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The standard rate of excise duty, which was earlier reduced to 8% in Feb, 2009 as a part of stimulus
package to Industries, has now been enhanced from 8% to 10%.
Thus, for Nov, 2010 attempt, applicable excise duty rate will be 10% (EC & SHEC extra).
FA, 2010 not applicable (as pointed out above). So, no discussion under this category.
shall submit
Prof Dippak /IDT Amendments/CX- Act, Rules, Exem, Circulars
Provided that
the Cenvat credit of Special shall be allowed immediately on receipt
CVD leviable u/s 3(5) of the of the capital goods in the factory of a
Customs Tariff Act manufacturer.
Provided further that
the Cenvat credit i.r.o. shall be allowed for the whole amount
capital goods of the duty paid on such capital goods in
the same financial year
-- if the said capital goods are cleared
AS SUCH in the same financial year
Provided further that [inserted in Year 2010– N/N 6/2010 (27th Feb, 2010)]
Where an assessee ELIGIBLE the cenvat credit in respect of capital
to avail an value based goods received by such assessee shall be
exemption (SSI Exemption) allowed for the whole of the amount of
duty paid on such capital goods in the
same FY.
Explanation: For the purpose of this proviso, it is hereby clarified that
An assessee shall be eligible, if
his aggregate value of clearances in the preceding FY (computed in
manner specified in the said notification), did not exceed 400
lakhs.
.
Special concession has been given to SSI sector in year 2010. Full cenvat credit on capital goods in
one instalment in the year of receipt of capital goods in the factory has been allowed
Following points shall be noted in this regard:
1) Rule 4(2) is talking about ‗Eligible SSI (Assessee eligible to claim SSI exemption)‘ and not about
Prof Dippak /IDT Amendments/CX- Act, Rules, Exem, Circulars
.
Rule 4(5) : Allowance of credit on Inputs / Capital goods send on job-work
4-(5):
(a) The Cenvat credit shall be allowed even if
-- any INPUTS or CAPITAL GOODS as such or after partially processing are sent to
a JOB-WORKER
for further processing, testing, repairing, reconditioning, or
for the manufacture of intermediate goods necessary for the manufacture of final
products or
for any other purpose,
and
-- It is established from the records, challans or any other document produced by the
manufacturer taking the Cenvat credit that the goods are received back in the
factory within 180 days their being sent to a job worker
If the inputs or capital goods are not received back within 180 days, the manufacturer
shall
Pay An Amount equal to cenvat credit attributable to inputs or capital goods
--- by debiting the cenvat credit or --- otherwise (i.e., through PLA) ,
but the manufacturer can take the cenvat credit again when the inputs or capital goods
are received back in his factory.
In once case, assessee intends to send moulds and dies to Mr A for manufacture of TV Cabinets. Assessee did
not send any input. Mr A will purchase inputs from market and will manufacture TV cabinet by using the
mould send. The said cabinets will be used by assessee in manufacture of TV.
Issue was as to whether assessee can send the mould to Mr A in terms of Rule 4(5)(b), i.e., by booking the
credit at its own end (without any reversal of credit).
Logically, the answer should be YES.
But in some cases found to be objecting to removal of moulds etc (without corresponding removal of inputs
alongwith) in such cases. For their objection, they placed reliance on definition of ‗Job-Work‘ as given in Rule
2(n) of CCR, 2004 as stated below:
― ‖
― ‖
It was contended that in case of job-work, supply of raw-material by another person is must (definition is
Prof Dippak /IDT Amendments/CX- Act, Rules, Exem, Circulars
stating that job-work is processing of raw-material / semi-finished goods supplied to the job-worker). A person
could be said to be acting as job-worker only if he was processing goods send to him by another person. Thus, if
raw-material was not sent, only capital goods were sent, then the person to whom such goods were sent could
not be said to be working in status of ‗job-worker‘ within the meaning of Rule 2(n) of CCR, 2004. Further, it was
contended that Rule 4(5)(b) allows credit in respect of jigs, fixtures, moulds and dies when these are send to
JOB-WORKER (and not to ANY PERSON), sending of moulds in the instant case is not permissible.
Literally, the interpretation given was correct. But that was never the intention. Now, rule 4(5)(b) has been
amended to specifically provide for allowance of credit on jigs/ fixtures/ moulds / dies to another person also.
.
