CENVAT Credit - Vice of Rule 6(6) not to apply to Exempted Ethanol

By Vijay Kumar

BY Notification No. 32/2015-CE dated 04.06.2015, Government had exempted Ethanol produced from molasses generated from cane crushed in the sugar season 2015-16 i.e. 1st October, 2015 onwards, for supply to the public sector oil marketing companies, namely, Indian Oil Corporation Ltd., Hindustan Petroleum Corporation Ltd. or Bharat Petroleum Corporation Ltd., for the purposes of blending with petrol.

As is well known, as per Rule 6(6) of the CENVAT Credit Rules, if the Final Products are exempted:

1. Credit is not allowed on the inputs used in the manufacture of exempted goods;

2. If credit is taken on dutiable and exempted goods, separate accounts have to be maintained;

3. If no separate accounts are maintained, an amount of six per cent has to be made on exempted goods;

4. No credit will be allowed on capital goods used exclusively for manufacture of exempted goods.

The above provisions are not applicable when the goods are

1. Cleared to SEZs

2. Cleared to 100 per cent EOUs

3. Cleared to EHTP or STP

4. Supplied to UN

5. Supplied for use of foreign Diplomatic Missions

6. Cleared for export under bond

7. Gold or silver arising in the manufacture of copper or zinc

8. Supplied against International Competitive bidding; power projects

9. Supplied for setting up Solar Power Generation projects

And now another item is added to the above list:

Ethanol produced from molasses generated from cane crushed in the sugar season 2015-16 i.e. 1st October, 2015 onwards, for supply to the public sector oil marketing companies, namely, Indian Oil Corporation Ltd., Hindustan Petroleum Corporation Ltd. or Bharat Petroleum Corporation Ltd., for the purposes of blending with petrol, in terms of the provisions of S.No.40A of the Table in notification No.12/2012-Central Excise, dated the 17th March, 2012, number G.S.R. 163(E), dated that 17th March, 2012 .

So that exempted ethanol doesn't create any CENVAT problems.

Also see Duty on Ethanol – a discriminatory approach.

Notification No. 21/2015-Central Excise (N.T.), Dated: October 07, 2015