Government of India
Ministry of Finance
Department of Revenue
(Central Board of Excise & Customs)
Circular No. 930/20/2010-CX
New Delhi, dated the 9th July, 2010.
To,
All Director Generals,
All Chief Commissioners of Central Excise (including LTU),
All Commissioners of Central Excise (including LTU).
Sir/ Madam,
Subject: Tolerance of breakage of bottles due to
handling during storage and clearance-reg.
It has been brought to the notice of the Board that some of the manufacturers
of bottled beverages are claiming the benefit of duty exemption in respect of
breakage of PET bottles upto 0.5% citing the Board’s Instruction letter No.
ID/3/70-CX8, as amended vide letter F.No. 261/ID/1/75-CX8 dated 17.09.1975. As
per the letter dated 17.09.75, tolerance of 0.5% is allowed on account of
breakage of bottles due to handling in the course of movements from the
manufacturing area to bonded store rooms and breakages during storage and
clearance there-from. It has also been observed that in some judicial
pronouncements, this benefit has been allowed to the parties, on the limited
ground that the said instruction has not been rescinded/ modified by the Board
and further the cenvat credit taken on bottles as input have been allowed to be
retained by the assessee.
- The matter has been examined. The instructions mentioned above were
issued primarily in the context of use of glass bottles. At the relevant
time, the scheme of Modvat/CENVAT credit was not available to the assessees
and, therefore, there was no issue of reversal of credit taken on bottles,
which were subsequently broken/ destroyed. After the introduction of MODVAT
and subsequent replacement of the same with CENVAT, any circular,
instruction or provision inconsistent with the same has no relevance. As per
the provisions of Rule 21 of Central Excise Rules, 2002, remission of duty
before removal can be claimed on any goods lost or destroyed by natural
causes or unavoidable accident, claimed by manufacturer to be unfit for
consumption or marketing. The said remission is granted subject to the
condition of reversal of cenvat credit taken on inputs used in the final
product, as per the
CircularNo.800/33/2004-CX dated 01.10.2004. Rule 3(5C)
was also inserted in CENVAT Credit Rules, 2004, w.e.f 07.09.07, to
specifically provide for the same. Further, as per Rule 3(5B) of CENVAT
Credit Rules, 2004, if the value of any input is written off, the cenvat
availed on the same is required to be reversed. Therefore, if the final
product (i.e bottled beverage) is broken/ destroyed then remission can be
claimed and if the bottle (input) is written off by the assessee as
destroyed, the same is required to be dealt with as per the provisions of
Rule 3(5B) of CENVAT Credit Rules, 2004.
- In view of above, the application of the letters/ instructions quoted in
para1 above, in the said judicial pronouncements, without recourse to the
aforesaid provisions of law, is therefore per incuriam. Necessary action may
be taken to safeguard revenue. Nevertheless, to avoid such disputes in
future, it is stated that the instructions/ letters quoted in para1 above
have no relevance in the present CENVAT scheme, and the instructions stand
rescinded.
- Trade & Industry as well as field formations may be suitably informed.
- Receipt of this circular may kindly be acknowledged.
- Hindi version will follow.
Yours faithfully,
(Amish Kumar Gupta)
OSD (CX-8)
F.No.261/03/2009-CX8