14/2002-CE had a totally different wordings. This explanation in the earlier Notification was clarifying that textiles fibres, yarns and fabrics brought from the market were deemed to have been duty paid. There is no such explanation in the present case.

Unless amended or clarified contrary, in our opinion, exemption is not available in Notification No. 30/04-CE, if the above two conditions are not satisfied.

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the sites)

POST YOUR COMMENTS
   

AR not Afar by SK Rahman

TIOL Tube Latest

Shri Shailendra Kumar, Trustee, TIOL Trust, giving welcome speech at TIOL Awards 2023




Shri M C Joshi, Former Chairman, CBDT




Address by Shri Buggana Rajendranath, Hon'ble Finance Minister of Andhra Pradesh at TIOL Awards 2023