Rule 5 : Refund of Cenvat Credit
the Cenvat credit i.r.o. the input or input service so used shall be allowed to be
utilised by the manufacturer towards payment of duty of excise on his clearances
of final products effected upon payment of duty
And where for any reason such adjustment is not possible,
the manufacturer shall be allowed refund of such amount subject to
such safeguards, conditions and limitations as may be specified by the CG by notification in the
Official Gazette..
For detailed reasoning/logic, refer corresponding [Amendment in ‗Service Tax Portion‘ – Rule 5 of
CCR, 2004]
Special CASE-STUDY:
Facts: Assessee Exporter took credit of following:
i) Input / Input Sr having a direct nexus with FP which was exported: Cr relating thereto Rs 50,000
ii) Input / Input Sr not having a direct nexus with FP which was exported: Cr relating thereto Rs 1,00,000
Assessee claim refund of entire credit – Department allowed refund of those having a direct nexus with
FP which was exported --
Issue: Whether refund of input / input Sr not having a direct nexus with FP which was exported shall be allowed?
Held that: “Refund shall be allowed – as there cannot be different yardsticks – one for permitting credit and other
for granting refund”.
Rule 6(6) : [Exceptional cases where credit allowed even when no ED payable on FP]
6(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 –
(i) Cleared to a SEZ Unit / Developer of SEZ for their authorized operations; or
(ii) Cleared to a 100% EoU; or
(iii) Cleared to a unit in EHTP or STP; or
(iv) Supplied to the United Nations or an International Organization for their official
use or supplied to projects funded by them, on which exemption of duty is
available under N/N 108/95-CX ; or
(v) All goods supplied
against International Competitive Bidding; or
to A Power Project from which power supply has been tied up through
tariff based competitive bidding; or
to A Power Project Awarded To A Developer through tariff based
competitive bidding;
(vi) Gold or silver falling within Chapter 71 of First Schedule; or
(vii) Cleared for Export under Bond/LuT as per CER, 2002;
Prof Dippak /IDT Amendments/CX- Act, Rules, Exem, Circulars
Rule 6(6) lists down exceptional cases where credit is allowed even when final product is not
chargeable to excise duty. That list has been enhanced.
.
Rule 15: Confiscation and Penalty
(1) If ANY PERSON, takes or utilizes cenvat credit wrongly or in contravention of any of
the provisions of these rules, then
all such goods shall be liable to confiscation and
such person, shall be liable to a penalty not exceeding
- “the duty or ST on such goods or services, as the case may be”, or
- “Rs 2,000/-“, whichever is greater.
(1) In a case, where the cenvat credit has been taken or utilised wrongly by reason of Fraud,
Collusion or any Wilful mis-statement or Suppression of facts, or Contravention of any
of the provisions of the Excise Act, or of the rules made thereunder with intent to evade
payment of duty, then,
THE MANUFACTURER shall ALSO be liable to pay penalty in terms of the
provisions of Section 11AC of the Excise Act.
(2) In a case, where the cenvat credit has been taken or utilised wrongly by reason of Fraud,
Collusion or any Wilful mis-statement or Suppression of facts, or Contravention of any
of the provisions of the Finance Act, or of the rules made thereunder with intent to evade
payment of service tax, then,
THE PROVIDER OF OUTPUT SERVICE shall ALSO be liable to pay penalty in
terms of the provisions of Section 78 of the Finance Act.
Old Rule 15 was very loosely drafted leading to some unintended interpretations. So, it has been
substituted by new Rule 15 which is quite simple.
Besides the above state actions, manufacturer shall also be liable to pay penalty in terms of Sec 11-AC,
i.e., duty evaded by use of such credit, in our case, Rs 2,00,000/-.
.
8/2003: SSI Exemption-
(1) :
Computation of limit of 150 lakhs / 400 lakhs
For the purposes of determining 150 lakhs, the following clearances shall not be taken
into account, namely :-
b) Clearances bearing the brand name or trade name of another person,
EXCEPT in the following cases :-
i) …. (Clearances of goods in nature of OE)
ii) …. (Clearances bearing some specified brand name)
iii) … (Clearances from factory in rural area).
