Modvat - SSI - Power to grant notional credit in respect of SED - Central Excise - 345/9/88-TRU

Modvat - SSI - Power to grant notional credit in respect of SED F. No. 345/9/88-TRU Dated 14-6-1988 Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Modvat - SSI - Power to grant notional credit in respect of SED. Reference is invited to this Ministry's letter of even number, dated the 18th March, 1988, regarding the power to grant notional credit in respect of special excise duty under Rule 57B of the Central Excise Rules read with Notification No. 175/86-C.E., and to state that some Collectors, whie differing with the view communicated in the aforesaid letter, have raised the following points : (i) The benefit of higher notional credit under Rule 57B read with Notification No. 175/86-C.E. is limited to basic excise duty alone since the said rule refers to a notification issued under Rule 8(1) and Notification No. 175/86-C.E. has accordingly been issued only under the authority of Rule 8(1) and not under any clause of the Finance Act, 1988. (ii) If higher notional credit is allowed in respect of special excise duty also, it may tantamount to allowing more credit of than what is leviable under the Finance Act, 1988. 2. The position regarding the rate at which notional higher credit is available in respect of inputs manufactured in the small scale sector has changed with the amendment of Notification No. 175/86 vide Notification No. 136/88-C.E., which has come into effect from 1st April, 1988. Under this notification, the quantum of higher credit available in respect of such inputs carrying a normal basic duty of 10% or more, has now been specified as the effective duty paid under Notification No. 175/86-C.E. plus an amount calculated at the rate of 5% ad valorem. Thus, if any input carries normal basic excise duty @ 15% ad valorem and the effective duty paid on such input manufactured in the small scale sector under Notification No. 175/86-C.E. is 5% (basic) plus 0.25% (special), i.e. 5.25% (total), the higher credit available for use of such input under Rule 57B read with Notification No. 175/86-C.E., as amended by Notification No. 136/88-C.E. is 5.25% plus 5% ad valorem, i.e. 10.25%. 3. With the amendment of Notification No. 175/86-C.E., vide Notification No. 136/88-C.E., the problem of allowing more credit of special excise duty than what is leviable under the Finance Act, 1988 is now restricted to such inputs which are leviable to normal basic duty at a rate less than 10% ad valorem and those inputs which were cleared during March, 1988. 4. The correct legal position during the period prior to 1-4-1988 is being re-examined in consultation with the Ministry of Law. A clarification on the points raised by the Collectors will be communicated, as soon as a final decision is taken. Case relating to show cause notices issued in regard to higher notional credit in respect of the special excise duty may be decided only after receipt of this clarification.