Simultaneous availment of Modvat procedure as well as full exemption - Difficulties regarding - Central Excise - 38/88

Simultaneous availment of Modvat procedure as well as full exemption - Difficulties regarding Circular No. 38/88 Dated 8-8-1988 [From F. No. 261/76/11/87-CX.8] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise and Customs, New Delhi Subject : Simultaneous availment of Modvat procedure as well as full exemption - Difficulties regarding. It has been represented to the Board that difficulties are being faced in availing Modvat as well as full exemption in respect of aluminium circles as well as winding wires made of copper. Aluminium circles of thickness 0.56 mm to 2 mm are fully exempted from payment of central excise duty under Notification No. 183/84 dated 1-8-1988 (now substituted by Notification No. 180/88 dated 13-5-1988). Aluminium circles of thickness 0.56 mm to 2 mm are chargeable to effective rate of duty of 13% and circles of thickness more than 2 mm are chargeable to duty of 25% fixed under Notification No. 151/86 dated 1-3-1986 (now substituted by Notification No. 204/88, dated 20-5-1988). Similarly winding wires made of copper are fully exempted under Notification No. 69/86, dated 10-2-1986 as amended provided duty on raw materials @ Rs. 6200 per tonne has already been paid and no credit of duty on inputs has been taken under Rule 57A. Winding wires made of copper are also chargeable to effective rate of duty of 15% under the notification aforesaid. The manufacturers manufacturing exempted as well as dutiable aluminium circles and winding wires made of copper are being denied the facility of Modvat as well as full exemption simultaneously. The matter has been examined by the Board. There is no bar either under the full exemption notifications aforesaid or Modvat rules for availing both facilities simultaneously. The only requirement under Modvat rules is that the inputs on which the credit has been taken should be used in the manufacture of final products which are chargeable to central excise duty. The credit so taken should also be used for payment of duty on the final products for the manufacture of which the same were brought to the factory. As long as it can be proved through reasonable accounting system that credit in respect of only those inputs has been allowed which are used in the manufacture of final products chargeable to duty, there should be no bar in allowing the full exemption as well as Modvat facility on the final products. It has, therefore, been decided by the Board that the manufacturers of aluminium circles as well as winding wires made of copper can be permitted to manufacture simultaneously exempted as well as dutiable aluminium circles and winding wires made of copper with Modvat facility provided separate accounts are maintained for manufacture of dutiable as well as exempted categories of the aforesaid products right from the raw material stage to the finished stage. Same position will hold good for any other commodity under similar circumstances. Past cases may be settled on the basis of above instructions. Suitable instructions to field formations may be issued. Trade interests may also be suitably informed. Please acknowledge receipt of these ins