iv) ….(Clearances of Account books, Registers, Writing pads and File folders);
v) Where the specified goods are in nature of PACKING MATERIALS, namely,
Printed cartons of Paper/Paper Board, Metal Containers, HDPE Woven sacks,
Adhesive Tapes, Stickers, PP caps, crown corks, Metal labels, plastic caps,
Printed Laminated Rolls, PLASTIC CONTAINERS & PLASTIC BOTTLES
[Notification No. 4/2010, dated 27-2-2010]
ATTENTION: Student shall Carefully note that – as per the newly inserted wordings – for being eligible for
exemption -- Goods shall be in nature of Packing Material + The brand name it is bearing shall be of a person
who intends it to use as packing material only (and not for resale)
e.g.,
Case-A: Pepsi has approached SSI unit for manufacture of ‗Plastic Bottles‘ with its brand name – Pepsi
intends it to use it as ‗packing material‘ for its FP SSI Unit can claim exemption on clearances of
such plastic bottles bearing brand name of another person
Case-B: Tupper-ware has approached SSI unit for manufacture of ‗Plastic Bottles‘ with its brand name –
Tupperware intends it to sell into the market (as his FP) SSI Unit cannot claim exemption on
clearances of such plastic bottles bearing brand name of another person
Case-C: Addidas has approached SSI unit for manufacture of ‗Plastic Bottles‘ with its brand name –
Tupperware intends it to sell into the market (as his FP) SSI Unit cannot claim exemption on
clearances of such plastic bottles bearing brand name of another person
Prof Dippak /IDT Amendments/CX- Act, Rules, Exem, Circulars
.
Sec 3-A: Power of CG to CHARGE EXCISE DUTY on the basis of CAPACITY OF
PRODUCTION in respect of NOTIFIED GOODS
.
Sec 3-A of the CEA, 1944 was introduced to curb massive tax evasion prevailing in
relation to commodities. It provides that any commodity in relation to which CG will find tax evasion
is prevailing, CG will notify that u/s 3-A and then, such goods shall be chargeable to ED as per
provisions of Sec 3-A (on basis of Annual Capacity of Production) and not u/s 3 (on basis of actual
clearances).
Earlier, 2 goods were Pan Masala Pan Masala
notified (containing tobacco) (not containing
tobacco)
Bagassee and other waste arising during the course of manufacture
Circular No. 904/24/2009 –dated 28th Oct, 2009
ISSUE: What would be the status of BAGASSE and other waste arising during course of manufacture? –
Whether these are also excisable goods liable to excise duty or not?
Clarification:-- YES.
Generally, the courts have been taking a view that the waste or refuse or residue arising
during the course of manufacture cannot be treated as excisable goods even if such waste
fetches some price in the market. However, all these matters pertain to the period prior to
2008.
By FA, 2008, the definition of “excisable goods” in Sec 2(d) of the Central Excise
Act, 1944 was amended by adding an explanation that for the purposes of this clause,
Prof Dippak /IDT Amendments/CX- Act, Rules, Exem, Circulars
“goods” include any article, material or substance which is capable of being bought and sold
for a consideration and such goods shall be deemed to be marketable.
It is clarified that with this amendment in Section 2(d), the bagasse,
aluminium/zinc dross and other such products termed as waste, residue or refuse
which arise during the course of manufacture and are capable of being sold for
consideration would be excisable goods and chargeable to payment of excise duty .
’
1) The explanation basically overrules the judgment of SC rendered in case of INDIAN ALUMINUM CO.-1995
wherein SC hold out that a product would be marketable only if it is ORDINARILY capable of being sold.
Now, that ordinarily aspect shall not be considered for determining marketability of an article. An article
capable of being sold though only occasionally/casually shall be deemed to be marketable.
2) BAGASSE vs Molasses: It shall be noted that BAGASSE is different from MOLASSES, though both arises
during course of manufacture of Khandsari sugar in Khandsari Sugar Factory. Bagasse refers to the residue of
sugarcane after juice has been extracted from it. On the other hand, Molasses is black colour thick liquid
which is obtained as a by-product with production of khandsari sugar.
Sugar-Cane Crushing Heating & Boiling Khandsari Sugar
(Sucrose (Gur)
obtained)
Bagasse Molasses
While there was no doubt as to dutiability of molasses, dutiablity of ‗bagasse‘ was under dispute. Now, CBEC
has confirmed dutiability of ‗bagasse‘.
Refilling from tanker to cylinders cannot be said to be repacking from bulk backs to
small packs
Circular No. 910/30/2009 –dated 16th Dec, 2009
ISSUE: Certain dealers are receiving liquid chemicals in bulk in Tankers and then selling those after
packing them into drums. Doubts have been raised as to whether such activity would amount to
manufacture in terms of Chapter Note 10 to Chapter 29.
Chapter Note: In relation to product of Chpater 29, the activity of repacking from bulk packs to
small packs would amount to manufacture.
Clarification:-- NO.
