Supply of goods Under Notification no.12/2012 against ICB

[shahid hashmi]

WE are highlighting herewith harassment meted out to Indian Industry through frivolous Show Cause Notices and non-application of mind in confirmation of demands. The other day, we received some frenetic phone call from an assessee, seeking a clarification from us as to whether he was eligible for exemption under Notification No. 67/95-CE for intermediate products used in captive consumption for manufacture of final products cleared under Notification No.6/2006 C.E. dated 01/03/2006 as amended under Notification No.12/2012 C.E. dated 17/03/2012 against International Competitive Bidding or supplies made for setting up of Solar Power generation Projects or facilities under Notification No.15/2010-CE dtd. 27/02/2010 as amended vide Notification No.26/2012-CE datd. 08.05.2012 under CENVAT CREDIT RULES, 2004, Rule 6 & sub rule 6 (vii). We replied with an emphatic ‘Yes', but the assessees confronted us with  notices demanding Rs. 36 Cr. of duty issued to some Power Cable Industries in the North Zone  denying exemption under Notification No. 67/95-CE for the intermediate goods used in the manufacture of Power Cables cleared to Mega Power Project under ICB. We came to know that this is also the view shared by the departmental Anti Evasion officers of the Rajasthan Commissionerate. It may appear strange, but this is how the department sought to interpret the said exemption notification:

Notification No. 67/95-CE dated 16.03.1995 as amended provides exemption from payment of whole of the Central Excise duty on the specified inputs manufactured in a factory and captively consumed within the factory of production in or in relation to the manufacture of specified final products provided the final products are cleared on payment of duty. This means, duty is payable on the inputs/intermediate goods, which are captively consumed in the manufacture of final products, which are fully exempted from payment of duly or chargeable to ‘Nil' rate of duty. taxmanagementindia.com

However, in the notification, exception is given to those goods, which are cleared:

(i) to a unit in Free Trade Zone, or

(ii) to a Hundred Percent Export Oriented Undertaking, or

(iii) to a unit in a Electronic Hardware Technology Park, or

(iv) to a unit in a Software Technology Park, or

(v) under Notification No. 108/95-CE dt. 28.08.1995, or

(vi) by the manufacturer of dutiable and exempted final products after discharging obligation prescribed in Rule 6 of Cenvat Credit Rules, 2004

The raw materials used in the manufacture of Insulated Power Cables are Aluminium/Copper Wire, PVC Compound, XLPE, G. I. Wire etc. During the course of manufacture of Insulated Power Cables, “Cables upto Armouring stage” emerges as an intermediate product, which is

in continuous process. Cables upto Armouring stage is consumed captively in the manufacture of final product “Insulated Power Cables”. 

During the visit  of Anti Evasion, it was observed that M/s xxxxx has cleared certain quantities of Insulated Power Cables at “Nil” rate of duty to Mega Power Project under ICB. The clearances to mega Power Project under Notification No.12/2012 CE  is not notified as exemtion under the Notification No. 67/95-CE dated 16.03.1995 and hence it appears that the assessees are liable to pay central excise duty on continuous process emerges as the  intermediate goods viz., “Cables upto Armouring stage” used in the manufacture of insulated Power Cables, cleared to mega power projects under International Competitive Bidding  under sub rule 6 (vii)  of Rule 6 of  CENVAT CREDIT RULES, 2004.

A simple application of mind by the officers in the field would have saved the time and money of both department and the assessee. It is strange to know that the officers holding highest position in the department are not aware that the clearances under ICB are neither ‘exempted' nor chargeable to ‘Nil' rate, but are ‘DEEMED EXPORTS' allowed to be cleared without payment of duty under sub rule 6(vii) of  Rule 6 of  CENVAT CREDIT RULES, 2004. Such clearances under sub rule 6 (vii) of Rule 6 of  CENVAT CREDIT RULES, 2004  are even eligible for sanction of Terminal Excise Duty. The exemption under captive consumption notification is not available only in cases where final products are ‘exempted' or ‘chargeable to Nil rate' and clearances under sub rule {6(vii)} under Rule 6 of  CENVAT CREDIT RULES, 2004 to Mega Power Project against International Competitive Bidding do not fall under these categories.

The word “ by the manufacturer of dutiable and exempted final products after discharging obligation prescribed in Rule 6 of Cenvat Credit Rules, 2004”  is being continued in the notification No. 67/95-CE.

But, who can put these simple facts into the minds of adjudication officers, when they have decided not to apply mind at the time of issuance of demands. All these notices are routinely confirmed for fear of review, and we have a recent CBEC circular to initiate coercive measures to realize dues, without even giving an opportunity to the assessees to be heard by the appellate forums.

We do not know if the field officers in other parts of the country also hold similar view, with regard to  clearances under Notification No.12/2012 against ICB; we hope CBEC would take stock of these frivolous demand notices issued and save industry from this kind of harassment.