Imports under DFIA and rebate/CENVAT Credit – CBEC walks into reality
The CBEC has issued a circular explaining the amendments made to the Notification 40/2006 Cus dated 01.05.2006. There is a widespread confusion in the officers and the importers whether they can simultaneously avail the rebate/CENVAT on the raw materials and also the benefit of Notification 40/2006. The issue is so complicated that the clarification runs into six pages and is very difficult to comprehend on first reading.
At the cost of repetition, it is requested to see a detailed analysis made on this issue in our columns by one of our contributors (Export promotion schemes vs Cenvat Credit or Rebate under Rule 18: The myth and the reality – R Raghavendra Rao). It is heartening to see that the views expressed by the author were almost on the same lines of the present clarification issued after consultation with the DGFT, Department of Commerce and the Ministry of Law
The author had suggested that there is no requirement of condition (v) in Notification 40/2006 to prohibit rebate/CENVAT on the material used in the manufacture of resultant product.
Now this condition has been deleted from the Notification. The circular clarifies
The restriction imposed vide condition No. (v) of the notification No. 40/06- Cus has been deleted; thus the ‘said facilities' can now be availed by the exporter.
To explain the other features in brief,
1. In cases where the imports take place after fulfillment of export obligation (by exporting goods manufactured by availing facilities like CENVAT/ Rebate)
the imported raw material should be used only in manufacture of dutiable goods. The importer shall submit a certificate from the jurisdictional Central Excise officer within 6 months from the date of clearance of the said materials, that the imported materials have been so used. In case this condition is violated, then the importer would be required to pay all duties of customs which have been exempted under notification No. 40/06- Cus dated 1.5.06.
if the materials are imported against an authorisation transferred by the Regional Authority, or the imported materials are transferred with the permission of Regional Authority, then the importer has to pay an amount equal to the additional duty of customs.
the importer also has an option to pay additional duty of customs on the imported materials and clear his goods without furnishing any bond as specified in condition No. (iiia) of the notification number 17/09- Cus dated 19.2.09. This additional duty of customs so paid shall be eligible for availing CENVAT Credit under CENVAT Credit Rules, 2004.
2. In cases where the imports take place after fulfillment of export obligation (by exporting goods manufactured without availing facilities like CENVAT/ Rebate)
the imported materials can be cleared without furnishing a bond specified in condition (iiia) ibid. However, the importer will have to furnish a proof to the assessing officer to the effect that the ‘said facilities' have not been availed
3. In cases of imports made before the discharge of export obligation in full
the importer has to execute a bond, at the time of clearance, binding himself to the conditions specified in the notification No. 40/06- Cus dated 1.5.06 and to pay the leviable customs duties along with interest @15% in case the conditions of the notification are not complied with.
The issue does not end here. In case 1 above, if the resultant goods are not dutiable, it is felt that there will be a double benefit. So, it has been clarified that that unintended benefits may have occurred in cases where the duty free inputs, imported/procured subsequent to completion of EO using indigenously procured inputs and on which Cenvat credit has been availed of by the exporter, are transferred or used in the manufacture of non excisable /exempted /nil-duty goods. In suchcases, Board has directed to take action to recover revenue.
Circular No. Dated: February 25, 2009