Tribunal has in the case of AMMONIA SUPPLY CO. – 2001- TRIBUNAL, held that “As per Note quoted
above, labelling or re-labelling of the container should take place at a time when the goods are
packed from bulk packs to retail packs. The assessee was not getting Ammonia in bulk packs.
They were getting it in tankers. Ammonia gas brought in tankers can never be termed as
brought in bulk packs. So the assessee was not repacking the goods from bulk packs to
retail packs. Accordingly the activity undertaken by the assessee in filling the smaller container
from bulk container namely tankers can never fall within the fiction of manufacture as envisaged
by Note 10 quoted above.”
Since, the tankers cannot be termed as bulk packs, the activity of transferring the goods
from tankers into smaller drums cannot be said to be covered by the said Chapter Note 10.
Author’s Note: Earlier, Tribunal also took the same view in case of DEEPAK TRADING CO.-2008.
Prof Dippak /IDT Amendments/CX- Act, Rules, Exem, Circulars
Held that:
Sec 4A(2) provides that for goods notified u/s 4-A(1), „value‟ shall be
deemed to be „Abated MRP”.
Rule 4 provides for valuation of samples on basis of „VALUE‟ OF SUCH
GOODS SOLD at or about the same time, Certainly, the VALUE has to be
understood in the wider sense as including „deemed value‟ of Sec 4A(2) of
the Act.
Thus, AV of Physician Samples under Rule 4 of CEVR, 2000 = Abated
/.
MRP Value
The CADILA LABORATORIES case was concerned with valuation of PHYSICIAL SAMPLES (Medince samples,
i.e., Samples in pharmaceutical industry). Now, CEBC has clarified that same principle shall be applicable for
valuation of samples of ―ALL GOODS NOTIFIED U/S 4-A”.
Job work in case of Motor Vehicle Industry: Valution when goods are sold from other
sale point of manufacturer
CBEC Circular – 902/22/2009- dated 20th Oct, 2009
Issue:. Some MANUFACTURERS OF MOTOR VEHICLES are getting complete Motor Vehicles manufactured
by sending the Chassis of the Motor Vehicles to INDEPENDENT BODY BUILDERS for building the
body as per the design/specification of the manufacturer. The practice followed is that the
Chassis is transferred to the Body builder on payment of appropriate Central Excise duty on
stock transfer basis and is not sold to them. The body builder avails the Cenvat Credit of the duty
paid on the chassis and clears the same on payment of duty to the Depot/Sales Office/Distributer
of the Motor Vehicle manufacturer. The body builder received the job charges for their body
fabrication and mounting activity. How the valuation of complete motor vehicle shall be done?
Clarification
A plain reading of Rule 10-A makes it clear that the Assessable Value for the purpose of
charging Central Excise duty, in the cases where the Job-worker transfer the excisable
goods to the Depot /Sale 0ffice/Distributer and/or any other sale point of the principal
manufacturer, shall be the Transaction Value on which goods are sold by the principal
manufacturer from such a place
Accordingly, it shall be ensured the Body-builders are paying ED on the price at which these
motor vehicles are sold by the chasis manufacturer.
’ Let us take an example:
Eicher motors Ltd manufactured chasis and send it to Audi Automobiles for body building. Now, Eicher Motors
ltd will be paying ED on chasis manufactured [Valuation shall be done in terms of Sec 4(1)(b) read with Rule 11
of CEVR, 2000 – as chasis is not sold, rather send to Audi Automobiles]. Further, process of body-building is also
―deemed manufacture in terms of Chapter Note 5 of Chapter 87 [Chapter 87 covers Motor Vehicles/
Automobiles] and thus, Audi Automobiles are also liable to pay ED in respect of body building activity carried
out by them. The Circular seeks to clarify that Audi Automobiles has carried out body building not for their own
but for Eicher Motors Ltd and thus, it shall pay ED doing valuation in terms of Rule 10-A [Valuation of goods
manufactured on Job-work].
Prof Dippak /IDT Amendments/CX- Act, Rules, Exem, Circulars
Chasis
Complete Vehicle
..
Students shall appreciate that had it been a case of sale of chasis to Audi Automobiles and then body
building by Audi Automobiles, then following differences would have arisen:
a) Chasis Manufacturer shall be paying ED doing valuation of Chasis sold in terms of sec 4(1)(a), i.e., on
transaction value (basis sale price) of chasis.
b) Body Builder would also be liable to pay ED doing valuation of motor vehicle in terms of sec 4(1)(a), i.e.,
on transaction value (basis sale price) of motor vehicle at which it is sold by body builder.
