Seventh amendment to rules - Modvat - 176/86 - Central Excise - Tariff

Seventh amendment to rules - Modvat

Notification No. 176/86-C.E.

Dated 1-3-1986

In exercise of the powers conferred by section 37 of the Central Excises and Salt Act, 1944 (1 of 1944), the Central Government hereby makes the following rules further to amend the Central Excise Rules, 1944, namely :—

1. (1) These rules may be called the Central Excise (Seventh Amendment) Rules, 1986.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Central Excise Rules, 1944 (hereinafter referred to as the said rules), in rule 9, for the third proviso, the following proviso shall be substituted, namely :—

"Provided also that such goods may be removed without payment of duty leviable thereon, if they are consumed or utilised in the place where such goods are produced or manufactured or any premises appurtenant thereto so specified under this sub-rule, either as raw material or as component parts for the manufacture of any other commodity which—

(i) is excisable goods specified by the Central Government by notification under sub-rule (1) of rule 56A,

(ii) was classifiable under the same Item No. in the First Schedule to the Act as it existed immediately before the commencement of the Central Excise Tariff Act, 1985 (5 of 1986), as the goods so consumed or utilised, and

(iii) is neither exempt from the whole of the duty of excise leviable thereon nor is chargeable to nil rate of duty.".

3. In rule 49 of the said rules, for sub-rule (4), the following sub-rule shall be substituted, namely :—

"(4) Notwithstanding, anything contained in sub-rule (1), payment of duty shall not be required in respect of excisable goods made in a factory if they are consumed or utilised in the same factory, either as raw material or as component parts for the manufacture of any other commodity which—

(i) is excisable goods specified by the Central Government by notification under sub-rule (1) of rule 56A,

(ii) was classifiable under the same Item No. in the First Schedule to the Act as it existed immediately before the commencement of the Central Excise Tariff Act, 1985 (5 of 1986), and

(iii) is neither exempt from the whole of the duty of excise leviable thereon nor is chargeable to nil rate of duty.".

4. In rule 56A of the said rule,—

(a) in sub-rule (3) in clause (via), for sub-clause (d), the following sub-clause shall be substituted, namely :—

"(d) The credit of duty allowed in respect of any material or component parts, and lying unutilised with a manufacturer, immediately before the commencement of the Central Excise (Seventh Amendment) Rules, 1986, may be transferred to his account in Form R.G.23A:

Provided that permission for such transfer of credit has been obtained from the Collector of Central Excise in terms of rule 57A.";

(b) for sub-rule (8), the following sub-rules shall be substituted, namely :—

"(8) Notwithstanding anything contained elsewhere in this rule or any change in the nomenclature or classification of any goods consequent to the commencement of the Central Excise Tariff Act, 1985 (5 of 1986), the credit of duty paid on any material, component parts or finished product shall be allowed if the credit of duty was allowable in respect of such material, component parts of finished product under this rule immediately before the commencement of the Central Excise Tariff Act, 1985 (5 of 1986) :

Provided that no such credit shall apply in respect of any material, component parts or finished product—

(i) if such credit was not allowable under this rule immediately before the commencement of the Central Excise Tariff Act, 1985 (5 of 1986),

(ii) in respect of which the special procedure prescribed under this rule was not being availed of by a manufacturer before the commencement of the Central Excise (Seventh Amendment) Rules, 1986, or

(iii) which are received in the factory of the manufacturer on or after the 1st March, 1987.

(9) Nothing contained in this rule shall apply to a manufacturer availing of the credit of duty paid on inputs under rule 57A."

5. In Chapter V of the said rules, after section A, the following section shall be inserted, namely :—

"AA. CREDIT OF DUTY PAID ON EXCISABLE GOODS USED AS INPUTS.

RULE 57A. Applicability. - (1) The provisions of this section shall apply to such finished excisable goods (hereinafter referred to as the "final products"), as the Central Government may, by notification in the Official Gazette, specify in this behalf, for the purpose of allowing credit of any duty of excise or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification (hereinafter referred to as the "specified duty") paid on the goods used in or in relation to the manufacture of the said final products (hereinafter referred to as the "inputs") and for utilising the credit so allowed towards payment of duty of excise leviable on the final products, whether under the Act or under any other Act, as may be specified in the said notification, subject to the provisions of this section and the conditions and restrictions that may be specified in the Notification:

Provided that the Central Government may specify the goods or classes of goods in respect of which the credit of specified duty may be restricted.

