News Update

Correction in challan attributes in respect of IDS, 2016 payments - reg32 officers to receive awards on Central Excise Day tomorrowSuman Saxena takes over as full fledged member of Bankruptcy BoardCabinet makes way for mega solar power projects with 40,000 MW capacityAfghani national caught with endangered corals speciesCabinet gives nod to India Poland Agreement on agricultural co-operationIT Ministry launches Cyber Swachhta KendraGovt's limitation in demonetization analytics should rekindle tax reformsCentral Excise - CESTAT cannot reduce mandatory penalty: Supreme CourtI-T - No additions warranted on gross value of cash deposits which represents turnover, if it did not breach profit limit prescribed u/s 44ADST -Collection of data on consumption of electricity by MSEDCL customers by taking photos of meter reading for generation of bills is taxable under BAS: CESTATCash deposit post demon(etisation) - CBDT guidelines for AO'sCBI arrests three Central Excise officials in graft caseITAT Vice President G D Agrawal gets officiating charge of PresidentUplift of 'Digital Payments' - more than INR 150 crore distributed as 'reward'Govt notifies all provisions of protocol amending India Israel DTAA (See 'DTAA' in 'TII')Anti Dumping - Writ Petition against final findings of Designated Authority: High Court was not justified in exercising its writ jurisdiction: SCCivil Services Day - PM Awards to be given today90K more affordable houses sanctioned for urban poorIndia offers tech knowhow to ASEAN in telecom sectorRestricting doubly exempt Corpus DonationST - Tribunal is barred from rendering finding or recording an order on matter in which appellant has not placed itself within Tribunal's appellate jurisdiction: CESTATI-T - No penalty is leviable, if basis of addition itself ceases to survive: ITATCX - SSI notfn. 8/2001 - Intent to take advantage of recognition enjoyed by another brand is critical to invoking of exception provision: CESTATCBEC grants Sec 11C benefit on services provided by Common Effluent Treatment Plant for period 2012 to 2015ACC promotes 292 CBDT officers as Principal CITAppointment of Special Public Prosecutors for income tax cases - JS-level officer from Ministry of Law to join screening panel for metrosCBI books senior IAS officer in graft caseIndia keen to give fillip to relations with African countries: AnsariHome buyers' complaint - SC toughens stand against Unitech; directs to deposit interest within 8 weeksFICN worth about Rs one crore seized on Indo-Bangla borderKalindi Express rams into goods train at Tundla StationChange in rate of tax vs. Change in effective rate of taxI-T - Rent earned by assessee engaged in business of leasing properties, will be taxable as 'business profits': ITATST - 'gross amount charged', is not an isolated phrase but to be read in conjunction with expression 'for such service provided': CESTATCX - Merely because Autolite India Ltd is a group company, appellant cannot use its brand name and claim SSI benefit: CESTAT
 
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