Clarification regarding simultaneous availment of SSI exemption for home consumption and Modvat credit for export-reg. - Central Excise - 323/39/97-CX

Circular No. 323/39/97-CX dated 14/7/97 F. No. 345/17/97-TRU Government of India Ministry of Finance Department of Revenue Tax Research Unit, New Delhi Subject: Clarification regarding simultaneous availment of SSI exemption for home consumption and Modvat credit for export-reg. I am directed to refer to Board's circular No. 59/88-CX-8 dated 27.10.88 (F. No. 263/32/88-CX 8) wherein it was clarified that small scale units who have opted for full exemption under notification No. 175/86-CE., could be permitted to avail exemption on goods cleared for home consumption under the said notification and to take credit of duty paid on inputs used in the manufacture of goods exported under bond or on payment of duty. It was also clarified that simultaneous availment of SSI exemption for home consumption and Modvat credit for export would be available provided the SSI units maintain separate accounts right from raw materials stage to the final production stage for export production as well as for home consumption production. Further, the units were allowed to take credit of duty paid on inputs used in the goods exported and utilise the same for payment of duty on similar products after crossing the exemption limit or if the adjustment is not possible for any reason the credit could be refunded in accordance with the provisions of Modvat rules. 2. doubts have been raised whether Board's above said instructions are equally applicable to units availing SSI exemption under notification No. 16/97-CE., dated the 1st April, 1997, since the benefit of exemption and concessional rate of duty under the notification is available subject to the condition that the assessee does not avail Modvat credit under rule 57A upto a clearance value of Rs. 100 lakhs. 3. The matter has been examined. It is observed that the aforesaid notification allows exemption on specified goods cleared for home consumption only. Goods cleared for export either under bond or on payment of duty are not covered under the said notification. Therefore, it the assessee wants to avail Modvat credit of duty paid on inputs used in the manufacture of goods exported, such credit can not be denied. 4. Further, the credit of duty paid on inputs used in the final products cleared for export under bond is also available under Rule 57F(13). The credit so taken by a manufacturer can be utilised towards the payment of duty on similar final products cleared for home consumption on payment of duty and where such adjustment is not possible, the credit can be refunded to him in accordance with the procedure prescribed by the Government. 5. It is, therefore, clarified that the Board's aforesaid instructions would mutatis mutandis apply to the units, simultaneously availing exemption under notification No. 16/97-CE., and Modvat credit on inputs used for their export production. The credit so availed can either be utilised for payment of duty when the units start paying duty after crossing the limit of Rs. 100 lakhs or the same can be refunded as per the provision of Modvat rules. It may kindly be ensured that all such units maintain separate accounts properly right from raw materials stage to the final production stage for export production as well as for home consumption production. ________________________________________ Applicability of Clarification F. No.267/14/06-CX-8 Government of India Ministry of Finance Department of Revenue Central Board of Excise Customs 1 st June, 2006 . Subject: Applicability of clarification given vide Circular No. 323/17/97-TRU dated 14.07.1997 on Notification No. 8/2003-CE dated 1.3.2003-reg. Attention is invited to Circular No. 323/17/97-TRU dated 14.07.1997 which clarified that SSI exemption for home consumption can be availed simultaneously along with taking MODVAT/CENVAT credit for the goods that are exported. Doubts have been raised by trade and industry as well as field formations regarding the applicability of this Circular to notification No. 8/2003- CE dated 1-03-2003 and notification No. 8/2006- CE dated 1-03-2006. 2. The matter has been examined. It is seen that the relevant condition of the erstwhile notification No. 16/97-CE is similar to the one in notification No. 8/2003- CE dated 1-03-2003 and notification No. 8/2006- CE dated 1-03-2006, which prescribed that MODVAT/CENVAT credit paid on inputs used in the goods cleared for home consumption cannot be taken for availing the benefit of the notification. In this context, Circular No. 327/17/97-TRU dated 14.07.1997 clarified that SSI exemption for home consumption can be availed simultaneously along with taking CENVAT Credit for the goods that are exported . Notification No. 8/2003-CE and Notification No. 8/2006- CE dated 1-03-2006 also debar availment of CENVAT Credit on inputs used in the manufacture of goods cleared for home consumption only. Thus, it is hereby reiterated that the clarification given vide Circular No. 323/17/97-TRU is applicable even in the context of the notification No. 8/2003- CE dated 1-03-2003 and notification No. 8/2006- CE dated 1-03-2006 .