Circular No. 27/2006-Cus.
Government of India
Ministry of Finance
Department of Revenue
13th October, 2006.
Sub: Availing of CENVAT Credit of Additional Customs Duty (CVD) paid through Duty Free Credit Entitlement(DFCE) / Target Plus Scheme(TPS) Certificates-Clarification reg.
I am directed to invite your attention to the above mentioned subject.
2. The Duty Free Credit Entitlement (DFCE) Scheme for Status Holders was introduced under the 2003 edition of the EXIM Policy 2002-07, vide paragraph 22.214.171.124, which came into force on 1.4.2003. In the Foreign Trade Policy 2004-09 announced on 31.8.2004, the DFCE Scheme was replaced by Target Plus Scheme (TPS) as contained in Paragraph 3.7 of the Policy. Notification Nos.53/2003-Cus. dated 1.4.2003 and 32/2005-Cus. dated 8.4.2005 have respectively been issued to operationalise the above mentioned two Schemes. In terms of a condition which is common to both the notifications, the importer is entitled to avail of the drawback or CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act, 1975 against the amount debited in the said certificate.
3. In this connection, a doubt has been raised as to whether Rule 3 of the CENVAT Credit Rules, 2004, which provides for allowing CENVAT credit of the specified duties of Customs/Central Excise subject to certain conditions, also needs to be suitably amended. Representations have been received from the Trade that certain field formations in the Central Excise are not allowing CENVAT credit on the strength of the duty debited through DFCE/Target Plus Certificates in the absence of an express provision in the CENVAT Credit Rules, 2004.
4. The matter has been examined by the Ministry in consultation with the Ministry of Law & Justice. In response to the query as to whether rule 3 of CENVAT Credit Rules should be amended to allow CENVAT credit of CVD paid through DFCE scrips, the Ministry of Law has observed that “it is more a matter of policy and legal administration instead of interpretation, on which views may differ. However, it would be preferable to have scheme-specific concessions in the relevant specific notification as against general amendment to the rules, which may be amenable to wider than intended interpretation. It is seen that notification No.32/2005-Cus. already provides for the same.”
5. As mentioned above, notification Nos. 53/2003-Cus. dated 1.4.2003 and 32/2005-Cus. dated 8.4.2005 governing imports under DFCE and Target Plus Scheme respectively clearly stipulate that the importer shall be entitled to avail of the drawback or CENVAT credit of additional duty leviable under section 3 of the Customs Tariff Act, 1975 against the amount debited in the certificates issued under the said schemes. In view of this as also taking into account the Law Ministry’s opinion, it has been decided that amendment of CENVAT Credit Rules is not required. It may be mentioned here that in the case of Target Plus Scheme, apart from the notification referred to above, vide Board’s Circular No.59/2004-Cus. dated 21.10.2004, it has been clarified that additional customs duty paid in cash or through debit under this Scheme may be adjusted as CENVAT credit or duty drawback.
6. In view of above, it is clarified that the additional customs duty paid in cash or through debit in certificate issued under DFCE/Target Plus Scheme can be availed of as CENVAT credit or duty drawback. For reasons mentioned in Pargraph 4 above, amendment of the CENVAT Credit Rules, 2004 is not required for the purpose.
7. A suitable Public Notice and Standing Order may be issued for the guidance of the trade and staff. Difficulties faced, if any in implementation of the Circular may be brought to the notice of the Board at an early date.