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| Duty-free inputs can be used only for exports | | CHATROOM |
| TNC Rajagopalan / New Delhi Jul 14, 2009, 00:56 IST |
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We have imported our raw materials under the Duty Free Import Authorisation (DFIA) scheme. Can we send it to a Special Economic Zone (SEZ) Unit?
Condition No. (vii) of Para 1 in the notification 40/2006-Cus. dated 1/5/2006 says that exempt materials shall not be disposed of or utilised in any manner, except for utilisation in discharge of export obligation, before the export obligation under the said authorisation has been discharged in full. Therefore, you cannot transfer the goods imported under DFIA unless the export obligation is fulfilled in full and you have obtained a transferability endorsement from the licensing authorities.
We are service providers. We are providing exempted services as well as taxable services. We are taking Cenvat credit of all the inputs and input services used for providing services, but not maintaining separate books. Before 1/4/2008, we were allowed to utilise the credit only to the extent of an amount not exceeding 20% of the amount of tax payable on the taxable output service. This had resulted in accumulation of credit. Recently the audit party had visited our unit and raised an objection regarding utilising such accumulated credit for full service tax payment. Is that correct?
Since 1st April 2008, you have two options. The first option is that under Rule 6 (3) of Cenvat Credit Rules, 2004, in respect of taxable services, you pay full tax and in respect of exempted/non-taxable services, you pay 8% of the value of such services. The second option is that you may pay an amount equivalent to Cenvat credit attributable to inputs and input services as per the formula given in Rule 6 (3A) of the Cenvat Credit Rules, 2004. When this provision was introduced, there was no explicit bar on utilisation of accumulated credit. Therefore, the audit objection is not correct. In this connection, you may refer to CBEC Circular no. 137/72/2008-CX.4 dated 21st November 2008, which clearly states that taking of credit and its utilisation is a substantive right of a tax payer under the value added taxation scheme and in the absence of clear legal prohibition, the right cannot be denied.
We are SSI. We are working under exemption notification no. 8/2003-CE dated 1/3/2003. We have received some job-work orders now. If we count the turnover of the job-work orders, we will cross the exemption limit of Rs. 1.5 crores. Is there any way to overcome this problem?
For the purpose of the notification no. 8/2003-CE dated 1/3/2003, the clearances, which are exempt from the whole of the excise duty leviable thereon (other than an exemption based on quantity or value of clearances) under any other notification or on which no excise duty is payable for any other reason, need not be counted. So, if you carry out job-work under any notification (say notification no. 83/94-CE dated 11/4/94 or 214/86-CE dated 25/03/1986) which provides for exemption to goods that you manufacture on job-work basis, there ought to be no problem.
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