Eou Exit and duty on materials from availabe CENVAT credit.

[Guest]

Dear sir,

We have recently exit from EOU scheme, while exit we paid duty on RM/WIP and stocks from available CENVAT/ST credit for the goods imported without payment of duty under PC/CT3.

We have received query saying that the CENVAT credit can not utilize while exit from EOU, and while calculating duty liability of imported materials, can any body suggest is there is specific noti or circular in Customs or CE rules 1944 which clearly says whether the above transaction is allowed or dis allowed.

thanks

Mitesh

[Suryanarayana Sathineni]

Dear Friend,

In terms of the FTP Provisions related to Exit from EOU Scheme, the unit required to pay duties which were not paid and payable on WIP and FG on the stoicks available on a specific date. This provision was incorporated much before extension cenvat credit facility to EOUs during 2004 by amenment to Rule 17 of CCR,2002.

While extending the cenvat facility to EOUs, it was stated that an EOU can pay the duties on the DTA clearances wither by way of debit from Personal Ledger Account (PLA) or from Cenvat Account.

In other words, the cenvat credit balances available to an EOU can be utilized for payment of ....

• Duty on the Cenvatted inputs/capital goods cleared as such in terms of Rule 3(5) of CCR,2004
• Pyament to duty on the DTA sale ( to the extent of cenvat and Cesses)
• for any other purposes which permit payment from cenvat in terms of CCR,2004

In my view any payment other than the above cannot be made from Cenvat credit and hence, you have to necessarily pay by way of cash through PLA.

Hope the above inputs address your query.

Best Regards,

Suryanarayana

AI Summary

Use of Cenvat credit limited to authorised EOU liabilities on exit; other exit duties must be paid from PLA. Duties on stocks (RM, WIP, FG) become payable on exit from the EOU scheme. Cenvat credit may be used only for authorised purposes - payment of duty on inputs/capital goods cleared as such, payment of duty on DTA clearances to the extent of Cenvat and cesses, and other expressly permitted uses - while any exit liabilities not covered by those authorised uses must be paid in cash through the Personal Ledger Account (PLA).