UTILIZATION OF CENVAT CREDIT

[RAMARANJAN MOHANTY]

We are the manufacturers of Pipes having plants at X in U.P, Y in Gujarat and Z in Karnataka.  The units at X , Z and Y are under Domestic Tariff Area (DTA).  We have accumulated Cenvat Credit balances in X and Z Units on account of reduction in Excise rates in the earlier years and also discharging the liability under Rule 6 (3) of Cenvat Credit rules.  We are contemplating to utilize the unused Cenvat credit balance at X and Z units.  We have the following proposals in our mind for which we need your detailed guidelines and legal tenability of the proposal.

Proposal -1

a)         We will be getting the export orders in the name of X and Z Nits..

b)         The Raw Material for the same shall be procured in the name of X & Z units.

c)         Advance Lincences shall be taken in the name of X & Z units and Y unit as supporting manufacturer.

d)         The Raw materials will be imported in the name of X and Z units making Y in the invoice as notified party.

e)         We will intimate the Y Range as per Notificateion No.214/86 Ex dated 25.03.1986 for carrying out the Job Work in the Y unit.

f)         X and Z units will also take permission under Rule 4(6) of the Cenvat Credit Rules 2004 for direct removal of pipes manufactured at Y on Job Work basis and under Notification No.214/86 for export.

g)         ARE-1 will be prepared at Y in the name of X/Z unit.

h)         All export documents will be made in X and Z units as the case may be.

i)          Y unit will raise invoice for job work charges with reference to the Job work challan.

j)          X and Z shall raise the Excise invoice after charging the Excise duty under Rule 18 of Cenvat Credit Rules 2002 under rebate of duty on finished goods (pipes) only by utilizing the Cenvat Credit lying unutilized.

k)         X & Z units will file the rebate claim of Excise duty under Rule 18.

 

Proposal- 2

 

a)         X & Z unit will purchase the Raw Material by its own for domestic orders received by it

b)         X & Z unit will send the Ram Material directly from the suppliers end to Y for carrying out the manufacturing activity of pipes underNotification 214/86.

c)         X and Z units will discharge the Excise duty liability on the Finished Goods i.e sale of pipes to the customers utilizing a portion of the cenvat credit on the value addition.

d)        Unit Y will charge the Job work Charges without any ED or service Tax to X&Z units.

 

Proposal -3

Any suggestions/proposals as you may deem fit.

We need detailed procedure from your end for utilizing the unutilized cenvat credit balance lying at our X & Z units

AI Summary

Pipe Manufacturer Seeks Legal Guidance on Utilizing Accumulated Cenvat Credit; Considers Export and Domestic Order Strategies A manufacturer of pipes with plants in Uttar Pradesh, Gujarat, and Karnataka is exploring ways to utilize accumulated Cenvat credit at their Uttar Pradesh and Karnataka units due to reduced excise rates. They proposed two main strategies: first, using export orders to utilize the credit by involving job work at their Gujarat unit; second, using domestic orders where raw materials are sent directly to the Gujarat unit for manufacturing. They seek guidance on the legal tenability of these proposals and procedures to utilize the unused credit. A respondent suggested obtaining LTU registration to address the credit accumulation issues.