News Update

FM says Chief Economic Adviser Arvind Subramanian’s tenure to be extended till Oct, 2018Income Tax conducts search at premises of S M Krishna's son-in-law who heads CCD GroupPak troops shoot at BSF posts in J&K; 5 injuredGST on 'out and out' transactions (See 'TOG Insight' in Taxongo.com)Whether due date for submission of GST TRANS-1 is really extended?Illegal income tax raids - Govt advises taxpayers to inspect warrants of searchesCII calls for 1% interest rate cut for job creationAffordable housing - Industry takes up GST issue with GovtIncome Tax - Provisions of Sec 115O do trench on powers of State Legislature to tax agri income but such incidential trenching does not warrant annulment of legislation: Supreme CourtGST - Govt notifies new rates for Duty Credit Scrips, saree falls, roasted grams and many other items + restriction on refund for corduroy fabrics + exemption to khadi fabric, musical instruments and many other items + clarity on issue of cereals etc sold in unit container with brand nameJuly GSTR-3B can now be edited and submitted: GSTNBlockage of Exporters' working capital - Govt exploring link between GSTR-1 & GSTR-3B Govt grants conditional IGST exemption to skimmed milk powder or concentrated milkCBI arrests Mumbai DCIT in alleged Rs 3 Crore corruption caseSC favours creation of portal to attend to home buyers’ grievancesNPPA notifies ceiling price exclusive of GST for 7 drugs including Rifabutin & Hepatitis B ImmunoglobulinCentral Govt notifies Porbandar Wildlife Sanctuary as Eco-sensitive zone; Industries not allowed in its surroundingsYogi Adityanath’s resignation from Lok Sabha notified to be valid from Sept 21, 2017New Drawback Rules, 2017 and AIR of Drawback explainedWealth Tax - Amendment made to Sec 40(3) vide FAs 1983 & 1988 is substantive in nature and that is why it cannot be retrospective: HCI-T- Simply because Writ Court has struck down previous transfer order u/s 127(2)(a), Department is not precluded from initiating fresh procedure: HCGST - Rs 65k Cr TRANS-1 Credit is much less than Rs 1.3 lakh crore as closing balance: GovtDoT finalises guidelines for settlement of claimsNITI, IRF Geneva sign pact in field of Intelligent Transport SystemsCBI nabs former HC Judge in medical admission scamGSTN informs that portal for uploading application seeking advance ruling to be ready only in Jan 2018 - HC questions authority for postponementCBEC makes many amendments in Drawback Rules; excludes many items from list of eligible goods + lists out goods where no drawback is to be determined; New rates to come in force from Oct 1, 2017I-T - Settlement Commission has no authority to review / reopen matters already concluded before it: HC
 
ADMISSIBILITY OF CENVAT OF CVD IF PAYMENT ADJUSTED THROUGH DEPB?

November 22, 2004

By S K Bhardwaj

TODAY, a major question troubling the trade and industry circles is that will the CENVAT credit of additional customs duty if paid on the inputs by way of debit entry in the DEPB be admissible?

Our Submission

The last sentence of para 4.3.5 of the EXIM Policy 2002-07 has been deleted by Notification No.28(RE 203/2002-07) dated 28.1.2004 para 11 issued by Central Government under section 5 of the Foreign Trade (Development and Regulation) Act, 1992. Before deletion the para read :-

“Normally, the exports made under the DEPB Scheme shall not be entitled for drawback. However, the additional customs duty/ excise duty paid in cash on inputs under DEPB shall be adjusted as CENVAT credit or duty Duty Drawback as per Rules framed by the Department of Revenue. In cases, where the additional customs duty is adjusted from DEPB, no benefit of CENVAT/Drawback shall be admissible.”

On being removed last sentence from above para, prima facie it appears that CENVAT credit is now admissible in case of the payment of CVD through debit in DEPB. The new para reads:-

“Normally, the exports made under the DEPB Scheme shall not be entitled for drawback. However, the additional customs duty/ excise duty paid in cash or through debit under DEPB shall be adjusted as CENVAT credit or duty Duty Drawback as per Rules framed by the Department of Revenue ”

But it is not true when it is analysed in the proper perspective.

CENVAT credit on the inputs or capital goods is governed by the CENVAT credit Rules, 2002 (now 2004) and not by the Export-Import Policy (Now Foreign Trade Policy) provisions. Rule 3 of the CENVAT Credit Rules, provides for the availability of CENVAT Credit on inputs or capital goods received in the factory if specified duties therein paid on any inputs or capital goods.

Vide Rule 3 of the CENVAT credit rules , Additional Customs Duty (CVD) leviable under 3 of the Customs Tariff act, paid on the inputs or capital goods is available as CENVAT credit.

Whether the “adjustment of additional customs duty by way of debit in the DEPB” can be considered as ‘ additional customs duty paid’?

Debit of customs duties involved on the goods imported in the DEPB is governed by exemption Notification No. 45/2002-Cus dated 22.04.2002 as amended. This provides that the goods imported under the DEPB Scheme are exempt from the whole of the duty of customs, additional duty of customs and special additional duty of customs, subject to fulfillment of the various conditions mentioned therein. One of the conditions is that the importer shall produce the DEPB before the proper officer for making the debit entry therein at the time of importation. By condition no. (v) of the notification, an option has been given to the importer to forego exemption in respect of the additional customs duty and pay the same in cash.

As per Notification No. 45/2002 if the additional customs duty is got adjusted in the DEPB, then it will amount to availment of the ‘exemption’ from customs duty. On the contrary, if the additional customs duty is paid in cash, then it will be deemed ‘non availment of exemption’ from additional customs duty.

The adjustment of additional customs duties in DEPB in terms of notification No.45/2002 shall amount to ‘availment of exemption’ and not the ‘payment of duty’, so the CENVAT Credit thereof shall not be admissible under Rule 3 of the Cenvat Credit Rules, 2004. The expression ‘duty paid’ has to be read in contrast to the expression ‘exemption availed’. Availment of exemption can’t be consanguineous to payment.

Regarding the deletion of last sentences from para 4.3.5 of the EXIM Policy, it does not necessarily follow that credit of additional duty paid/adjusted through DEPB will be admissible unless and until, a corresponding amendment is made in the Cenvat Credit Rules, 2004 as well and/ or 45/2002-Customs Notificaton. This is because credit has not been allowed for any exemption enjoyed under Customs Law.

The above is a classic case where Ministry of Commerce has set the intention to give importers Cenvat facility of DEPB debit of CVD but Ministry of Finance has not followed it up with their own amendment of Customs and Central Excise Rules. This is one among many instances of dichotomy in decisions of two Govt organs.

(The author is working with L G Electronics India Pvt Ltd )


POST YOUR COMMENTS
   

TIOL Tube Latest

GST: एक देश एक कर | गोष्ठी - संस्करण ३