Do assessees need to file ER 5 & ER 6 returns even if Principal Inputs are not CENVATTED?
AS per Rule 9A of the CENVAT Credit Rules, 2004, a manufacturer of final products has to submit annual and monthly returns relating to the consumption of principal input in the manufacture of final products. As per the explanation given under the rule, "principal inputs", means any input which is used in the manufacture of final products where the cost of such input constitutes not less than 10% of the total cost of raw-materials for the manufacture of unit quantity of a given final products .
There are certain products where the “principal inputs” are either non-dutiable (like wood used for manufacture of paper) or exempted. The other inputs on which credit is availed are not principal inputs, as they do not constitute more than 10% of the cost of inputs. Though the “principal inputs” constitute more than 10% of the cost of the raw materials, the fact remains that CENVAT credit is not availed on these inputs. In such cases, a doubt arises as to whether an assessee has to file ER 5 and ER 6 at all. When an assessee has not availed any credit on the principal inputs, the question of filing the ER 5 and ER 6 returns does not arise. However, it appears that the field formations are not willing to buy this logic and are insisting on filing ER 5 and ER 6 by treating the other inputs as principal inputs and in some cases the non-CENVATTED inputs as principal inputs. A suitable clarification is required on this especially in view of the CBEC instructions dated 14.01.2011 vide F.No.267/117/2010-CX8, directing the Commissioners to invoke the provisions of Rule 27 of the Central Excise Rules for non-filing of the returns.