Clarification On Modvat Credit Benefit

In terms of Rule 57 cc of the central excise rules, which was brought into operation from September 1 this year, a manufacturer producing exempted goods as well as dutiable goods is required to debit an amount equal to eight per cent of the value of exempted goods at the time such exempted goods are cleared from his factory, a press release issued by the finance ministry said here.

In this context, certain doubts have been raised whether the user of such exempted goods can take modvat credit for the amount of eight per cent shown in the invoice by the manufacturer of exempted goods.

 

It is now clarified that no modvat credit of the amount debited under rule 57cc is admissible to the user of exempted goods.

This is for the simple reason the amount of eight per cent is not in the nature of excise duty, the release said.