Circular No. 83 /2000-Cus
Government of India
Ministry of Finance
Department of Revenue
New Delhi, 16th October, 2000.
Subject : Modvat / Cenvat credit – cash refund of unutilized credit on exports
In terms of the Customs & Central Excise Duties Drawback Rules, 1995, drawback is allowed to the exporters for the duties of Customs and Central Excise suffered on the imported or indigenous inputs used in the manufacture of the export product for which no relief is otherwise available. Accordingly, in the All Industry Rates. Drawback Table, notified by the Central Government annually, the drawback rates for various export products are also indicated with their customs and Central Excise allocations. The Customs allocation denotes the Basic Custom Duty, Surcharge on Basic Customs Duty and the Special Additional Duty paid, if any. The Central Excise allocation represents the Additional Customs Duty leviable in terms of Section 3 of the Customs Tariff Act, 1975 or the Central Excise duty leviable in terms of Central Excise Tariff Act, 1985. It has been specifically provided in various Notifications notifying the Annual Drawback Table that the Central Excise allocation of the drawback would be allowed only if the exporters do not avail of the MODVAT / CENVAT Scheme.
2. A representation has been received from the Vidarbha Industries Association, Nagpur, that its members who are manufacturing and exporting Woven Sacks and Bags falling under SS No. 39.251 of the Drawback Table and claim only the Customs allocation of Drawback rate are not being allowed cash refund of the unutilised CENVAT credit. This is on the Premise that since the Drawback has been availed, the cash refund of the unutilised CENVAT credit is prohibited in terms of Rule 57F(14) of the central Excise Rules, 1944.
3. The issue has been examined in the Board. It is observed that Rule 57A(1) of the Central Excise Rules, 1944 specifically provides that the Central Government by notification may specify the finished excisable goods for the purpose of allowing Credit of any of excise or the additional duty under Section 3 of Customs Act, 1975, i.e., the specified duty paid on the goods used in the manufacture of such final products. Rule 57F(13) expounds that where any inputs are used in the final products which are cleared for exports under bond or used in the intermediate products cleared for exports in accordance with rule 57F(14), the credit of specified duty in respect of the inputs so used shall be allowed to be utilised by the manufacturer towards payment of duty of Excise or any final products cleared for home consumption or for exports on payment of duty any where for any reason such adjustment is not possible, the manufacture shall be allowed refund of such amount subject to such safeguard, conditions anf limitations as may be specified by the Central Government. Rule 57F(14) lays down that no refund of credit mentioned in Rule 57F(13) shall be allowed if the manufacturer avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995 or claims a rebate of duty under Rule 12, in respect of such duty.
4. A combined and harmonious reading of these provisions reveals that the word “duty” appearing any where in the MODVAT rules, unless otherwise qualified should always be construed as having reference to duty of Central Excise or the additional duty under section 3 of Customs Tariff Act, 1975. Since Rule 57F(13) mentions the wording “Credit of specified duty in respect of inputs so used ——” and Rule 57F(14) states that no credit in sub-rule (13) shall be allowed in the exporters avail of drawback- in respect of such duty, it is amply clear that the prohibition of Rule 57F(14) for grant of refund is only in respect of availment of drawback as regards the Central Excise duty or Countervailing duty. There is no double benefit available to the manufacturer where only Customs portion of All Industry Rate of Drawback is claimed, if refund of unutilised credit is given, as no MODVAT (now CENVAT) credit facility is permissible for Customs duty suffered on imported inputs. Denial of refund of MODVAt credit of Excise/Countervailing duty paid on inputs relating to export products, if this cannot be used otherwise, will thus not be only act harshly on the exporters, it will not be in accordance with the provisions of the MODVAT rules.
5. It is, therefore, clarified that where only Customs portion of duties is claimed as per the All Industry Rate of Drawback, Rule 57F(14), does not come in the way of admitting refund of unutilised credit of Central Excise/Countervailing duty paid on inputs used in products exported.
6. Rule 57AC(7) of the CENVAT contains similar provisions for refund of unutilised credit earned on inputs used in goods/intermediate goods cleared for export. Therefore, the interpretation would be applicable to all such cases under erstwhile MODVAT rules as well as the CENVAT rules effective from 1.4.2000.