Valuation when inputs or capital goods are cleared as such – Board responds
In DDT of 28.4.2005, it was pointed out
- Board clarifies, that when inputs or capital goods are cleared as such under
1. Rule 57AB of Central Excise Rules or
2. Rule 3(4) of the Cenvat Credit Rules 2001 or
3. Rule 3(4) of the Cenvat Credit Rules 2002,
valuation should be as per Rule 3(5) of the Cenvat Credit Rules 2004. Now this Rule does not speak of any valuation. An amount equal to the credit taken is to be reversed. But how on earth can the provisions of Cenvat Credit Rules, 2004 be applicable to Central Excise Rules 1944, Cenvat Credit Rules 2001 & Cenvat Credit Rules 2002? Only the good Board can think of such ingenious methods of taxation. Somebody who was clearing inputs as such in the year 2000 was required to anticipate the Board clarification to be issued in 2005 before paying an amount or reversing the credit.
• As per Rule 57AB of the Central Excise Rules 1944, the value for such clearances had to be determined under Section 4.
• Same was the case under Cenvat Credit Rules 2001.
• But under Cenvat Credit Rules 2002 there was no valuation and an amount equal to the credit taken was to be reversed.
Now the Board wants to apply the present Cenvat Credit Rules to all these earlier rules - obviously with retrospective effect.
Board certainly does not have the power to retrospectively amend the law, however much it wants to usurp the powers of Parliament. The instructions in this circular are going to result in hundreds of audit objections and thousands of Show Cause Notices. Central Excise consultants are assured of buttered bread as long as the Board is active and gives such clarifications
Now the Board clarifies that
The situation prior to 1.3.2003 {when rule 57AB(1C) of Central Excise Rules, 1944, or rule 3(4) of CENVAT Credit Rules, 2001 or un-amended rule 3(4) of CENVAT Credit Rules, 2002 was in force} shall continue to be governed by the provisions as in force at the relevant time.
So there is no retrospective clarification after all. Then what was the clarification all about?
CBEC Circular No. 816/ 13/ 2005-CX, Dated: June 16, 2005