Explanation. - For the purposes of this rule, 'inputs' includes paints and packaging materials but does not include :—

(i) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products ;

(ii) packaging materials in respect of which any exemption to the extent of the duty of excise payable on the value of the packaging materials is being availed of for packaging any final products ;

(iii) packaging materials the cost of which is not included or had not been included during the preceding financial year in the assessable value of the final products under section 4 of the Act ; or

(iv) cylinders for packing gases.

RULE 57B. Credit of duty in respect of inputs obtained from small-scale manufacturers. - Notwithstanding anything contained in rule 57A, credit of specified duty on inputs may, in a case where the duty on inputs has been paid under a notification issued under sub-rule (1) of rule 8 exempting such inputs from a part of the duty leviable thereon on the basis of value of clearances of such inputs during any specified period, be allowed at the rate otherwise applicable to such inputs but for the said notification :

Provided that the said notification provides for grant of credit in respect of such inputs at such higher rates as may be specified therein.

RULE 57C. Credit of duty not to be allowed if final products are exempt. - No credit of the specified duty paid on the inputs used in the manufacture of a final product shall be allowed if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty.

RULE 57D. Credit of duty not to be denied or varied in certain circumstances. - (1) Credit of specified duty allowed in respect of any inputs shall not be denied or varied on the ground that part of the inputs is contained in any waste, refuse, or by-product arising during the manufacture of the final product, whether or not such waste, refuse or by-product is exempt from the whole of the duty of excise leviable thereon or is changeable to nil rate of duty or is not specified as a final product under rule 57A.

(2) Credit of specified duty allowed in respect of any inputs shall not be denied or varied on the ground that any intermediate products have come into existence during the course of manufacture of the final product and that such intermediate products are for the time being exempt from the whole of the duty of excise leviable thereon :

Provided that such intermediate products are used within the factory of production in the manufacture of final product on which the duty of excise is leviable whether in whole or in part.

RULE 57E. Adjustments in duty credit. - If duty paid on any inputs in respect of which credit has been allowed under rule 57A, is varied subsequently due to any reason resulting in payment of refund to the manufacturer or the importer of the inputs, the credit allowed shall be varied accordingly by adjustment in the credit-account maintained under sub-rule (3) of rule 57G or in the accounts maintained under rule 9 or sub-rule (1) of rule 173G or, if such adjustment is not possible for any reason, by cash recovery from the manufacturer availing of credit under rule 57A.

RULE 57F. Manner of utilisation of the inputs and the credit allowed in respect of duty paid thereon. - (1) The inputs in respect of which a credit of duty has been allowed under rule 57A may—

(i) be used in, or, in relation to, the manufacture of final products for which such inputs have been brought into the factory ; or

(ii) be removed, subject to the prior permission of the Collector of Central Excise, from the factory for home consumption or for export on payment of appropriate duty of excise or for export under bond, as if such inputs have been manufactured in the said factory :

Provided that where the inputs are removed from the factory for home consumption on payment of duty of excise, such duty of excise shall in no case be less than the amount of credit that has been allowed in respect of such inputs under rule 57A.

(2) Notwithstanding anything contained in sub-rule (1), a manufacturer may, with the permission of the Collector of Central Excise and subject to such terms and conditions and limitations as he may impose, remove the inputs as such, or after the inputs have been partially processed during the course of manufacture of final products, to a place outside the factory, for the purpose of test, repairs, refining, reconditioning or carrying out any other operations necessary for the manufacture of the said goods and return the same to his factory for further use in the manufacture of the final products provided that the waste if any, arising in the course of such operations is also returned to the said factory after such operations.

(3) Credit of specified duty allowed in respect of any inputs may be utilised towards payment of duty of excise,—

(i) on the final products in which such inputs have been used ; or

(ii) on the inputs themselves if such inputs have been permitted to be cleared under sub-rule (1):

Provided that the credit of specified duty in respect of inputs used in the final products cleared for export under bond shall be allowed to be utilised towards payment of duty of excise on similar final products cleared for home consumption on payment of duty.

