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Regarding extension of benefit of conditional Central Excise
notifications for the purpose of levy of countervailing duty under Section 3(1)
of the Customs Tariff Act, 1975
Circular No. 37
dated 18th June 2001
I am directed to
refer to the subject mentioned above and to say that representations have been
received in Board's office whether the benefit of conditional Central Excise
notification prescribing a concessional excise duty should be taken into account
for the purpose of levy of additional duty (CVD) on imported goods. As for
instance, candles attract excise duty at 16%. However, units which do not avail
of CENVAT credit in respect of input or capital goods, and which pay the entire
duty either in cash or through their PLA can avail of a concessional rate of
excise duty of 4%. The issue raised is whether candles imported into India
should attract CVD at 16% or 4%.
2. The
matter has been examined. While examining the issue of extending the benefit of
Central Excise exemption notification No. 19/ 98-CE, the larger 5 Member bench
of CEGAT in a recent judgement in the case of Priyesh Chemicals & Metals Vs.
Commissioner of Central Excise, Bangalore [2000 (38) RLT 588 (T)] held that:
"There is
no dispute that exemption notification under Central Excise Act and Rules
applied to imported goods for the purpose of levy of additional duty of Customs.
There is also no dispute that the imported goods/ importers should satisfy the
conditions of exemption notifications if they claim the benefit of exemption.
This is the law laid down by Supreme Court in the Thermax case [1992 (61) ELT
352 (SC)] and the Bombay High Court in the Ashok Traders case [1987 (32) ELT 262
(Bom)]. We are in complete agreement with the Revenue on this issue. In the
present case, the appellants are contending that they satisfied the condition
stipulated in the proviso to notification No. 19/ 88 by stating that they had
not availed themselves of Modvat Credit on the inputs used in the manufacture of
the imported consignment of Zinc Ash. This is not the correct understanding of
the requirement of notification. The exemption notification stipulates that
"no credit of duty paid on the inputs used in the manufacture of said goods
have been taken under Rule 56A or Rule 57A of Central Excise Rules 1944".
In order to satisfy the condition it has to be shown that the Zinc Ash in
question had been manufactured from inputs on which no credit of duty has been
taken. The goods were manufactured abroad. It is common knowledge that the
Central Excise Act of India and Central Excise Rules of India do not apply to
manufacture abroad. Therefore, the appellant's claim that the imported
consignments fulfil the requirement of notification has no substance on basis in
facts. In other words, it is clear from the exemption notification that it
exempts only Zinc Ash, which is produced from duty paid inputs. In order to
satisfy this condition, it is necessary that a manufacturer seeking exemption
should prove that the Zinc Ash was produced from duty paid inputs. Imported
goods are incapable of fulfilling this condition and therefore, could not claim
the exemption under notification No. 19/ 88-CE."
3. In
view of the above decision of the CEGAT, it is clear that where the importer
does not fulfil the conditions stipulated in an Excise notification, he cannot
claim benefit of the same for CVD purposes. Accordingly, it is clarified that
the imported goods will not be eligible for the benefit of conditional Central
Excise notification when it is not possible to verify the conditions stipulated
in the notification. Thus, in the example cited above, candles imported into
India will be chargeable to CVD @ 16% and not 4% as it is not possible to verify
the condition regarding non-availment of CENVAT credit as also other conditions.
Where practice is otherwise, immediate safeguard measures for recovery of duties
short levied may be taken.
4. It
may also be noted that the above judgement does not deny the benefit of an
exemption under conditional Central Excise notification to imported goods while
charging CVD where the fulfillment of a mere procedural requirement may have
been violated and all substantive requirements laid down are fulfilled as viewed
by the Supreme Court in the Thermax case referred to above. Pending provisional
assessments if any may be finalised in accordance with the above clarification.
Difficulties, if any, in implementation of above clarification may be brought to
the notice of the Board.
Kindly acknowledge receipt of this Circular.
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