Cenvat Credit Rules amended – Credit for DTA clearances
DDT 325 - 20 03 2006 had pointed out
“Cenvat Credit Rules amended but important changes yet to come. - But then Board has totally forgotten about the required amendments consequent to the 2006 budget. There is a formula for taking credit on inputs received from EOUs. Now the formula is meaningless in view of the changed amount of duty payable by EOUs. With the budget most likely to be passed next week, Board can slip in this notification too.
The Government has indeed amended the Cenvat Credit Rules to prescribe the new formula for taking credit for inputs received from EOUs after 1.3.2003. The formula is X multiplied by {(1+BCD/400) multiplied by (CVD/100)}. Don't get confused; the whole idea is credit available is the duty (excise) paid and this is what credit is all about. With or without these complicated formulae.
A recap:-
In this Budget Notification No. 23/2003 – Central Excise was amended to fix the duty payable by EOUs to 25% of the customs duties and the applicable excisable duties.
Assume the value is 100; customs duty is 10% and excise duty is 20%, as per the formula in the notification itself,
Value = 100
Customs duty = 2.5% = 2.5 ( 25% of customs duty)
Total = 102.5
CVD (excise) = 102.5 x 20% = 20.5 (this is the amount which a buyer from EOU can take as credit)
Now as per the formula given in the latest amendment to the Cenvat Credit Rules, X multiplied by {(1+BCD/400) multiplied by (CVD/100)}., the credit would be 100 x 410/400 x 20/100 = 100 x 1.025 x 0.2 = 20.5 (this is the credit allowed)
LHS = RHS :
QED (SEE TODAY'S GREEK AND LATIN)
But why was this not done on 1.3.2006 when the notification was amended and what was the credit eligibility till now?
NOTIFICATION NO. , Dated: March 20, 2006