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Regarding Exemption from Central Excise Duty on Goods Manufactured from
Duty Paid Goods
Central
Excise Circular No. 667 dated 26th September 2002
The
undersigned is directed to refer to Board�s Circular No. 125/ 36/ 95 - CX,
dated 15th May 1995, issued from F. No. 341/ 26/ 95-TRU, on the above
subject.
2. It was clarified therein that in the
context of notifications which exempt specified goods provided such goods have
been made from other goods on which appropriate duty of excise has already been
paid, the benefit would be available even if the inputs are exempted from excise
duty. This was based on the opinion of the Ministry of Law that the expression
�appropriate duty of excise� would include �nil� duty also, having
regard to the judicial pronouncements prevailing then.
3. The interpretation of the expression
�appropriate duty of excise has already been paid� was considered by a
Constitution Bench of the Hon�ble Supreme Court in the case of CCE, Vadodra
vs. Dhiren Chemical Industries [2002(139) ELT 3 (S.C.) = 2001(47) RLT 881(SC)].
The Hon�ble Supreme Court have held that the word �appropriate� in the
context of such exemption notifications means the correct or specified rate of
excise duty, and that where an exemption is extended subject to the condition
that the �appropriate duty has been paid� on the raw material, then such
exemption shall not be available when the raw material is not liable to excise
duty or such duty is nil. In the light of the above, the clarification given by
the Board that nil duty paid goods or fully exempted goods should be deemed to
be goods on which appropriate duty of excise has been paid no longer holds good.
4. Board�s Circular No. 125/36/95-CX
dated 15th May, 1995 stands accordingly modified in view of the law
now laid down by the Constitution Bench of the Hon�ble Supreme Court.
Consequently, whenever an exemption is subject to the condition that appropriate
duty of excise has been paid on the inputs, the exemption will not be available
if the inputs are exempted from excise duty or are subject to nil rate of excise
duty. The same considerations will apply to additional duty of customs also.
5. Commissioners are requested to bring to
the notice of the Board instances where the application of the principle laid
down by the Hon�ble S.C. has led to denial of an exemption notification.
6.
Field formations and trade may be suitably informed.
7.
Receipt of this letter may please be acknowledged.
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