Supply to SEZ – Whether export entitling DTA unit to Rebate under R-18 of CER, 2002?
CBEC Circular – 6/ 2010 -- dated 19th March, 2010
Issue: Whether DTA unit can supply goods to SEZ under rebate claim in terms of Rule 18 of CER, 2002?
Clarification
Rebate under Rule 18 of CER, 2002 is admissible when the supplies are made from DTA
to SEZ.
Clearance of duty free material for authorised operation in the SEZ is admissible under
Section 26 of the SEZ Act, 2005 and procedure under Rule 18 or Rule 19 of CER, 2002 is
followed to give effect to this provision of the SEZ Act, as envisaged under Rule 30 of the
SEZ Rules, 2006.
Therefore, it is viewed that
The settled position that rebate under Rule 18 of the Central Excise Rules, 2002 is
admissible for supplies made from DTA to SEZ does not warrant any change even if
Rule 18 does not mention such supplies in clear terms.
’ Judiciary has been consistent in its stand as to difference in treatment of supply to SEZ and to
100% EoU.
a) Supply to 100% EoU: Supply of goods manufactured in India from DTA to EOUs/ (including STPs/ EHTPs/
BTPs) is regarded as ‗deemed export‘ and are eligible for the deemed export benefits specified under
Foreign Trade Policy (FTP). These supply are treated as ―DEEMED EXPORT‖ and not ―ACTUAL PHYSICAL
EXPORT‖.
b) Supply to SEZ: Supply of goods manufactured in India from DTA to SEZ is regarded as ‗ACTUAL EXPORT‘.
Prof Dippak /IDT Amendments/CX- Act, Rules, Exem, Circulars
2) WHAT IS THE CATCH? – Circular seems to be prejudicial to interest of assessee (as it seeks to classify
goods as capital goods and thereby, entitling assessee to credit of 50% in the current year and balance
subsequently). However, actually this is beneficial – HOW?
Actually, there is an Exemption Notification issued by CG u/s 5-A to the Ceramic Tile Industry. It provides
for charging concessional rate of duty on ceramic tiles subject to the condition that no cenvat credit on
inputs used in the manufacture of ceramic tiles is taken.
Now, relying upon circular, assessee claiming exemption can take a stand that these are classifiable as
‗Capital Goods‘ and exemption nowhere bars availment of credit on ‗capital goods‘ and thus, credit is
admissible along with the exemption.
Issue. Whether the receiver of input service can take credit only after the FULL VALUE that is
indicated in the invoice, bill or challan raised by the service provider, and also the service tax
payable thereon, has been paid.
Prof Dippak /IDT Amendments/CX- Act, Rules, Exem, Circulars
It has been represented that in many cases, after the invoice is issued by the service
provider, the service receiver does not make the full payment of the invoiced amount
on account of discount agreed upon after issuance of invoice; or
deducts certain amount due to unsatisfactory service; OR
withholds some amount as security to be held during contract period.
Due to these reasons the value paid may not tally with the amount indicated in the invoice, bill
or challan. In such cases the department has raised objections to the taking of credit as it does
not meet the requirement of the Rule 4 (7).
Clarification
In the cases where the receiver of service reduces the amount mentioned in the
invoice/bill/challan and makes discounted payment, then it should be taken as FINAL
PAYMENT towards the provision of service.
The mere fact that finally settled amount is less than the amount shown in the invoice does
not alter the fact that service charges have been paid and thus the service receiver is entitled
to take credit provided he has also paid the amount of service tax, (whether proportionately
reduced or the original amount) to the service provider. The invoice would in fact stand
amended to that extent.
The credit taken would be equivalent to the amount that is paid as service tax.
However,
in case of subsequent refund or extra payment of service tax, the credit would also be
altered accordingly
Removal of CAPITAL GOODS after having been used for more than 10 years: Credit
implications
Instruction F.No. 267141/2009: dated 7th Dec, 2009
Issue:. Rule 3(5) provides payment of reduced amount of CCr when capital goods is removed after
having been used in the factory. It provides for reduction @2.5% per quarter or part of quarter
(reduction rates are different for computers). Considering the prescribed reduction rate of 2.5%,
it pre-supposes useful life of capital goods as 10 years. However, actual useful life of asset may
be much more than 10 years.
