Audit's “Imported” objection
A Netizen sent us this mail informing us of a mind boggling AG Audit objection.
Here it goes- The assessee avails the benefit of Nil rate of duty in terms of Notification 6/2006- CE, Sr.No.91 in respect of goods supplied against International Competitive bidding.
There is a condition no.19 appended to this notification which reads –
“19. If the goods are exempted from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under Section 3 of the said Customs Tariff Act when imported into India .”
The assessee satisfies this condition and clears the goods at Nil rate.
Now, comes the question of CENVAT Credit which he avails in respect of these goods which are also cleared on payment of duty.
The assessee points to Rule 6(6)(vii) of the CCR, 2004 and says that he is not required to either reverse any credit or pay any amount because the said sub-rule reads thus –
“(6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either-
X x x
(vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under section 3 of the said Customs Tariff Act when imported into India and supplied against International Competitive Bidding in terms of [notification No. 6/2002- Central Excise dated the 1st March, 2002 or notification No. 6/2006- Central Excise dated the 1st March, 2006, as the case may be.]”
In the above scenario, the mighty Audit [in its objection taken in the year 2006] had this to say –
“As per Rule 6(6), the provisions of sub-rules (1), (2), (3) and (4) (of the said rule 6) shall not be applicable in case the excisable goods removed without payment of duty are either, interalia, all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 and the additional duty leviable under section 3 of the Customs tariff Act when imported into India and supplied against International Competitive Bidding in terms of Notification 6/2002 or 6/2006. Thus the provisions of Rule 6(3) (b) shall not be applicable only if the goods cleared without payment of duty, under Notification no. 6/2006, are imported into India and supplied against International Competitive Bidding.”
Rest assured that the assessee has been presented with a bouquet of demand notices running into Crores of rupees.
We are bewildered!