LTU – Conditions and Procedure in Central Excise, Cenvat Credit and Service Tax

[Surender Gupta]

The Finance Minister in his Budget Speech 2005-06 announced the proposal to set up Large Taxpayer Units ( hereinafter referred to as LTUs) in the country in line with the international practice, which would service large taxpayers paying excise duty, corporate tax/income-tax and service tax under a single window. The Government has decided to implement the LTU scheme in a phased manner.

In the first phase the LTU scheme is being implemented in Bangalore. Various procedures and conditions has been prescribed / imposed in this regard through various notifications. These are:

A.  Conditions for becoming an eligible LTU

B.  Procedures

1.  Procedure for opting LTU status

2.  Effect of approval as granted by the Chief Commissioner

3.  Single Executive (Single window system)

4. Procedures and facilities under Central Excise

5.  Procedures and facilities under Cenvat Credit

6. Procedures under Service Tax

Conditions for becoming an eligible LTU

The following persons who satisfied the following conditions are eligible for opting LTU status: -

(Rule 2(ea) of Central Excise Rules, 2002 , Notification No. 20/2006 CE(NT) dated 30-09-2006, Circular No. 833/10/2006 CE dated 5-10-2006 and Circular No. 834/11/2006 CE  dated 5-10-2006 )

The person should -

-  have PAN

-  be engaged in manufacturing / production of goods or providing services

-   be registered under Central Excise or Service Tax

-  have paid duties of excise or service tax of more than rupees 5 crores in cash or through PLA in the preceding year of filing of application or during the finance year 2004-2005

- Presently assessed to income tax or corporate tax under the Jurisdiction of CCIT-I, Bangalore (other than revenue district of Tumkur) and CCIT-II of Bangalore (other than district of Kolar)

The following persons are not eligible for LTU status:

- This facility is not available to the manufacturer or producer of goods falling under chapter 24 or Pan Masala falling under chapter 21 of CETA

1.  Procedure of opting LTU status

1.1 Submit an application in prescribed Form, indicating his willingness to be a large taxpayer unit.

1.2  Application shall be submitted to the Chief Commissioner of Central Excise, Large Taxpayer Unit for the city where the large taxpayer is presently assessed to income tax or corporate tax.

1.3   Details of each premises registered in Central Excise or Service Tax is required to furnished  (including 1^st / 2^nd Stage dealers, if any)

1.4  The Chief Commissioner of Central Excise, Large Taxpayer Unit may after due verification of the application form, grant the acceptance in writing.

1.5  Such approval shall be granted within 7 days.

1.6  For existing units no new registration is require to be obtained. Existing registrations under Central Excise or Service Tax will continue.

1.7  For new premises which become liable to be registered, after opting as large taxpayer, the application for such new registration shall be made before the Chief Commissioner of Central Excise, Large Taxpayer Unit.

2. Effect of approval as granted by the Chief Commissioner

2.1. Once a taxpayer acquires the status of LTU, the entire jurisdiction of central excise, service tax and income tax matters shall stand transferred to the said LTU in respect of all his manufacturing units, service providing premises, and other registered premises located throughout the country.

2.2. Central Excise and Service Tax Returns shall be filed with the LTU jurisdiction, however as a transitional measure, the returns for the month of September, 2006 (to be filed in October, 2006) will be filed with the erstwhile jurisdictional officers and returns for the month of October, 2006 onwards shall be filed in the LTU.

2.3. The following as shall also be subject to the jurisdiction of new jurisdiction: -

·   Filing of refund/rebate claims

·   Audit, Adjudication and Appeals.

·   Filing of  intimation, permissions.

·   Visit to units

·   Acceptance of proof of export.

2.4. It will be the duty of The Chief Commissioner, LTU to intimate the jurisdictional Central Excise, Service Tax and Income Tax Commissioners regarding the transfer of the specified units from his jurisdiction to the LTU.

