Export of Exempted Goods - Complication Compounded
BY Notification No. dated 26.05.2010, Government brought in a draconian change in Notification No. , dated the 26th June 2001, by which export of exempted goods were not allowed under the notification. While reporting this amendment in DDT 1369? 31.05.2010, we observed,
What the Board probably wants to achieve by this amendment is to deny Credit and/or refund under the CENVAT Credit Rules and undo judgements of High Courts. Board seems to have forgotten the fact that the policy of the government is to export goods and not taxes.
Now the Board has issued a Circular clarifying the notification.
“It has been brought to the notice of the Board that some of the manufacturers of exempted goods are exporting such goods under bond. Subsequently, they claim refund of accumulated input credit under Rule 5 of the CENVAT Credit Rules, 2004. The department had objected to this procedure on the ground that if the goods are exempted from payment of excise duty, in that case the goods cannot be exported under bond for the reason that bond is executed only when goods are liable for payment of excise duty and if there is no excise duty, there is no question of exporting under bond. However, it has been observed that in some cases, the judicial pronouncements on the issue have been against the department.”
Obviously the Board doesn't like these judicial pronouncements and are bent on overruling the irresponsible and ignorant judiciary.
The Board further clarifies:-
“The policy of the govt. is not to tax the exports. There are different methodologies and procedures for refund in different situations. If the goods are exempted, then the department has prescribed a detailed procedure for refund of input taxes through Notification No. dated 06.09.2004, wherein a detailed procedure requiring verification of details like manufacturing process, input-output ratio, wastages etc., by the departmental officer is prescribed. The reason for the same is that in case of exempted goods, the department does not exercise control. It appears that the exporters are exporting the exempted goods under bond to avoid detailed verification and scrutiny by the department for claiming of refund of input taxes. Accordingly, it was felt necessary to correct the anamoly.
In view of above, an amendment to the conditions for exporting under bond under the Notification No. dated 26.06.01, has been notified through Notification No. dated 26.05.10, wherein, goods which are exempted from payment of duty or chargeable to nil rate of duty, have been disallowed to be exported under bond. Since, 100% EOU's are also required to export the goods under bond, in terms of Customs and Excise notifications, the exports from 100% EOU's have been specifically excluded from the purview of this amendment.”
The Board seems to be unaware of all its notifications. Board says that a detailed procedure has been prescribed for refund of input taxes through Notification No. 21/2004-CE (NT) dated 06.09.2004. Now as per Condition 5 of this Notification 21/2004, The goods shall be exported on the application in Form A.R.E. 2 specified in the Annexure to this notification and the procedures specified in Ministry of Finance (Department of Revenue) notification No., dated the 6th September, 2004 or in notification No. , dated the 26th June, 2001 shall be followed.
Notification No. is for rebate on goods cleared on payment of duty – hence not applicable for exempted goods and Notification 42/2001 requires a bond and as per the recent amendment, exempted goods are not allowed to be exported under this notification. So both the notifications are out! In spite of the proclaimed lofty policy of the government not to export taxes, Board seems to be bent upon exporting taxes contained in the export of exempted goods! There is no way the exporter of exempted goods can get back the duty paid on his inputs – all because Board is fussy about some some export procedure. What is wrong with the existing practice as upheld by the Judiciary? What is wrong in allowing refund of CENVAT Credit on inputs used in the manufacture of exempted goods? Now the Board has put such exporters in an impossible situation. It is really unfortunate that the Board while preaching lofty goals, actually causes impediments to exports. Board should have a little more respect for judicial decisions and government policy. If you are exporting exempted goods, the Board now wants you to export the duty on inputs also!!!
The reason cited for this amendment is in case of exempted goods, the department does not exercise control. What is this control? The other exporters are “controlled” by the department? In any case, the department can always verify the admissibility of credit under Rule 5 and may even prescribe a special procedure for refund of CENVAT Credit in cases where exempted goods are exported.
And DDT is never tired of suggesting that the Board should immediately appoint an English Teacher to correct their great law making adventures; if there is no provision for appointing an English teacher, they should at least use the Spell Check provided by Microsoft Word. They want to correct the anamoly. Sir, if you had a little respect for your word processor, it would have corrected it to 'anomaly'
CBEC Circular No. 928/ 18 /2010-CX Dated: June 28, 2010