(4) Any waste, arising from the processing of inputs, in respect of which credit has been taken may—

(a) be removed on payment of duty as if such waste is manufactured in the factory ; or

(b) be removed without payment of duty, where it belongs to such class or category of waste as the Central Government may from time to time by order specify for the purpose for being used in the manufacture of the class or categories of goods as may be specified in the said order, subject to the procedure under Chapter X being followed ; or

(c) be destroyed in the presence of proper officer on the application by the manufacturer, and if found unfit for further use or not worth the duty payable thereon, the duty payable thereon being remitted :

Provided that such waste may be destroyed by the manufacturer governed by Chapter VIIA after informing the proper officer in writing regarding the quantity of such waste and the date on which he proposes to destroy, at least seven days in advance and after observing all such conditions as may be prescribed by the Collector of Central Excise by a general or special order with regard to the manner of disposal of such waste.

(5) No part of the credit of duty allowed shall be utilised save as provided in sub-rule (3).

RULE 57G. Procedure to be observed by the manufacturer. - (1) Every manufacturer intending to take credit of the duty paid on inputs under rule 57A, shall file a declaration with the Assistant Collector of Central Excise having jurisdiction over his factory, indicating the description of the final products manufactured in his factory and the inputs intended to be used in each of the said final products and such other information as the said Assistant Collector may require, and obtain a dated acknowledgement of the said declaration.

(2) A manufacturer who has filed a declaration under sub-rule (1) may, after obtaining the acknowledgement aforesaid, take credit of the duty paid on the inputs received by him :

Provided that no credit shall be taken unless the inputs at the time of their receipt in the factory are accompanied by a Gate Pass, an AR-1, a Bill of entry or any other document as may be prescribed by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) in this behalf evidencing the payment of duty on such inputs :

Provided further that having regard to the period that has elapsed since the duty of excise was imposed on any inputs, the position of demand and supply of the said inputs in the country and any other relevant considerations, the Central Government may direct that with effect from a specified date, all stocks of the said inputs in the country, except such stocks lying in a factory, customs area [as defined in the Customs Act, 1962 (52 of 1962)] or a warehouse as are clearly recognisable as being non-duty paid, may be deemed to be duty-paid and credit of duty in respect of the said inputs may be allowed at such rate and subject to such conditions as the Central Government may direct, without production of documents evidencing the payment of duty :

Provided also that the manufacturer shall take all reasonable steps to ensure that the inputs acquired by him are goods on which the appropriate duty as indicated in the documents accompanying the goods, has been paid.

(3) A manufacturer of the final products shall maintain,—

(a) an account in Form R.G. 23A, Parts I and II;

(b) in respect of duty payable on final products, an account-current with adequate balance to cover the duty of excise payable on the final products cleared at any time.

(4) A manufacturer of the final products shall submit a monthly return to the Superintendent of Central Excise indicating the particulars of the inputs received during the month and the amount of duty taken as credit along with extracts of Parts I and II of Form R.G. 23A and shall also make available the documents evidencing the payment of duty on the inputs on demand by the proper officer.

RULE 57H. Transitional provisions. - (1) Notwithstanding anything contained in rule 57F, the Assistant Collector of Central Excise, may allow credit of the duty paid on inputs received by a manufacturer before filing a declaration under rule 57G if he is satisfied that—

(a) such inputs are lying in stock, or are received in the factory, on or after the 1st day of March, 1986, or

(b) such inputs are used in the manufacture of final products which are cleared from the factory on or after the 1st day of March, 1986,

and that no credit has been taken by the manufacturer in respect of such inputs under any other rule or notification :

Provided that no credit under this sub-rule shall be allowed in respect of inputs received on or after the 1st day of April, 1986.

(2) Notwithstanding anything contained in rule 57A, no credit of duty paid on the inputs used in the manufacture of a final product (other than those inputs in respect of which credit of duty was allowable under any rule or notification prior to the 1st day of March, 1986, when used in the final products) shall be allowed if duty has been paid on the inputs on or before the 31st ay of January, 1986.

