Reversal of ITC on gold dore bars

[ROHIT GOEL]

Dear Sir,

As per rule 44A of the CGST Rules, 2017, if ITC taken on account of additional customs duty (equivalent to excise duty) paid at the time of importation of gold dore bars and the said gold dore bar/gold/jewellery made out of imported gold dore bar is held as of 1st July 2017, then ITC should be resricted to 1/6th.

In our client's case, they purchased Gold Cast Bars from an importer who imported Gold Dore Bars and thereafter manufactured cast bars from same. The importer has charged Basic excise [email protected]% at the time of sale and has mentioned on the invoice that the cast bars were made from imported dore bars. The officer has proposed that ITC in our case should be restricted to 1/6th as per the rule.

However, we believe since we have not taken ITC of 'additional customs duty paid at the time of import of gold dore bars' but of 'excise duty at the time of acquisition of cast bars' the Rule would not be applicable in our case. Is our view correct? And is there any other view preferred by the experts?

[KASTURI SETHI]

If the department differs with your opinion, you must get in writing. Verbal reasoning has no value or existence. Additional Customs duty (CVD) and Basic Central Excise duty are totally different kinds of duties. Both these kinds of duties are not correlated at all. CVD means equal to Central Excise duty should be levied in the form of Customs duty i.e. Additional Customs duty. Basic Central Excise is not linked to ACD (CVD) more than this. I am appending a few case laws to understand both kinds of duties and to what extent these are related for any purpose. You will have to read deeply and thoroughly to understand and fight the issue. These case laws will lay only foundation to encounter the problem.

[Bhartiya Plastic Udyog and Another v. U.O.I. - 1983 (12) E.L.T. 661 (Del.)] =1983 (1) TMI 88 - HIGH COURT OF DELHI This decision was approved in 1999 (113) E.L.T. 358 (S.C.) = 1999 (9) TMI 88 - SUPREME COURT.

[Carbide India Ltd. v. Collr. of Cus. - 1985 (19) E.L.T. 236 (Tri.)] =1984 (3) TMI 401 - CEGAT NEW DELHI This decision was affirmed in 2001 (131) E.L.T. A 253 (S.C.) = 1990 (1) TMI 324 - SC ORDER.

[Hyderabad Industries Ltd. v. U.O.I. - 1995 (78) E.L.T. 641 (S.C.)] =1995 (7) TMI 368 - SUPREME COURT This decision was affirmed in 1999 (108) E.L.T. 321 (S.C.) = 1999 (5) TMI 29 - SUPREME COURT.

Hyderabad Inds. has been relied is Coalgate Palmolive (India) Ltd. v. Commr. of Cus. - 2016 (339) E.L.T. 161 (S.C.) = 2016 (9) TMI 360 - SUPREME COURT.

Text corrected as per Corrigenda No. F. 3/Ed.B.J./64/2016, dated 25-1-2017 as issued by Supreme Court and As per Corrigenda Published in 2017 (346) E.L.T. 512 (20th February 2017 - Vol. 346 : Part 3)]

If you delve deep into all case laws, I hope you will be able to arrive at some decision.

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AI Summary

Debate Over ITC Reversal on Gold Dore Bars: Rule 44A's Applicability Questioned Under GST. Clarification Sought. A discussion was initiated regarding the reversal of Input Tax Credit (ITC) on gold dore bars under the Goods and Services Tax (GST) framework. The query focused on whether ITC should be restricted to 1/6th as per Rule 44A of the CGST Rules, 2017, when excise duty is paid on gold cast bars made from imported gold dore bars. The respondent clarified that additional customs duty and basic central excise duty are distinct, suggesting that the rule might not apply in this case. The respondent advised obtaining written confirmation from the department and referenced case laws for further understanding.