SSI Exemption and CENVAT Credit – Branded Goods -Long Pending Issue Solved
As per para 2(iii) of Notification No. 8/2003 – Central Excise dated 01.03.2003, the manufacturer shall not avail the credit of duty on inputs under rule 3 or rule 11 of the CENVAT Credit Rules, 2002 (herein after referred to as the said rules), paid on inputs used in the manufacture of the specified goods cleared for home consumption, the aggregate value of first clearances of which, as calculated in the manner specified in the said Table does not exceed rupees one hundred and fifty lakhs;
This means that during the period when exemption from duty is availed for the first clearance of 150 lakhs rupees, no CENVAT credit can be taken.
But as per para 4 of the notification, the exemption cannot be availed if the goods bear the band name of another person. Obviously then duty has to be paid. Now if duty has to be paid, can't CENVAT Credit be taken? But the para 2(iii) of the Notification bars Credit when the exemption is availed.
So is simultaneous availment of exemption and Credit permissible?
Long ago in - 17 11 2006 , we covered this issue with the question Whether benefit of SSI exemption is available if CENVAT Credit is taken?
We had also carried a story Open sesame SSI exemption and CENVAT - simultaneous availment possible; says CESTAT.
After more than two years, the Government has now amended the Notification No. 8/2003 to add a proviso to para 2(iii),
"Provided that nothing contained in this clause shall apply to the inputs used in the manufacture of specified goods bearing the brand name or trade name of another person, which are ineligible for the grant of this exemption in terms of paragraph 4."
So, now Credit can be availed on the branded goods cleared on payment of duty – a stand that judiciary had taken long ago and which we propagated.
This is a simple issue which was under litigation for more than twenty years and which the Board could have solved very easily by amending the Notification which they have now done. Any way better late than never.
Have you noticed the Board is actively into correcting several litigating issues of late? Is Chidambaram (or his absence from Finance Ministry) responsible?
Notification NO. , Dated: February 11, 2009