Duty paid by EOUs for DTA clearance – amount of credit eligible. Board forgets to amend Cenvat Credit Rules while amending Notification No. 23/2003 – C.E

By Vijay Kumar

When excisable goods are cleared from the EOUs to the DTA , the duty payable is the aggregate of the customs duties payable.

By Notification No. 23/2003 C.E dated 31.3.2003, a 75% exemption was given on the Basic Customs Duty for calculating the aggregate of Customsduties.

Assume the Value to be Rs. 100, Basic Customs Duty to be 10% and CVD (equal to excise duty) is 16%, the duty calculation was

Now what is the Cenvat Credit that a DTA buyer can take? Apparently Rs. 16.4 as that was the excise duty component. Strictly he would be eligible for Rs. 18.9, the entire duty as the aggregate of customs duties is actually the excise duty. To avoid this, there is a provision in the Cenvat Credit Rules that Provided that the CENVAT credit in respect of inputs and capital goods cleared on or after 1st March, 2006 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 unit pays excise duty under section 3 of the Excise Act read with serial number 2 of the notification no. 23/2003- C entral Excise dated 31st March, 2003 [ G.S.R. 266(E), dated the 31st March, 2003] shall be equal to X multiplied by {( 1+BCD /400) multiplied by ( CVD /100)}].

Let us calculate this on the value of Rs. 100 and BCD of 10% and CVD of 16%. This would be

100x [1+10/400] x16 /100 = 100x410 / 400x16 /100 = 100x1.025x0.16 = 16.4

This is exactly the amount paid corresponding to excise duty and so this should be the amount of credit that should be allowed.