excise duty on yarn under Notf No 30/2004-CE

[Guest]

Respected Sir, 

I am manufacturing Polypropylene Multifilament yarn(800deniers)  from PP Granules being used as intermediate captively in the manufacture of narrow woven fabric. Narrow woven fabric is conditionally exempted subject to non availment of Cenvat credit on inputs. i.e.granules under Notf No 30/2004-CE .Previously I was availing cenvat credit on PP Granules and  paying excise duty on narrow woven fabric under  Notification No. 30/2004-CE dated 09.07.2004 and availing exemption on PPMF Yarn under Notif No 67/95-CE dated 01.03.1995. Now I want to pay duty on  intermediate product Polypropylene Multifilament yarn under Notif No 67/95-CE dated 01.03.1995 at the value of 110% of cost of production and avail  exemption on Narrow woven fabric under Notification No. 30/2004-CE. But Notification No. 30/2004 provides conditional exemption to Narrow woven fabric  subject to non availment of credit on inputs. But I want to avail Cenvat credit on inputs. It is clarified PPMF yarn is unconditional dutiable item not covered under Notification No. 30/2004-irrespective of availment on cenvat credit on inputs. Excise officers are asking me to not to avail Cenvat credit on inputs under new scenario and pay duty on PPMF yarn by PLA. My explanation is that I am using duty paid inputs into PPMF Yarn on which I will excise duty and PPMF Yarn is inputs  for Narrow woven fabric (exempted) .My question is whether I can avail cenvat on inputs i.e. granules and use in payment of duty on PPMF yarn and also avail exemption on Narrow woven fabric under Notification No. 30/2004 which is conditional notf does not allow cenvat credit to inputs if I clear NWF without duty.  PPMF yarn which is intermediate for Narrow woven fabric,can be treated as inputs for Narrow woven fabric to fulfil condition of Notification No. 30/2004 and to avail exemption on NWF.

Yours regards,

 Harish

[Surender Gupta]

What is input, what is intermediate product, what is finished goods? Make a chain of all these. You can divide two manufacturing activity independently and choose to pay or avail exemption. But, for this you have to keep all records separate.

As an option, if you avail cenvat credit on inputs, pays excise duty on intermediate goods and wish to avail exemption on finished goods under notification no. 30/2004 - there should not be any difficulty because denial of cenvat credit under this notification is for manufacturing of goods falling under this notification only on which exempiton is availed. Duty paid at intermediate stage shall not be available as cenvat credit and to be forgotten

On the other side, you can avail credit on inputs, avail exemption under notification no. 67/95 for intermediate goods instead of notification no. 30/2004 and pay duty of excise fully on finished goods without availing benefit of notification no. 30/2004.

AI Summary

Cenvat credit eligibility determines if exemption on finished narrow woven fabric can be claimed while paying duty on intermediate yarn. If input credit on granules is availed and duty is paid on the intermediate PPMF yarn, the manufacturer may still seek the conditional exemption on the finished narrow woven fabric provided manufacturing activities are segregated and records kept; however, duty paid at the intermediate stage shall not be available as cenvat credit for the exempt finished product and must be treated as non-creditable.