Supply against Invalidation Letter

[Guest]

One of our customer holds Advance Authorisation & has provided us with Invalidation Letter for supply them with goods domestically produced by us. We have to send them the goods without excise duty ? Our queries are :

1. We do not hold any Advance Authorisation, are we eligible to supply them with Goods against their Invalidation Letter ?

2. How do we pacify excise for duty free billing against supply of goods against the Invalidation Licence ? Is there any notification for the same with Excise for supply against Invalidation ? We have read Notification No. 44/2001-Central Excise (N.T.) which interprets that we would be eligible to supply the goods only if we hold the Advance Authorisation with us also.

[Suryanarayana Sathineni]

Dear Friend,

Pl. Note, under FTP, there are different types of Advance uthorizations and to name a few, Advance Authorization,Advance Authorization for Annual requirement, Advance Intermediate Authorizations, Advance Authorization for Deemed export purposes etc.,

The Original Advance Licence Holder who intends to procure any of the materials indiginously covered under an Authorization, he has to apply for issue of an Advance Release Order (ARO) or which is also called as invalidation for a particular material with specific quantity and value and to issue on the name of a particular manufacturer who is otherwise called as Intermediate goods manufacturer.

Upon receipt of such ARO/invalidation from the Main Advance licence holder, the manufacturer of intermediate goods should apply for an Intermediate Advance Authorization ARO/invalidation to the DGFT.

The intermediate goods manufacturer then supply the goods to the original Advance Authorization holder against the Advance intermediate Authorization obtained by him or against the acknowledgement receipt if he already applied for the Authorization which is pending issue from DGFT.

The above information is clear that to supply the intermediate goods , the manufacturer should necessarily be in possession of an intermediate Advance Authorization or an acknowledgemnt receipt for the application made for such licence.

Notification No. 44/2001 extended exemption from excise duty if supplied against an advance intermediate licence to the Advance licence holder subject to complying the conditions stated therein.

In the alternative, the intermediate goods manufacturer, can also clear the goods on payment of excise duty since the aove notification is only conditional exemption and not absolute to come under the purview of Section 5A (1A) of Central Excise Act,1944.

Best Regards

Suryanaryana

[DR.MARIAPPAN GOVINDARAJAN]

Thanks Sri Suryanarayana for your detailed explanation.

AI Summary

Advance intermediate authorization requirement: manufacturers need authorization or acknowledgement to claim excise exemption; otherwise duty payment required. Supply against an invalidation letter requires the intermediate goods manufacturer to possess an advance intermediate authorization or an acknowledgement receipt for its application; excise exemption is conditional where supplies are made against a valid advance intermediate licence and its conditions are met, otherwise the manufacturer may clear goods on payment of excise duty.