dutiable and exempted product

[Asked by Guest]

a sugar mill has been manufacturing varities of Ethyl Alcohol of dutiable (Rectified Spirit and Natural Spirit-RSNS) and non dutiable (Neutral spirit- DNS) from Molasses. They are not maintaining separate accounts. They have been reversing the credit for RSNS by using the formula Amount expunged = Total Quantity of Molasses consumed / Total Quantity of RSNS produced XQuantity of RSNS produced The assessee find objection from Central Excise Department that the procedure for reversal of the credit is not in conformity with Rule 6 of Cenvat Credit Rules, 2004. The assessee are not providing any exempted service. Now the assessee proposes to follow Rule 6(3)(i)of Cenvat Credit Rules, 2004. The question is whether the assessee can reverse the credit by payment through PLA (now 5% on the value of exempted product) and avail Cenvat Credit. What is the practice followed by other Sugar Mills

[Snehal Kulkarni]

Rule 6 of CCR2004 says about the Obligation of the manufacturer when manufacturing the dutiable and exempted goods. There are three option

1. To maintain the seperate account for Cenvat Credit

2. To reverse the cenvat credit to the tune of the exempted goods cleared

3. Or to pay the 5% value on the clearance value.

In your case, it is seen that you are not maintaining the seperate account for dutiable and exempted goods.

It is better to pay 5% of the clearance value of the exempted goods. This will the debit from the Cenvat account. For example, if the value of the exemplted goods cleared is Rs 100, then you have to debit Rs 5 to RG account.

This will be cost to you where as this is not going to charge to the Customer. This value doesnt reflect on the Excise Invoice hence the Credit to the Customer will not be possible.

 

 

 

AI Summary

Cenvat credit reversal: paying the prescribed amount on exempted clearances regularises input credit when separate accounts are absent.
Rule 6 of the Cenvat Credit Rules, 2004 offers three compliance options for manufacturers producing both dutiable and exempt goods: maintain separate accounts; reverse cenvat credit proportionately for exempt clearances; or discharge a prescribed payment on the value of exempted clearances. Where separate accounts are not maintained, manufacturers may elect the payment option, debit the payment from the cenvat account to regularise input credit entitlement, and bear the resulting cost which is not shown on the excise invoice and cannot be passed to customers.