(3) On an application from a manufacturer who had been immediately before the commencement of the Central Excise (Seventh Amendment) Rules, 1986, availing of,—

(a) the special procedure under rule 56A in respect of materials or component parts for use in the manufacture of finished excisable goods, or

(b) an exemption for giving credit with respect to duty paid on the materials or component parts used in the manufacture of finished excisable goods,

the Collector may permit such manufacturer to transfer the credit of duty paid on the said materials or component parts received by such manufacturer and lying unutilised before such commencement in his account in R.G. 23 to his account in R.G. 23A :

Provided that the materials and component parts and the finished excisable goods have been specified as inputs and final products respectively in the notification issued under rule 57A.

RULE 57-I. Recovery of credit wrongly availed of or utilised in an irregular manner. - (1) If the credit of duty paid on inputs has been taken wrongly, the credit so taken may be disallowed by the proper officer and the amount so disallowed shall be adjusted in the credit account or the account-current maintained by the manufacturer or if such adjustments are not possible for any reason, by cash recovery from the manufacturer of the said goods :

Provided that such manufacturer may make such adjustments on his own in the credit account or the account-current maintained by him under intimation to the proper officer.

(2) If any inputs in respect of which credit has been taken are not fully accounted for as having been disposed of in the manner specified in this section, the manufacturer shall upon a written demand being made by the Assistant Collector of Central Excise pay the duty leviable on such inputs within 10 days of the notice of demand.

6. In rule 100H of the said rules, for the figures and letter "56C," in both the places where they occur, the figures and letters "56C, 57A," shall be substituted.

7. In rule 173Q of the said rules, in sub-rule (1), after clause (b), the following clause shall be inserted, namely :—

"(bb) take credit of duty in respect of inputs used in the manufacture of final products wrongly or does not utilise the inputs in the manner provided for in the rules or utilises the credit of duty in respect thereof in an irregular manner; or"

8. In rule 209 of the said rules, in sub-rule (1),—

(a) after the words "Notwithstanding anything contained in any other provision of these rules", the brackets, words, figures and letter "(save and except rule 173Q)" shall be inserted ;

(b) after clause (b), the following clause shall be inserted, namely :—

"(bb) takes credit of duty in respect of inputs used in the manufacture of final products wrongly or does not utilise the inputs in the manner provided for in the rules or utilises the credit of duty in respect thereof in an irregular manner; or"

9. In Appendix I to the said rules,—

(a) in the "(I) List of Central Excise Forms", after entry 55G, the following entry shall be inserted, namely :—

(1)	(2)	(3)	(4)
"55GG	Account of duty paid inputs received for use in or in relation to the manufacture of final products	57A	R.G. 23A";

(b) in "(II) Speciman Form", after Form R.G. 23 (Central Excise Series No. 55G), the following Form shall be inserted, namely :—

"Central Excise Series No. 55-GG

FORM R.G. 23A

PART-I

Stocks Account of 'inputs' for use in or in relation to the

manufacture of 'final products'

(Rule 57 A)

S. No	Date		Description of Inputs received	Quantity received	Particulars of GPI/ ARI/Other approved document, Bill of Entry, No. and date
(1)	(2)		(3)	(4)	(5)
Name and address of the manufacturer/importer/ Stock-yard from whom the inputs received			Range and Division/ Custom House from whose jurisdiction the inputs received		Issued for use in or in relation to the manufacture of final product
					Chit No. and Date	Quantity
(6)			(7)		(8)	(9)
		Issued for clearance as such
On payment of duty					Otherwise
ARI/GPI No. and Date			Quantity		Document Particulars	Quantity
(10)			(11)		(12)	(13)
Balance Quantity in stock			Central Excise Officer's Initials	REMARKS
(14)			(15)	(16)

PART-II

Entry Book of Duty Credit

S. No.	Date	Opening Balance of duty in credit	Fresh Credit Allowed (4 to 6)
			ARI/GP1/Other approved document/Bill of Entry No. and date	Range/Division/ Custom House from where received	Folio and Entry No. in Part I
(1)	(2)	(3)	(4)	(5)	(6)

 

Fresh Credit Allowed (7)			Total Credit Available
Amount of duty credited			[(3)+(7)]
Basic Excise Duty	Additional Duty of Customs	Other duties (specify)
(a)	(b)	(c)
(7)			(8)

 

DEBIT (9 to 11)			Balance of credit	Central Excise Officer's initials	REMARKS
ARI/GPI/Other approved documents No. and date	Basic Excise duty	Other duty (specify)
(9)	(10)	(11)	(12)	(13)	(14)