Board Circulars – aimed at resolving the complexities or creating them?
Yesterday Board (CBEC) issued a circular relating to simultaneous availment of the benefit of Notifications 29/2004 and 30/2004 CE dated 9.7.2004. Notification 30/2004 provides complete exemption for specified goods, mostly, textiles from payment of duty with the condition that no input credit shall be availed. Notification 29/2004 prescribes effective rate at 4% or 8% with Cenvat benefit on the inputs. Board had earlier clarified that simultaneous availment of both the notifications is allowed subject to the condition that separate books of accounts have to be maintained for goods cleared under the two notifications.
As the manufacture of textile articles requires continuous use of chemicals, dyes etc, it is practically not possible to maintain separate accounts for these consumables. Therefore some manufacturers were reversing the proportionate credit on these consumables used in the exempted gods. Board has received representations from the trade and field officers whether such proportionate reversal can be allowed.
The Board has clarified that non-availment of credit on inputs is a precondition for availing exemption under this notification and if manufacturers avail input tax credit, they would be ineligible for exemption under this notification. Reversal of credit on a later date would not suffice to make them eligible for this exemption
Board further clarified that though it may not be practically possible to segregate and store inputs like dyes and chemicals separately or maintain separate accounts, in such cases, in order to facilitate simultaneous availment of the two notifications, such manufacturers may be advised not to take credit initially and instead take only proportionate input credit on inputs used in the manufacture of finished goods cleared by him on payment of duty. Such proportionate credit should be taken at the end of the month only.
What is the difference between taking credit proportionately for the consumables used in the dutiable goods as directed by the Board and taking full credit but reversing the proportionate credit of the consumables used in the exempted goods as is being done by certain manufacturers?
And this circular has been issued on 1.2.2007 and can now be followed by the manufacturers prospectively. Since these two Notifications are in force from 9.7.2004, what about those assessees who reversed the credit proportionately on the inputs used in the exempted goods at a later date? Show Cause Notices will follow, possibly with the suppression fact that assessee being aware in 2004 that Board is going to issue a circular in 2007!
CIRCULAR NO. , Dated: February 1, 2007