Modvat scheme - Certain clarification - Regarding - Central Excise - B. 22/8/86-TRU

Modvat scheme - Certain clarification - Regarding F. No. B. 22/8/86-TRU Dated 10-4-1986 Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Modvat scheme - Certain clarification - Regarding The undersigned is directed to invite attention to the various points raised with regard to availing of credit under the Modvat scheme. In this connection, the more important points raised by the Collectors and the clarifications therefor are contained in the enclosed statement. Collectors are requested to go through the clarifications and difficulties, if any, may be brought to the notice of the Board. 2. Delegations of powers of Collectors :- All Collectors are requested to delegate to the Assistant Collectors their various powers relating to the Modvat scheme. 3. Removal of inputs under Rule 57F :- The permission for removal of inputs may be granted by a general order for each individual manufacturer. The inputs may be removed on returnable Gate Passes and accounts may be maintained as at present under the provisions available under Rule 56A for such removal. The Directorate of Inspection is being asked to carry out a study and prescribe forms and accounts fort this purpose. Further instructions may be awaited. 4. Kindly acknowledge receipt of this letter. MODVAT CLARIFICATIONS Sl. No. Points on which clarification sought Clarification (1) (2) (3) 1. Whether existing instructions under Rule 56A relating to subsidiary gate passes/documents relating to supply from stockyards, canalising agency certifying the amount, of duty paid would be applicable for Modvat. It is clarified that existing instructions relaxations relating to supply of godos from stockyards/canalising agencies certifying the amount of duty paid would apply for Modvat also. 2. Where the inputs are not accompanied by gate passes or other documents evidencing payment of duty can credit be availed? Except in cases where credit is permitted without the production of duty paying documents in all cases the duty paying documents or any other document like subsidiary gate pass should accompany. However in cases such as movement by rail or any other mode of transport where the gate pass or other document covering the input is received subsequently, due to reasons beyond the control of the manufacturer availing Modvat, credit in such cases can be taken after receipt of such document. The input may however be taken into use immediately after its receipt after making a suitable entry in RG 23A Part I. 3. In the case of manufacturing operations involving the supply of raw materials (inputs) by the buyer can credit be availed though the duty paying document may be in the name of the buyer. Such credit is permissible provided the entire raw material (inputs) covered under the gate pass is transferred to the manufacturer availing of Modvat relief and provided that the person in whose name the gate pass is made makes a suitable endorsement on the reverse of the gate pass. 4. Method of maintaining accounts. The declaration to be filed under Rule 57G may be filed for the final products chapter- wise, indicating the various inputs to be used in the final products. 2. Regarding stock accounts while all receipts have to be entered in the prescribed account, manufacturers may be permitted to continue to have their own stock accounts for the inputs. Depending upon the number of inputs/varieties of inputs received, Collectors may permit suitable relaxations in particular cases or in general. 3. The credit account under Modvat rules may be maintained chapterwise. 5. How to discharge duty liability in the case of parts of the inputs used in or in relation to the manufacture of final products which are exempt from duty? Modvat credit is not availabe if the final products are exempt or are chargeable to nil rate of duty. However, where a manufacturer produces along with dutiable final products, final products which would be exempt from duty by a notification (e.g. an end-use notification) and in respect of which it is not reasonably be psssible to segregate the inputs the manufacturer may be allowed to take credit of duty paid on all inputs used in the manufacture of the final products, provided that credit of duty paid on the inputs used in such exempted products is debited in the credit account before the removal of such exempted final products. 6. Whether credit of duty paid on inputs (on or after 1-2-1986) which are used in final products manufactured prior to 1-3-1986 but cleared on or after 1-3- 1986, be allowed. It is permissible to allow credi in such cases under Rule 57H. It is clarified that in all cases, where the inputs are/were lying in stock on or received after 1-3-1986 or the final products lying in stock, no credit shall be allowed if duty was paid on the inputs before 1-2-1986. Whether a small scale unit who has availed of full exemption up to Rs. 15 lakhs (or Rs. 30 lakhs) can avail of Modvat in respect of specified goods on which duty is paid? Whether a manufacturer (especially small scale unit) avialing of Modvat relief can be allowed to opt-out of the scheme? There is no bar for a small scale unit to avail of Modvat relief in respect of clearances after crossing the full exemption limit. Similarly a small scale unit who has been paying excise duty at the end of a financial year and who has been availing of Modvat may be allowed to enjory full exemption limit upto the permissible limits in respect of the first clearances in a subsequent financial year subject to the conditions :- (i) that the credit available as balance would lapse; and (ii) in respect of any final products for which full exemption from duty, if any, is availed of, the credit of duty on inputs is paid back, as such credit has been wrongly availed of;