CENVAT - Rule 3(7)(a) - Notifn 23/2003 does not reduce rate of basic customs duty but quantum is reduced by 75% - term BCD in second proviso implies basic custom duty applicable on goods by normal importer from abroad - Credit correctly taken: CESTAT
By TIOL News Service
MUMBAI, OCT 27, 2015: THE appellant purchased inputs from 100% EOU and availed credit of the Countervailing duty paid on the same.
The issue involved is as to whether the quantum has been computed correctly.
The assessee is before the CESTAT. However, they did not appear in person but vide their letter dated 29/06/2015 requested that the case may be decided on merits.
Serial number 2 of the notification No. 23/2003-Central Excise, dated the 31st March, 2003 in terms of which the goods were cleared at the material time read -
|
S.No.
|
Chapter or heading No. or sub-heading No.
|
Description of Goods
|
Amount of Duty
|
|
2
|
Any Chapter
|
All goods
|
“In excess of the amount equal to the aggregate of duties of Customs leviable on like goods, as if, -
(a) duty of customs specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), read with any other notification in force was reduced by 75%, and
(b) no additional duty of customs was leviable under sub-section (5) of the section 3 of the said Customs Tariff Act:
Provided that while calculating the aggregate of customs duties, additional duty of customs leviable under sub-section (5) of the section 3 of the Customs Tariff Act shall be included if the goods cleared into Domestic Tariff Area are exempt from payment of sales tax or value added tax.
Illustration: - Assuming product X has the value Rs.100/- under section 14 of the Customs Act, 1962, and for the purposes of this illustration, is chargeable to basic customs duty of 10% ad valorem, additional duty of 20% ad valorem only, then the computation of duty required to be paid would be as follows:
Basic Customs duty but for this exemption = Rs.10/-
Basic Customs duty because of this exemption = Rs.2.5/-
Value for the purpose of calculation of additional duty = Rs.100/- + Rs.2.51/- = Rs.102.5/-
Additional duty = 20% of Rs.102.5/- = Rs.20.50/-
Total duty payable after this exemption = Rs.2.5/- + Rs.20.5/- = Rs.23/-
|
So also, the CENVAT credit admissible was governed by proviso to Rule 3(7)(a) of the CENVAT Credit Rules, 2004 which read as under:
Provided that the CENVAT credit in respect of inputs and capital goods cleared on or after 1st March, 2006 from an export oriented undertaking or by a unit in Electronic Hardware Technology Park or in a Software Technology Park, as the case may be, on which such unit pays excise duty under section 3 of the Excise Act read with serial number 2 of the notification No. 23/2003-Central Excise, dated the 31st March, 2003 [G.S.R. 266(E), dated the 31st March, 2003] shall be equal to X multiplied by [{(1+BCD/400) multiplied by (CVD/100)}.
The question involved is what should be the BCD, whether the BCD should be the rate as specified in tariff or the basic custom duty which was payable by the 100% EOU.
The AR submitted that the normal meaning of the word 'BCD' would be the rate at which customs duty was payable by the 100% EOU and the idea of the said proviso is to restrict the credit availed by a unit.
The Bench referred to the notification (supra) and the CCR, 2004 and observed -
"7. A combined reading of the Notification as also the proviso, it will be seen that there is no intention to restrict the CENVAT credit under the CENVAT Credit Rules but the intention is to permit the CENVAT only on the countervailing duty portion. Notification 23/2003 does not reduce the rate of basic customs duty but the quantum is reduced by 75%. In the proviso, taking into account this aspect, the words used are BCD / 400 . It is very clear that the term 'BCD' in the second proviso implies the basic custom duty applicable on the goods by a normal importer from abroad. This duty rate may be tariff rate or an effective rate as per unconditional exemption Notification."
Holding that the credit taken by the appellant is correct, the appeal was allowed with consequential relief.
(See 2015-TIOL-2294-CESTAT-MUM)
