CENVAT Credit on Structural Components of Boiler - CBEC Clarifies - Again
BY Circular No. dated 02.04.2012, Board made some very important (and apparently wrong) clarifications.
The issue before the Board was, "CENVAT credit is being denied to the supporting structural parts of the Boilers at the buyers' end by classifying the same under Chapter 73 as structural parts and not as a part of Boiler. These are not being covered under the definition of inputs under the CENVAT Credit Rules, 2004, on account of exclusion given in rule 2 (k)(iv)(B)(b). This denial is on the ground that these are used for structures for support of Capital goods, without which the Capital goods can function."
And the Board clarified, "those structural components which are to be used essentially as a part of Boiler System would be classifiable as parts of Boiler only under Heading 8402 of the Tariff. It is further clarified that since these structural components are nothing but the parts and accessories of the Boiler, they would be covered by the definition of inputs under Rule 2(k)(iii) of the CENVAT Credit rules, 2004 (i.e. all goods for generation of electricity & steam)."
But, Board was missing an important point. The classification of the product has to be decided at the manufacturer's end and not at the end where CENVAT Credit is taken.
We had pointed this out in - 09.04.2012, and asked a question whether this clarification would apply to goods 'other than' boilers?
Board now clarifies this question. Board says "clarifications have been sought as to whether in view of the said circular, CENVAT Credit will be admissible on structural components used for the support of the Capital Goods”. (What are THE Capital Goods?)
And Board clarifies, "it is once again reiterated that in terms of the Rule 2(k) of the CENVAT Credit Rules, 2004, while CENVAT Credit is available in respect of parts of Boiler, the same is not admissible in respect of the structural components used for laying of foundation or making of structures for support of capital goods/ Boiler."
It is beyond reason, why the Board should create so much confusion by issuing circulars. Can't they just be satisfied with their confusing rules and notifications? Should they complicate matters further by issuing clarifications on which further clarifications have to be issued within less than two months? It is absolutely clear that the one who drafted the clarification (all others up in the line only sign) had no clue as to where classification of goods has to be done and whether the officer at the receiving end had the power to classify the goods received as inputs. No wonder, Board Circulars are not respected and followed in the field.
For every problem, there is a solution, which is simple, elegant and wrong.
Circular No. , Dated: May 18, 2012