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?

AI Summary

Input tax credit reversal: distinction between additional customs duty and basic excise alters ITC restriction applicability.
If ITC claimed stems from additional customs duty (CVD) paid on imported gold dore bars and the goods were held on 1 July 2017, ITC is subject to a one sixth restriction; where the taxpayer availed ITC of basic excise charged on purchased cast bars, the applicability of that restriction depends on whether the ITC can be traced to ACD or to excise. The adviser advises obtaining any departmental dissent in writing, distinguishes CVD and basic excise as legally separate, and cites case law to test the duties' relationship for challenging the restriction.