Export Oriented Doubt
CENVAT Credit on inputs received from a Hundred Percent EOU is governed by second proviso to Rule 3(7) of the CENVAT Credit Rules, 2004. This proviso reads:
Provided further that the CENVAT credit in respect of inputs and capital goods cleared on or after the 7 th September, 2009 from an export-oriented undertaking or by a unit in Electronic Hardware Technology Park or in a Software Technology Park, as the case may be, on which such undertaking or unit has paid -
(A) excise duty leviable under section 3 of the Excise Act read with serial number 2 of the notification no. 23/2003 -Central Excise, dated 31st March, 2003 [G.S.R. 266(E), dated the 31st March, 2003]; and
(B) the Education Cess leviable under section 91 read with section 93 of the Finance (No. 2) Act, 2004 and the Secondary and Higher Education Cess leviable under section 136 read with section 138 of the Finance Act, 2007, on the excise duty referred to in (A), shall be the aggregate of -
(I) that portion of excise duty referred to in (A), as is equivalent to -
(i) the additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, which is equal to the duty of excise under clause (a) of sub-section (1) of section 3 of the Excise Act;
(ii) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act; and
(II) the Education Cess and the Secondary and Higher Education Cess referred to in (B)
In some cases, the EOUs do not avail the benefit of reduced duty on DTA clearances under Sl No 2 of the Notification (which is allowed only for clearances under specified paras of the FTP) and pay full duties. However, they avail the benefit of Sl No 1 of the Notification No 23/2003 CE dated 31.03.2003. This Sl No exempts payment of special additional duty of 4% levied under sub-section 5 of Section 3 of the Customs Tariff Act, 1975 if the EOUs pay sales tax / VAT on such DTA clearances.
Now the question is whether the restriction under the second proviso to Rule 3(7) of the CENVAT Credit Rules is applicable to such clearances?If yes, how? And if not, why? Will the Board look into it? EOU Scheme was started in early 80s and even today, there is lot of confusion on how much education cess an EOU has to pay on domestic clearances and how much CENVAT Credit the buyer can take.