Supplies of intermediate products under Intermediate Advance Licence - Admissibility of Modvat where raw materials are imported as replenishment - Instructions regarding - Central Excise - 6/92

Supplies of intermediate products under Intermediate Advance Licence - Admissibility of Modvat where raw materials are imported as replenishment - Instructions regarding Circular No. 6/92 Dated 1-6-1992 [Form F. No. 209/6/92-CX.6] Government of India Central Board of Excise Customs New Delhi Subject : Supplies of intermediate products under Intermediate Advance Licence - Admissibility of Modvat where raw materials are imported as replenishment - Instructions regarding. Representations have been received by the Board from various associations and assessees requesting that Modvat credit should be allowed to be availed on indigenous raw materials used for manufacturing final products supplied under Rule 191BB in cases where the raw materials are imported later on as replenishment and requested that manufacturers operating under both Intermediate Advance Licence Scheme as well as Advance Licensing Scheme should be allowed to make their supplies under Intermediate Advance Licence out of raw materials imported against an Advance Licence and later on to fulfil their 'actual export' obligation out of supplies of raw materials received under Intermediate Advance Licence. The matter has been examined in the Board' s office. It is seen that the issues involved including Advance Licence Scheme, Intermediate Advance Licence Scheme and supplies under Modvat are fairly complex procedures involving simultaneous scrutiny of complex customs, excise and import licensing aspects. It is considered necessary that the legal position on the subject be clarified as under : It is permissible under law for an intermediate advance licence holder to use indigenous raw materials to manufacture his finished product (intermediate product in terms of Rule 191BB) to be supplied to the ultimate exporter provided that quantity of intermediate product supplied to advance licence holder does not exceed limits in such advance licence together with quantities that may be imported against such advance licence. However, intermediate advance licence holder would not be entitled to avail of any Modvat on such indigenous raw materials used by him. Also it would not be permissible for him to use the imported raw materials imported by him for directly exporting the manufactured product, since direct exports and deemed exports (i.e. supplies to ultimate exporter under Rule 191BB) are two distinct streams of raw materials and final products and cannot be mixed. Collector of Central Excise may issue sufficiently clear instructions on the subject for the guidance of divisional and range officers working in their jurisdiction so that no unintended benefit is passed on to the assessees in violation of law and procedure. Collectors, Additional Collectors and Deputy Collectors may also check these aspects closely during inspections.