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Interpreting section 3 of CEA - Who wins and who loses


Cenvat credit and EOU when CVD is Nil

Excellent Article!

Though EOUs are required to calculate duty in the manner of Customs duties payable, actually they are paying Central Excise duty leviable under the Proviso to Section 3(1) of the CE Act 1944. This duty is covered under the definition of the term “duty” as defined at Rule 2(e) of CER 2002. So, in the given situation as mentioned at Para 12 of the Article, when the tariff rate of CE duty is Nil or it is unconditionally exempted, but basic Customs duty is leviable, EOUs are required to pay CE duty which is equivalent to 50% of basic Customs duty. Cenvat credit on inputs used by EOUs in manufacture of such goods cannot be denied presently on the ground that no CVD is leviable or no CE duty is payable by units situated in DTA.

However, Cenvat credit of duty paid by EOU in such cases is not available to consignee in as much as Cenvat credit equivalent to CVD portion only is available as per the formula prescribed under Rule 3(7)(a) of CCR, 2004.

These are personal views.

Shvetal Parikh 04/09/2015

 

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