3. Single Executive (Single window system)

3.1. The Chief Commissioner, LTU will assign a Client Executive for each large taxpayer from among the Additional/Joint/Deputy/Asstt. Commissioner posted in the LTU either from the Income Tax or Central Excise Department.  The said Client Executive will be the single point interface with the large taxpayer for any assistance, clarification, and grievance redressal.

3.2.  See notification no. 21/2006 CE(NT) dated 30-9-2006 amending notification no. 14/2002 CE(NT) 8-3-2002 and notification no. 22/2006 CE(NT) dated 30-9-2006 amended notification no. 38/2001 CE(NT) dated 26-6-2001

3.3. See Circular No. 833/10/2006 CE dated 5-10-2006 and Circular No. 834/11/2006 CE  dated 5-10-2006

4. Procedure and Facilities under Central Excise

4.1.  Rule 12BB of the Central Excise Rules, 2002 has been inserted vide notification no. 18/2006 CE(NT) dated 30-9-2006

Facility of transferring intermediate goods within its premises:

4.2. LTU may remove intermediate goods or inputs or capital goods from one registered unit to another unit without payment of duty or reversal of credit (Except Petrol, HSD and LDO).

4.3. Transfer without payment of duty or reversal of credit is allowed subject to that the recipient unit uses the said goods for further manufacture of the finished goods and pay excise duty thereon. 

4.4. The said goods can be removed by the sender premises under an invoice or a transfer challan, which should contain all details as in case of an invoice except the value. 

4.5. The above facility is not available to a unit located in EHTP or STP and to EOU.

Conditions for transferring intermediate goods without payment of duty:

4.6. the subject goods are manufactured or produced using the said intermediate goods and cleared on payment of appropriate duties of excise leviable thereon within a period of six months, from the date of receipt of the intermediate goods in the recipient premises; or

4.7. the subject goods are manufactured or produced using the said intermediate goods and exported out of India, under bond or letter of undertaking within a period of six months, from the date of receipt of the intermediate goods in the recipient premises,

4.8. Commissioner of Central Excise may impose other conditions if required.

4.9. Where the subject goods manufactured or produced using the said intermediate goods are not cleared on payment of appropriate duties of excise leviable thereon or are not exported out of India within the said period of six months, duties of excise payable on such intermediate goods shall be paid by the recipient premises with interest in the manner and rate specified under section 11AB of the Act:

4.10. Where any duty of excise (like NCCD) is payable on such intermediate goods (which is being transferred from one unit to another) and if the said duty (i.e. NCCD) is not payable on such subject goods (Finished goods), the said duty of excise as equivalent to the total amount payable on such intermediate goods along with interest under section 11 AB of the Act shall be paid by the recipient premises:

Where duty has been in excess due to arithmetical error:

4.11. Where a registered premises of a large taxpayer manufacturing excisable goods has paid to the credit of Central Government any duty of excise in excess of duty of excise payable on account of arithmetical error, the said large taxpayer may adjust the excess duty so paid by him, against his duty liability for the subsequent period subject to the limitations prescribed under rule 3(7)(b) of the CENVAT Credit Rules, 2004:

4.12. The adjustment as above is admissible only if the said registered premises has not passed on the incidence of such excess duty so paid to any other person, and the consignee does not avail credit of such duty under the said CENVAT Credit Rules, 2004.

Other procedural issues in Central Excise:

4.13. Any notice issued but not adjudged by any of the Central Excise officer administering the Act or rules made thereunder immediately before the date of grant of acceptance by the Chief Commissioner of Central Excise, Large Taxpayer Unit, shall be deemed to have been issued by Central Excise officers of the said Unit.

4.14. A large taxpayer shall submit the monthly returns, as prescribed under these rules, for each of the registered premises.

4.15. A large taxpayer, on demand, may be required to make available the financial, production, stores and CENVAT credit records in electronic media, such as, compact disc or tape for the purposes of carrying out any scrutiny and verification as may be necessary.

4.16. A large taxpayer may, with intimation of at least thirty days in advance, opt out to be a large taxpayer from the first day of the following financial year.

