Excise duty liabilities on one FG use in other FG within the Factory

[Chetan Pawar]

Dear All,

We are the Chemical manufacturing unit, Recently we have already produced one A FG Product but some reasons we have utilized the same in another B FG product and the same ( B FG Product) has been clear without payment ofExcise Duty against notification No.012/2012 dt.17.03.2012 (Sr.No.336).

Can you please tell me what is the Excise Duty Liabilities comes on A FG Product.or is their any notification or rules in this regards??

Awaiting your replies.

Thanks and Regards,

Chetan Pawar

[YAGAY andSUN]

Dear Chetan,

Please check the Rule 6(6) (iva) of the CENVAT credit Rules, 2004 in this regard.

Regards

YAGAY and SUN (Knowledge is power, when shared)

(Management and Indirect Tax Consultants)

[PAWAN KUMAR]

Dear Chetan Ji,

Please specify the serial number of notification No.12/2012-CE Dated 17.03.2012 under which the goods was cleared without payment of duty.

[YAGAY andSUN]

Dear Pawan,

Please check the fourth line of Mr. Chetan's query in which the Serial No. 336 of Notification No. 12/2012-C.E. dtd. 17-03-2012 has been mentioned.

Further, if such supply is covered under 6(6) (iva) of the CENVAT credit Rules, 2004, then, Mr. Chetan is not required to pay the amount as mentioned in this Rule.

After going through the relevant provisions, please do share your valuable inputs on this matter.

Regards

YAGAY and SUN (Knowledge is power, when shared)

(Management and Indirect Tax Consultants)

[Mahir S]

Yes, No need for any such excise reversal.

[PAWAN KUMAR]

Dear Sir,

Under S.No.336 of Notification, Exemption provided for goods supplied under International Competative Bidding subject to condition No.41 as per which Imported goods at Nil Customs duty should be used in the manufacturing of goods or either directly supplied as such after importation on nil customs duty. As FG A has captively consumed and it is your final product also, If imported goods are used to manufacture FG A, no need of any duty liability on FG A. but if domestic duty paid inputs are used and you have taken cenvat credit on such duty paid inputs, you need to reverse such cenvat credit used in manufacture of FG A as per my view.

[Rajagopalan Ranganathan]

Sir,

Sl. No. 336 of Notification No. 12/2012-CE dated 17.03.2012 states that-

336.

Any Chapter

All goods supplied against International Competitive Bidding.

Nil

41

Condition 41 of the said Notification states that-

41.	If the goods are exempted from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under section 3 of the said Customs Tariff Act when imported into India.

Plain reading of entry 336 of the Notification and condition 41 will lead to the inference that excisable goods falling under any Chapter of first Schedule of Central Excise Tariff Act, 1985 (1 of 1986) will be exempted when supplied against international competitive bidding if similar goods when imported into India is exempted from the duties of customs leviable under the first schedule to the Customs Tariff Act, 1975 (51 of 1975) and additional duty leviable under Section 3 of the said Customs Tariff Act.

Therefore F.G. B manufactured by you is exempted from CENVAT duty leviable under Section 3 of CEA, 1997 provided similar goods, when imported into India is exempted under Customs Tariff Act, 1975. Therefore if F.G. A also manufactured by you is used in the manufacture of F.G. B then it is not eligible for captive consumption exemption granted by Notification No.67/95-CE dated 16.3.1975 as amended since to avail such exemption final product should not be exempted one or chargeable to 'Nil' rate of duty. Therefore you are liable to pay duty on F.G. A.
Rule 6 (iv) and 6 (iva) of Cenvat Credit Rules, 2004 stipulates that credit availed on inputs used in the manufacture of final product which is

(iv) supplied to the United Nations or an international organization for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No.108/95-Central Excise, dated the 28th August, 1995, number G. S R. 602 (E), dated the 28th August, 1995; or

⁹[(iva) supplied for the use of foreign diplomatic missions or consular missions or career consular offices or diplomatic agents in terms of the provisions of 12/2012-Central Excise, dated the 17th March, 2012, number G.S.R. 163(E), dated the 17th March, 2012.

Therefore of F.G. B is supplied under rule 6 (iv) or 6 (iva) of Cenvat Credit

rules, then you need not reverse the credit taken on the inputs used in the manufacture of F.G. A.

However, since you are paying duty on F.G. A you can take credit of duty paid on inputs used in the manufacture of F.G. A and you need not reverse the credit under Cenvat Credit Rules, 2004.

AI Summary

Chemical Manufacturer Queries Excise Duty on Using Finished Goods; Rule 6(6)(iva) of CENVAT Credit Rules Applies A chemical manufacturing unit queried about excise duty liabilities for using one finished product (FG A) in the production of another (FG B), which was cleared without duty under a specific notification. Respondents advised checking Rule 6(6)(iva) of the CENVAT Credit Rules, 2004, and clarified that if FG B is exempt under international competitive bidding, FG A might not qualify for captive consumption exemption. If FG A used duty-paid inputs with availed CENVAT credit, reversal might be necessary unless specific conditions under the notification are met.