Irregular availment of Modvat credit on inputs used in exempted goods - Instructions regarding - Central Excise - 5/93-CX-8

Irregular availment of Modvat credit on inputs used in exempted goods - Instructions regarding Circular No. 5/93-CX-8 Dated 26-5-1993 [From F.No. 267/16/93-CX-8] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Irregular availment of Modvat credit on inputs used in exempted goods - Instructions regarding. Attention is invited to the Board's earlier Circular No. 5/87-CX-6, (F.No. 211/50/86-CX-6), dated 7-1-1987, wherein it was clarified that an assessee producing both dutiable and exempted final product may be allowed to take credit on all inputs used in the manufacture of final product provided that credit of duty paid on the inputs used in the exempted products is debited in the RG-23A register before the removal of such exempted goods. 2. Instances, have come to notice where the aforesaid instructions are not being followed in the field formations. Recently, in a case reported by the audit, an assessee cleared certain quantities of pharmaceutical product as "Physician samples" without payment of duty availing exemption. However, the credit of duty availed on inputs used in such exempted products was not reversed, resulting in irregular availment of MODVAT credit. 3. It is once again reiterated, that the aforesaid instructions of the Board contained in Circular No. 5/87-CX-6, dated 7-1-1987 may please be followed scrupulously so as to avoid such lapses resulting in loss of revenue. 4. Field formations in your jurisdiction may please be informed accordingly 5. Receipt of this Circular may be acknowledged.