Cascading effect of budget changes
Normally Government works without the left hand knowing what the right hand is doing. It is really difficult to keep track of the links to all the proposals in the budget. In these tax matters, for every action there is a connected (but often undetected) reaction. For some of the changes brought in by this budget, it is required to amend the Cenvat Credit Rules, which is being blissfully ignored. We bring you two such issues.
1. Supplies to projects under International Competitive Bidding was exempted under Notification No.6/2002 C.E dated 1/3/2002. The Notification is rescinded but the exemption continues in 6/2006. As per Rule (6) (6) (vii) of Cenvat Credit Rules 2004, an assessee can avail Modvat Credit for inputs used in the manufacture of final products supplied to a project under International Competitive Bidding in terms of notification No.6/2002 C.E dated 1/3/2002. The assessee need not follow the restrictions imposed under Sub Rules (1) to (4) of Rule 6 of Cenvat Credit Rules, 2004. As, Notification No.6/2002 C.E. dated 1/3/2002, has been withdrawn, Rule (6) (6) (vii) also needs amendment inserting the new notification No.6/2006 C.E. dated 1/3/2006. This will be done in due course, but till then? Confusion.
2. Cenvat credit on goods received from EOUs: The cenvat credit is based on a formula. But now the very duty structure has been changed, but not the formula for taking credit. Will the credit be allowed on the existing formula or will a new one be prescribed. This also requires amendment to the Cenvat Credit Rules.
This requires urgent attention of the Board.