We are paying two per cent excise duty on our goods as per notification no. 1/2011-CE dated 1.3.2011 as amended. We are not taking CENVAT (Central Value-Added Tax) credit of the duty paid on the inputs or tax paid on input services, as the exemption notification does not allow that. But we want to take credit of the duty paid on capital goods. Can we do that?
As per Rule 2(d) of CENVAT Credit Rules, 2004, “exempted goods” means excisable goods which are exempt from the whole of the duty of excise leviable thereon, and includes goods which are chargeable to “Nil” rate of duty and goods in respect of which the benefit of an exemption under Notification No. 1/2011-C.E., dated the 1st March, 2011 or under entries at serial numbers 67 and 128 of Notification No. 12/2012-C.E., dated the 17th March, 2012 is availed. So, the goods you manufacture are treated as exempted goods for the purpose of CENVAT Credit Rules, 2004. As per Rule 6(4) of the said Rules, ‘no CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year’. Therefore, if your capital goods are used exclusively in the manufacture of goods in respect of which you avail exemption under notification no. 1/2011-CE dated 1.3.2011, you cannot take Credit of the duty paid on such capital goods. This position is also clarified though CBEC Circular no. 943/4/2011-CX., dated 29-4-2011.
We have received a Show Cause Notice from our ICD Customs alleging wrongful classification. We are preparing a reply but the ICD staff is threatening to attach our property. Can they do that?
Section 28BA of the Customs Act, 1962 provides for provisional attachment of property for the purpose of protecting the interests of revenue during the pendency of any proceedings under Section 28 or Section 28B of the Act. However, any such action can be taken only with the approval of the Commissioner, who must give you an opportunity to make submissions as to why the property belonging to you should not be provisionally attached, and take a decision after considering the material before him. You may refer to CBEC Circular no. 10/2008-Cus dated 30.6.2008 in this connection.
Under the Served from India Scheme (SFIS), we can transfer the duty credit scrip or goods imported under SFIS scrip to a group company. Is it necessary that the group company must also be a service provider?
As per Para 3.12.7 of the Foreign Trade Policy (FTP), ‘Entitlement/goods (imported/procured) shall be non transferable (except within group company and managed hotels) and be subject to Actual User condition’. So, as per this provision, there is no requirement that the group company must be a service provider.
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