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Regarding cash refund of the unutilised MODVAT/ CENVAT credit earned on
exports
Circular No. 83 dated 16th October 2000
In terms of the Customs & Central Excise Duties
Drawback Rules, 1995, drawback is allowed to the exporters for the duties of
Customs and Central Excise suffered on the imported or indigenous inputs used in
the manufacture of the export product for which no relief is otherwise
available. Accordingly, in the All Industry Rates Drawback Table notified by the
Central Government annually, the drawback rates for various export products are
also indicated with their Customs and Central Excise allocations. The Customs
allocation denotes the Basic Customs Duty, Surcharge on Basic Customs Duty and
the Special Additional Duty paid, if any. The Central Excise allocation
represents the Additional Duty of Customs leviable in terms of Section 3 of the
Customs Tariff Act, 1975 or the Central Excise duty leviable in terms of the
Central Excise Tariff Act, 1985. It has been specifically provided in various
Notifications notifying the Annual Drawback Table that the Central Excise
allocation of the drawback would be allowed only if the exporters do not avail
of the MODVAT/ CENVAT Scheme
2. A representation
has been received from the Vidarbha Industries Association, Nagpur, that its
members who are manufacturing and exporting Woven Sacks and Bags falling under
SS No. 39.251 of the Drawback Table and claim only the Customs allocation of
drawback rate are not being allowed cash refund of the unutilised CENVAT credit.
This is on the premise that since the drawback has been availed, the cash refund
of the unutilised CENVAT credit is prohibited in terms of Rule 57F(14) of the
Central Excise Rules, 1944.
3. The issue has
been examined in the Board. It is observed that Rule 57A(1) of the Central
Excise Rules, 1944 specifically provides that the Central Government by
Notification may specify the finished excisable goods for the purposes of
allowing Credit of any duty of excise or the additional duty under section 3 of
the Customs Act, 1975, i.e. the specified duty paid on the goods used in the
manufacture of such final products. Rule 57F(13) expounds that where any inputs
are used in the final products which are cleared for exports under bond or used
in the intermediate products cleared for exports in accordance with Rule 57F(4),
the credit of specified duty in respect of the inputs so used shall be allowed
to be utilised by the manufacturer towards payment of duty of excise or any
final products cleared for home consumption or for exports on 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 Central Government. Rule 57F(14) lays
down that no refund of credit mentioned in Rule 57F(13) shall be allowed if the
manufacturer avails of drawback allowed under the Customs and Central Excise
Duties Drawback Rules, 1995 or claims a rebate of duty under Rule 12, in respect
of such duty.
4. A combined and
harmonious reading of these provisions reveals that the word `duty' appearing
any where in the MODVAT rules, unless otherwise qualified, should always be
construed as having reference to duty of Central Excise or the additional duty
under section 3 of the Customs Tariff Act, 1975. Since Rule 57F(13) mentions the
wording "Credit of specified duty in respect of inputs so used..." and
rule 57F(14) states that no credit in sub-rule (13) shall be allowed if the
exporters avail of drawback..... in respect of such duty, it is amply clear that
the prohibition of Rule 57F(14) for grant of refund is only in respect of
availment of drawback as regards the Central Excise duty or Countervailing duty.
There is no double benefit available to the manufacturer where only Customs
portion of All Industry Rate of Drawback is claimed, if refund of unutilised
credit is given, as no MODVAT (now CENVAT) credit facility is permissible for
Customs duties suffered on imported inputs. Denial of refund of MODVAT credit of
Excise/ Countervailing duty paid on inputs relating to export products, if this
cannot be used otherwise, will thus not only act harshly on the exporters, it
will not be in accordance with the provisions of the MODVAT rules.
5. It is, therefore,
clarified that where only Customs portion of duties is claimed as per the All
Industry Rate of Drawback, Rule 57F(14), does not come in the way of admitting
refund of unutilised credit of Central Excise/ Countervailing duty paid on
inputs used in products exported.
6. Rule 57AC(7) of
the CENVAT contains similar provisions for refund of unutilised credit earned on
inputs used in goods/ intermediate goods cleared for export. Therefore, the
interpretation would be applicable to all such cases under the erstwhile MODVAT
rules as well as the CENVAT rules effective from 1.4.2000.
7. Suitable Public
Notice for information of the trade and standing orders for guidance of the
staff may kindly be issued on the above lines.
8.
Receipt of the Circular may please be acknowledged.
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