Now the related issue is, if a capital goods is actually having a life of more than 10 years and
it is removed its TOTAL USE, i.e. as WASTE OR SCRAP , then whether no payment is required to be
made (considering reduction rate of 2.5% per quarter or part of quarter) or whether payment of
AN AMOUNT equal to TV of such waste/scrap shall still be payable in terms of Rule 3(5-A) of CCR,
2004?
Clarification
It is clarified that in view of specific provisions under Rule 3(5A) of CCR, 2004, if the capital
goods, on which Cenvat credit has been taken, are cleared as waste and scrap, even after a period
of 10 years, an amount equal to the duty leviable on the transaction value for such capital goods
cleared as waste and scrap, would be payable.
’ For detailed understanding of implications of this clarification, please refer ―AMENDMENT IN
ACT/TULES (PART-1)‖ of this booklet.
Treatment of Credit when WIP is written off in books of accounts
Circular No. 907/27/2009: dated 7th Dec, 2009
Relevant Rules / Provisions (Reproduced)
Rule 3(5-B) of CCR, 2004: If the value of ANY INPUT (or capital goods) have been written off
FULLY in the books of accounts, then the manufacturer shall pay AN AMOUNT equal to the
cenvat credit taken on such input (or capital goods).
Rule 3(5-C) of CCR, 2004: Where on any GOODS MANUFACTURED or PRODUCED by an assessee,
the payment of duty is ordered to be remitted under Rule 21 of the CER, 2002, the Cenvat
credit taken on the inputs used in the manufacture or production of said goods shall be
reversed..
Issue: As per Rule 3(5-B) of CENVAT Credit Rules, 2004, if the value of INPUTS is fully written off, then
the manufacture is required to pay an amount equal to cenvat credit taken. What would be
treatment of cenvat credit when
Prof Dippak /IDT Amendments/CX- Act, Rules, Exem, Circulars
(ii) Write off of WORK IN PROGRESS: As regard writing off WIP, it is stated that
if the WIP has reached the stage, when it can be considered as MANUFACTURED
GOODS, in that case, the same treatment as applicable to finished goods (as discussed
above) above would apply.
However, If the activity carried out on the WIP goods cannot be considered as
amounting to manufacture , in that case, the said goods should be considered as
input and the treatment for reversal of credit applicable to input would be
applicable.
’ Regarding treatment of credit when final product is written off in books of accounts, Circular is
fairly clear and well drafted. But regarding treatment of credit when WIP is written off, it is not so well drafted
and likely to raise disputes. Lets consider the following cases in light of CBEC circular:
Manufacturer of Shirt [Input: Fabric]
Situation Analysis Reversal of credit & applicable
rule
i) Fabric purchased – credit INPUTS written off Pay amount equal to credit
taken – fire broke out - value taken [Rule 3(5-B) of CCR, 2004]
written off fully in books of
accounts
ii) Fabric purchased – credit FP written off – If remission is granted
taken- Shirt manufactured Assessee will submit claim for remission (generally, it will) – then ED
and packed – lying in store- of ED in terms of Rule 21 of CER, 2002 not payable and credit has to be
room in ready to sell reversed in terms of Rule 3(5-C)
condition – got destroyed by of CCR, 2004
fire – value written off in
books of accounts
iii) Fabric purchased – credit WIP so written off is basically in nature Going by CBEC interpretation,
taken – fabric issued to of partially processed inputs – Circular assessee shall pay amount equal
production of shirt – fabric seeks to provide that though inputs have to credit taken [Rule 3(5-B) of
cut down – fire broke out – been partially processed, still their CCR, 2004] -- In Author‟s
cut fabric destroyed – value written off shall be treated as covered by opinion stand taken by Circular
written off in books of Rule 3(5-B) [basically, what it intends to is fair and reasonable
accounts state is the expression “INPUT” in rule
3(5-B) shall be understood as input as
such or partially processed”]
iv) Fabric purchased – credit The issue arises here – whether this shall What the circular is trying to
taken - fabric issued to be treated as say is that, if the assessee treats
production of shirt – cutting Written off of FP (treatable as per such shirt as manufactured shirt
and sewing done – shirt point (ii) and claiming remission of ED
Prof Dippak /IDT Amendments/CX- Act, Rules, Exem, Circulars
ready but packing not done Written off of partially processed thereon, then he shall reverse
– fire broke out – value input (treatable as per point (iii) credit in terms of Rule 3(5-C).
written off in books of On the other hand, if he treats
accounts it as partially processed inputs,
then he shall be required to pay
amount equivalent to credit
taken in terms of Rule 3(5-B).
[- so, whatever way he chooses,
Department shall be happy.]