Cnevat of AED paid on Capital Goods

[Vinay Kunte]

Is 100% Cenvat Credit of AED Paid @4% on imported capital goods allowed in the first year? If yes, under which provision?

Can the experts put some light on the issue which is being raised under the EA 2k Audit now underway from FY 2015-16 onwards?

[KASTURI SETHI]

Sh.Vinay Kunte Ji,

Are you talking of Additional Duty of Customs leviable under sub-section 5 of Section 3 of the Customs Tariff Act or Additional duty leviable under Section 3Customs Tariff Act equivalent to the duty of excise ?

[KASTURI SETHI]

Proviso to Rule 4(2a) of Cenvat Credit Rules, 2004

[Provided further that the CENVAT credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, [ * * * *] in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer.

Also go through this case law especially of highlighted portion. The whole judgement is not relevant for you.

2009 (244) E.L.T. 286 (Tri. - Chennai) = 2009 (4) TMI 310 - CESTAT, CHENNAI D.C.W. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, TIRUNELVELI

[Vinay Kunte]

Sir

I am referring to the Duty payable as per provisions of Sub-Section 5 of Section 3 of Customs Tariff Act which was introduced in 2005.

As per mu knowledge which now needs to be updated or confirmed that it is the Duty Charged @4% in lieu of VAT /CST on the Goods imported which is charged on the entire Value including taxable Value+Duty of Customs+CVD.

Is it called as AED or SAD ? That's another confusion which also needs to be cleared.

Regret to have not clarified it earlier.

[KASTURI SETHI]

Sh.Vinay Kunte Ji,

W.r.f. to your reply to my query, my above replies are in your favour. Pl. go word for word. Proviso is correlated to Rule 4. Proviso cannot be read in isolation. Similarly, if we read cited case law, although the appeal of the party stands rejected, yet the highlighted portion is relevant. If we read the whole case law in continuity, it goes in your favour. As per case law, restriction of 50% imposed in Rule 4 of Cenvat Credit Credit Rules, excludes Additional Duty of Customs.

[Himansu Sekhar]

100% is eligible in in the 1st year. This is as mentioned in Rule 4. The budget bulletin of Govt. of India as on 01.03.05 will be helpful to you.

[Himansu Sekhar]

I mean bulletin as on 28.02.05

[Himansu Sekhar]

you can refer the book written by Sri V.S. Datey

[Himansu Sekhar]

2 Credit of this additional duty can be utilised only for payment of excise duty (including special excise duty and additional excise duties) on final products (and not for paying service tax). Credit of this additional duty in respect of capital goods can be taken in one instalment (as against in two instalments in other cases). All provisions relating to Cenvat Credit, including those relating to rebate and refunds are applicable to this additional duty, as are applicable to the excise duty leviable under the Central Excise Act.

this is from the explanatory notes budget 2005-06. 06

[KASTURI SETHI]

What a fool-proof reply by Sh.Himansu Sekhar Ji ! Thanks a lot, Sir.

[Himansu Sekhar]

Thank you sir

[KASTURI SETHI]

Sh. Himansu Sekhar Ji,

Pl. refer to your reply at serial no.7 dated 24.3.2021. I am fond of the books written by Sh.V.S.Datey. His books are always par excellence. To cap it all, I am his fan in real terms.

[Vinay Kunte]

Respected Sir

I thank you all for the valuable guidance given by you in the matter / issue raised by me which now I am confident that it would be settled in favor and we will save a good amount in interest.

Thank you once again to all the experts.

[Himansu Sekhar]

I have read his book several times. You can also invest your knowledge in this line. Starting from some specific subjects like ITC.

[KASTURI SETHI]

Sh.Himanshu Sekhar Ji,

Thanks a lot for your suggestion but I am not author. Writing a book is an inborn gift by God. I am not gifted with this talent/art of writing. My knowledge and I.Q. both are restricted.

[Ganeshan Kalyani]

Sri Kasturi Sir, you should give a try to write a book as suggested by Sri Himanshu Sir. You possess sea of knowledge. You have replied maximum queries in TMI Discussion Forum. You have also written articles herer. So you can also write book, I hope. Let the readers be benefited with your knowledge. In my view, you should give a try.

[YAGAY andSUN]

Dear Kasturi Sir,

If you do not write a book on Indirect Taxation, then it is O.K. But please start compiling your knowledge in just 250 odd pages, so that we all be benefited from it. It is soft challenge for you Sir. Please accept it and complete the task for our benefits. We are all with your Sir.

Regards,

YAGAY and SUN

[KASTURI SETHI]

M/s. Yagay and Sun,

Sir, I am very thankful to you for considering me capable for this. I shall make an attempt as per your advice.

I am also thankful to Sh.Himanshu Sekher Ji and Sh.Ganeshan Kalyani Ji for considering me capable for such creative work.

[Himansu Sekhar]

thank you Ganedh Kalyaniji

AI Summary

Experts Confirm 100% Cenvat Credit on 4% AED for Imported Capital Goods Permissible in First Year Under Rule 4. A discussion forum addresses the eligibility of 100% Cenvat Credit on Additional Duty of Customs (AED) paid at 4% on imported capital goods in the first year. The inquiry seeks clarity on the applicable provisions under the Cenvat Credit Rules, 2004. Participants, including experts, discuss relevant legal provisions, case law, and government budget bulletins. They confirm that 100% credit is permissible in the first year under Rule 4, and additional duty credit can only be used for excise duty payments. The discussion also includes appreciation for contributions and suggestions for writing books on the subject.