5. Procedure and Facilities under Cenvat Credit

5.1. New rule 12A has been inserted to the Cenvat Credit Rules, 2004 vide notification no. 19/2000 CE(NT) dated 30-09-2006

Removal of intermediate goods without reversal of Cenvat Credit:

5.2. A large taxpayer may remove inputs (except Petrol, HSD, LDO), or capital goods, as such, on which CENVAT credit has been taken, without reversal of Cenvat Credit for further use in manufacture or production of final goods.

5.3. Such transfer is allowed subject to condition that the final products are manufactured or produced using the said inputs and cleared on payment of appropriate duties of excise leviable thereon within a period of six months, from the date of receipt of the inputs in the recipient premises; or

5.4. the final products are manufactured or produced using the said inputs and exported out of India, under bond or letter of undertaking within a period of six months, from the date of receipt of the input goods in the recipient premises,

5.5. The Commissioner of Central Excise, may impose any other conditions if required.

5.6.  Final goods manufactured using such transferred goods must be cleared within six months on payment of excise duty.

5.7.  If not cleared within six months as above, or such inputs are cleared as such from the recipient premises, an amount equal to the credit taken in respect of such inputs by the sender premises shall be paid by the recipient premises with interest in the manner and rate specified under rule 14 of these rules:

5.8.  In case of Capital Goods, if such capital goods are used exclusively in the manufacture of exempted goods, or such capital goods are cleared as such from the recipient premises, an amount equal to the credit taken in respect of such capital goods by the sender premises shall be paid by the recipient premises with interest in the manner and rate specified under rule 14 of these rules:

5.9.  The above facility is not available to EOU or units situated in EHTP or STP

5.10. However, the first recipient premises may take CENVAT credit of the amount paid (where finished goods are not removed within six months) as if it was a duty paid by the sender premises who removed such goods on the basis of a document showing payment of such duties.

5.11.  CENVAT credit of the specified duties taken by a sender premises shall not be denied or varied in respect of any inputs or capital goods, removed as such on the ground that the said inputs or the capital goods have been removed without reversal of Cenvat Credit, or

5.12.  on the ground that the said inputs or capital goods have been used in the manufacture of any intermediate goods removed without payment of duty under sub-rule (1) of rule 12BB of Central Excise Rules, 2002.

Transfer of Cenvat Credit:

5.13. A large taxpayer may transfer, CENVAT credit available with one of his registered manufacturing premises or premises providing taxable service to his other such registered premises by.

5.14. For the purpose of transfer of Cenvat Credit, there should be proper records and suitable entries to be made therein.

5.15. A transfer challan containing registration number, name and address of the registered premises transferring the credit as well as receiving such credit, the amount of credit transferred and the particulars of such entry as mentioned in the records to be issued.

5.16. The recipient premises can take CENVAT credit on the basis of such transfer challan as mentioned in clause (ii):

5.17. Provided that such transfer or utilisation of CENVAT credit shall be subject to the limitations prescribed under clause (b) of sub-rule (7) of rule 3.

5.18. Other procedural aspects are same as in the case of Central Excise

6. Procedures to be followed in Service Tax

6.1  Rule 10 to the Service Tax Rules, 1994 has been inserted vide notification no. 28/2006 ST dated 30-9-2006

6.2  The return shall be made for each premise separately unless the assessee registered for centralized. In case of centralized registration return is to be filed consolidated.

6.3  A large taxpayer, on demand, may be required to make available the financial, stores and CENVAT credit records in electronic media, such as, compact disc or tape for the purposes of carrying out any scrutiny and verification, as may be necessary.

6.4   A large taxpayer may, with intimation of at least thirty days in advance, opt out to be a large taxpayer from the first day of the following financial year.

6.5  Any notice issued but not adjudged by any of the Central Excise officer administering the Act or rules made thereunder immediately before the date of grant of acceptance by the Chief Commissioner of Central Excise, Large Taxpayer Unit, shall be deemed to have been issued by Central Excise officers of the said unit.