Simultaneous availment of Modvat procedure as well as full exemption - Clarification Regarding - Central Excise - V-76(3)1/T/88

Simultaneous availment of Modvat procedure as well as full exemption - Clarification Regarding F. No. V-76(3)1/T/88 Dated 30-8-1988 Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Simultaneous availment of Modvat procedure as well as full exemption - Clarification Regarding. At present Aluminium circles of thickness 0.56mm to 2mm are fully exempted from payment of Central Excise duty under Notification No. 180/88, dated 13-5-1988. Aluminium circles of thickness 0.56mm to 2mm are chargeable to effective rate of duty of 13% and circles of thickness more than 2mm are chargeable to duty 25% fixed under Notification No. 204/88, dated 25-8-1988. 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. 2. The matter was under consideration as to whether manufacturers could be allowed to claim simultaneously Modvat credit as well as full exemption in respect of aluminium circles as well as winding wires of copper. 3. The matter has been examined. There is no bar either under the full exemption notification 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. 4. It has therefore been decided that manufacturers of aluminium circles as well as winding wires of copper, can be permitted to manufacture simultaneously exempted as well as dutiable aluminum 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. 5. The above position will also hold good for any other commodity under similar circumstances. 6. The assessees who intend to claim simultaneously Modvat Credit as well as full exemption in respect of their finished products, are required to give intimation within 24 hours regarding receipt of raw materials on which credit under rule 57A has not been claimed and which are going into the manufacture of fully exempted products, and to keep that material ready for inspection for the next 24 hours from the time of giving intimation, for proper officer's verification if he deems it necessary. They are also required to maintain the record of such raw materials and to furnish quarterly return. The copy of Collector's Supplementary Instruction No. 4/1988, dated 30-8-1988 issued under Rule 233 of the Central Excise Rules, 1944 in this regard is enclosed for information of the trade. 7. All the Associations concerned are requested to bring the above contents to the notice of their member manufacturers in particular and the Trade in general.