Part of Cenvat Credit Rules, 2002, explained

CHATROOM

We had received an order from an exporter for supply of goods under notification no. 43/2001-CE dated June 26, 2001. We removed the goods without duty payment against Annexure 1 issued by the Central Excise authorities of the buyer. Our Excise authorities are saying that such supply is not covered under Rule 6 (6) of the Cenvat Credit Rules, 2004 and that we have to pay 10 per cent of the value of the goods in accordance with Rule 6 (3) of the said Rules. Kindly advise the correct position.

Notification No. 43/2001-C.E. (N.T.), dated June 26, 2001, is issued under rule 19(3) read with rule 19(2) of Central Excise Rules, 2002 wherein procurement of excisable goods without payment of duty for the purpose of use in manufacture or processing of export goods and their exportation out of India has been provided subject to the conditions, safeguards and procedures mentioned therein.

According to sub-rule (1) of rule 6 of Cenvat Credit Rules, 2002, the credit is not available on inputs which are used in the manufacture of exempted goods. Sub-rule (2) and sub-rule (3) of the said rule gives an option to the manufacturer to maintain the separate inventory of inputs for use in exempted goods or pay an amount of 10 per cent of the value of the exempted goods (barring the exceptions mentioned therein) in case he chooses not to maintain separate inventory and to avail the credit on common inputs i.e. inputs used for both exempted and dutiable goods.

Thus, the provisions of sub-rule (1), (2) and (3) are applicable to those manufacturers who manufacture both dutiable and exempted goods. Since notification No. 43/2001-C.E. (N.T.) has been issued under rule 19 of Central Excise Rules, 2002, which only prescribes conditions, safeguards and procedures, the goods procured under this notification does not attract the provisions of sub-rule (1), (2) and (3) of rule 6 of Cenvat Credit Rules, 2002. You may draw the attention of your authorities to CBEC Circular no. 785/18/2004-CX., dated May 17, 2004.

Our Customs House Agent says that drawback on re-export of imported goods is available only if we re-export to the supplier through the port from where import was effected. Is it correct

Drawback on re-export of goods (which were imported earlier) is eligible in terms of Section 74 of the Customs Act and Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 outline procedure to be followed for availing drawback. Customs notifications have also been issued u/s 74 of the Customs Act specifying the percentage of duty drawback which is available in respect of such re-exported goods.

Neither Section 74 nor relevant Rule nor Customs Notification requires that for the purpose of availing drawback under Section 74 of Customs Act, the goods should be re-exported back to the same supplier or that such re-export should only take place from the port through which the goods were imported earlier. You may refer your CHA to CBEC Circular no. 72/2002-Cus. dated November 1, 2002.

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