Validity of 'Highlights' of FTP
Along with the Foreign Trade Policy, DGFT also released Highlights of the Foreign Trade Policy. As per Serial No 40 of the said highlights, EOUs will now be allowed CENVAT Credit facility for the component of SAD and Education Cess on DTA sale.
Relevant questions that require clear answers:
++ Will the Ministry of Finance issue notification based on “Highlights” when in the past it has been shy of issuing notifications even after express provisions have been made in the FTP itself?
++ Notwithstanding the above, what does the Highlight intend to communicate – There has never been a case of EOU not being allowed to avail credit of SAD and eligible education Cess? In such a case, is the measure warranted, given that there was never any issue in this regard?
++ The EPCES Circular No 86 dated 27 August 2009 explains that the said issue would resolve a major issue relating to EOUs, as in the open houses, EOUs have repeatedly requested for change of CENVAT credit formula. Can we then safely presume that serial no. 40 of the Highlights of FTP should have actually read thus, “DTA units procuring goods from EOUs will now be granted CENVAT Credit facility for the component of SAD and Education Cess levied on DTA Sale by the EOU” (This should be relevant if a corresponding amendment is made to the formula for CENVAT Credit availment by the DTA unit on procurement from EOU, as provided in Rule 3(7)(a) of the CENVAT Credit Rules, 2004 to incorporate therein, SAD and eligible component of Cess)