Goods received back by EOUs from DTA - What is admissible credit?
JUST like any other manufacturer, the goods manufactured and cleared in DTA by a 100% EOU may be rejected by the customers and it may be necessary to bring back the goods to the EOU for repair, reconditioning etc. In such cases, the EOUs can avail the facility under Rule 16 of the Central Excise Rules 2002 and take the credit of duty paid on the goods received back as if they are inputs.
But it is not all that simple – at least as far as the Department is concerned. There is a restriction under Rule 3(7) of the CENVAT Credit Rules 2004 to the effect that the credit would be restricted to the portion of CVD and the Education Cess paid on such CVD. Many field officers are imposing this restriction even on the goods received back by the EOUs from DTA, which results in denial of credit of BCD portion. Further if the same goods are removed after some processing which amounts to manufacture, the EOU has to again pay the duties, which include BCD portion. Therefore denial of credit on BCD portion results in double levy.
Some are even going to the extent of denying total credit on the ground that the provisions of Rule 16 are not applicable to EOUs.
Maybe the Board should intervene and demystify the doubts.