Charging duty on exempted Goods

[MEHUL ASHAR]

Respected Sir,

As regarding above subject, My query is that do we have to charge 6% duty on the sale of exempted goods deriving CETSH NO. 25051011 on the basis of taking credit on the pet-coke which we receive according to the rule 6 of CCR 2004.Please reply.

[Ganeshan Kalyani]

Sir, I your final product is exempted the Cenvat credit is not eligible. Thanks.

[KASTURI SETHI]

I endorse the views of Sh.Ganeshan Kalyani, Sir. This 6% is amount of reversal and credit cannot be taken.

[Rajagopalan Ranganathan]

Sir,

Silica sand (Processed) which fall under sub-heading No. 2505 10 11 attracts 'Nil' rate of duty under First Schedule of Central Excise Tariff Act, 1985. That is, the said product is unconditionally and absolutely exempted from duty. Therefore if you use pet coke on which duty is paid and the said duty is availed as credit, then if such coke is used in the manufacture of Silica sand (Processed) then you have to pay back 6% of the price of Silica sand (Processed) under rule 6 of CCR, 2004. If you use the pet coke only in the manufacture of Silica sand (processed) then you are not eligible to take credit of duty paid on such pet coke since the same is used in the manufacture of absolutely exempted excisable goods.

[Ganeshan Kalyani]

Sir, querist has to respond as to what is his final product - exempt or dutiable. Thanks.

[MEHUL ASHAR]

Respected Sirs,

Thank u 4 ur replies.

AI Summary

Cenvat credit reversal required where inputs are used solely to manufacture exempted goods, mandating repayment in lieu of credit.
If the final product is unconditionally exempt, credit of duty paid on inputs used in its manufacture is not allowable; where such inputs are used to produce exempt goods the manufacturer must reverse the benefit by paying the amount provided under the credit reversal mechanism, and if inputs are used exclusively for exempt manufacture the entire credit is ineligible and must be repaid.