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TRIPLE THE AMENDMENTS TRIPLE THE HASSLE NOW ALL IS WELL

Central Excise - By: - Pradeep Jain - Dated:- 24-7-2015 Last Replied Date:- 25-7-2015 - Introduction Proviso : when it is added to an exemption notification, brings out some conditions on fulfillment of which the benefit of notification will be allowed. Therefore, as and when there is any amendment in a proviso, the scope of a notification is either restricted further or it leads to expansion in its scope. However, sometimes the amendments to these provisos bring utter confusion which shivers a .....

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issue Notification no. 30/2004-CE dated 9.7.2004 grants exemption to the textile articles specified in it. The proviso to this notification prior to amendment reads as follows:- 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, 2004 Thus, the benefit of notification no. 30/2004-CE is not allowed to the goods which are being manufactured by the inputs on which .....

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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. . The analysis of new proviso makes it clear that the exemption is available subject to following conditions:- The final products should be manufactured from such inputs:- On which a .....

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urer should not have taken credit of such duty suffered by the inputs. The language uses the words appropriate duty . The word appropriate has been explained by the hon ble Supreme Court in the case of COLLECTOR OF C. EX., VADODARA Versus DHIREN CHEMICAL INDUSTRIES [2001 (12) TMI 3 - SUPREME COURT OF INDIA]. The head note of this decision reads as follows:- Exemption - Notification exempting finished goods if made from materials on which the appropriate amount of duty of excise has already been .....

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ill not apply - Collector of Central Excise, Patna v. Usha Martin Industries [1997 (8) TMI 77 - SUPREME COURT OF INDIA] overruled - Section 5A(1) of Central Excise Act, 1944. [paras 3, 6, 7] The analysis of above decision of hon ble Supreme Court makes it clear that the phrase appropriate duty of excise has been paid means the correct or specified rate of excise duty. If the raw material is not liable to duty or attracts NIL rate of duty, appropriate duty of excise has not been paid. Thus, the c .....

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ndition has been attached. The text of the proviso reads as follows:- Provided that the said excisable goods are manufactured from inputs or by utilising input services on which appropriate duty of excise leviable under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) or additional duty of customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) or service tax under section 66 of the Finance Act, 1994 (32 of 1994) has been paid and no credit of such excise duty o .....

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the manufacturer should use only taxable input services and no credit of such input service should have been taken. Else the benefit of exemption notification would be denied. Similar notification came for the 12/2012 but with difference that for certain entries the condition was also prescribed for capital goods also. Supreme Court decision in the case of SRF Ltd. : Reason behind amendments These three amendments have been done to overcome the impact of Supreme Court decision in the case of M/s .....

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these goods. In this case, in fact no such credit was admissible under Cenvat Credit Rules, 2004. The Tribunal ruled that when the credit under the CENVAT Rules is not admissible, question of fulfilling the aforesaid condition does not arise. By holding this, Tribunal came to conclusion that condition which was not possible of satisfaction had to be treated as not satisfied. However, Supreme Court reversed this decision and decided in favour of assessee by allowing the benefit of Nil CVD even w .....

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ions The above discussed three amendments have exactly same consequences. As from 17.7.2015, the benefit of Notification no. 30/2004-CE, 1/2011-CE & 12/2012-CE will not be allowed if the appropriate duty of excise or additional duty of customs is not paid on inputs (input services also, in later two notifications) or if the credit of such duty/service tax has been taken by the manufacturer. Therefore, now the manufacturer will have to keep a check on each and every input/ input service; each .....

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ent in the final product, these have to be duty paid. Thus, even those inputs which are negligibly used (like lubricating oil) have to be duty paid. If the manufacturer receives any of the bill on which no duty is charged by the supplier, department will deny the benefit of this notification by taking shed of above stated proviso. If the item X in the above example is an article eligible for benefit of notification no. 1/2011-CE or 12/2012-CE, the situation will be even harsher as even the input .....

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x paid. All the suppliers are not charging the duty/tax. There can be many reasons for not charging the duty/ tax, one significant reason being that the supplier/ service provider is availing the benefit of SSI exemption. Now, pursuant to above amendments, if the manufacturer wants to claim the benefit of these notifications, he would be forced to purchase the inputs and avail input services only from the giant suppliers/ service providers. In other words, the small manufacturing units or servic .....

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otifications. Recent Development After the hassle confusion of around five days, Government has come up with the solution to above referred problem. The solution has been given by further amendment to these three notifications. This time the amendment has been done by adding explanation to the respective provisos. The explanation added to proviso to notification no. 30/2004-CE reads as follows:- Explanation.- For the purposes of this notification, appropriate duty or appropriate additional duty .....

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cation no. 37/2015-CE, 38/2015-CE and 39/2015-CE; all dated 21.07.2015. Further, Circular no. 1005/12/2015-CX dated 21.7.2015 have also been issued which clarifies the above stated amendments. In this circular, it has been clarified that the said amendments have been done to make the domestic manufacturers survive and that these conditions are to be satisfied by the manufacturers of the goods, not the buyers/importers. It is therefore clarified that the domestically manufactured goods will conti .....

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ons has not been changed. Hence, the inputs/input services should have to be duty paid (whether it is NIL or some positive figure). However, in the case where any of the inputs is received without duty paying document then the condition of notification will not be satisfied. Accordingly, the benefit of notification will not be allowed in such a case. Therefore, now the manufacturer will have to be conscious about the duty paying documents of the inputs or input servcies procured by him. But this .....

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