Permission to avail Modvat credit on inputs used for export production by SSI units simultaneously availing full exemption up to 15 lakhs or 30 lakhs for home consumption - Regarding - Central Excise - 59/88

Permission to avail Modvat credit on inputs used for export production by SSI units simultaneously availing full exemption up to 15 lakhs or 30 lakhs for home consumption - Regarding Circular No. 59/88 Dated 27-10-1988 [From F. No. 263/32/88-CX.8] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi . Subject : Permission to avail Modvat credit on inputs used for export production by SSI units simultaneously availing full exemption up to 15 lakhs or 30 lakhs for home consumption - Regarding. I am directed to say that it has been represented to the Board that Modvat credit is being denied on the inputs used exclusively for the goods exported under bond to small scale units who have opted for full exemption under Notification No. 175/86 on clearances for home consumption. It has been suggested that small scale units should be permitted to avail the credit of duty paid on inputs utilised for manufacture of goods exported under bond even though such small scale units are availing full exemption from duty under Notification No. 175/86 on clearances for home consumption. It has been further suggested that the said credit can either be allowed to be utilised for payment of duty when the small scale units started paying duty after crossing full exemption limit or the same can be refunded where such adjustment is not possible. The matter has been examined by the Board. Under Notification No. 175/86 only the clearances for home consumption are exempted. Under the aforesaid notification the assessees can either opt for Modvat and pay concessional rate of duty or they can opt to avail full exemption on clearances of goods for home consumption up to 15 lakhs or 30 lakhs depending upon whether they manufacture goods of one sub-heading or more than one sub-heading. There is no exemption on the goods exported. Therefore, if the assessees want to avail Modvat credit of duty paid on inputs used in the manufacture of goods exported either under bond or on payment of duty, such credit cannot be denied. Proviso to Rule 57F(3) provides that credit of duty paid on inputs used in the final product cleared for export under bond shall be allowed to be used towards the payment of duty on similar final products cleared for home consumption on payment of duty and where for any reason such adjustment is not possible, the credit can be refunded to the manufacturers in accordance with the procedure prescribed by the Government, However, there may be operating difficulties in case assessees want to avail full exemption on clearances for home consumption and want to avail Modvat in case of goods exported under bond or on payment of duty. With a view to sort out the difficulties of the trade in this regard, it has been decided that if the assessee agrees to maintain separate accounts right from raw material stage to the final product stage for export production as well as for home consumption production, then he can be permitted to take credit of duty paid on inputs used in the goods exported under bond and utilised the same for payment of duty on similar product after crossing the exemption limit or if the adjustment is not possible for any reason the credit can be refunded in accordance with the provisions of Rule 57F(3). The above instructions may be brought to the notice of field formations. Trade interests may also be suitably informed. Receipt of these instructions may be acknowledged.