Advocate Anandaday Misshra
The era of Goods & Service Tax (GST) has started with three notifications on 17th July 2015. The idea is to check the breaking of chain for the purpose of GST.
The difference only lies in following manner :
a. inclusion of inputs in Notification No. 34/2015 -C.E., Dated- 17th July 2015
b. inclusion of inputs and input services in Notification No. 35/2015-C.E., Dated- 17th July 2015
c. inputs or capital goods and/or inputs or input services, as and wherever applicable, in Notification No. 36/2015-C.E., Dated- 17th July 2015
However, I take up Notification No. 34/2015-C.E dated 17.07.2015 for better understanding of its implication .This notification is effecting the textile industry .
A proviso has been introduced via Notification No. 34/2015-C.E in Notification No. 30/2004-C.E dated 9.07.2004 as below :
“Provided that the said excisable goods are manufactured from inputs on which appropriate duty of excise leviable under the First Schedule to the Central Excise Tariff Act or additional duty of customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) has been paid and no credit of such excise duty or additional duty of customs on inputs has been taken by the manufacturer of such goods (and not the buyer of such goods), under the provisions of the CENVAT Credit Rules, 2004.”.
This duty implication is effective from 17th July 2015
Accordingly the changes are summarised as below :
This notification has created two parts in as much as two mandates have been put to avail the benefit of the said notification.
As per the first part, it is obligatory on the part of the assessee to produce the invoice declaring that the appropriate duty of excise has been paid .
The second command, couched in the negative, is that the provisions of the said notification shall not apply if credit of duty paid in inputs are availed .
Condition No. 1-
Inputs shall be duty paid and cenvat credit of such inputs shall not be availed by the manufacturer of goods looking to avail exemption .
” duty paid raw material
Condition No. 2.
If Inputs are not duty paid , then manufacturer shall have to pay duty on such manufactured final goods .
” no cenvat on duty paid raw material
Precaution No. 1
The manufacturer shall have invoices evidencing the duty paid on invoices . It must be noted that the expression is “appropriate duty of excise has been paid“.
The onus will be on the manufacturer to verify the same and establish that the inputs have really suffered the incidence of appropriate rate of duty and presumption that it is duty payable will not help the assessee anymore
Precaution No. 2
The manufacturer has to show on invoices clearing the goods under exemption with the remark
” manufactured out of duty paid inputs and no credit credit is availed on the inputs “
Certain queries have come to me from various segments as below :
Querry No. 1.What about the goods manufactured till 16th July 2015 ?
Answer :It must be known , as settled law , that no exemption can be withdrawn retrospectively . Even , otherwise , the good manufactured till 16th July 2015 and accounted in Daily Stock Account will not be under the purview of this notification.
Querry No.2 .What is appropriate rate of duty of excise leviable ?
Answer :The expression “appropriate duty of excise has been paid“can be understood from the ruling of Honourable Supreme Court in the matter of COLLECTOR OF C. EX., VADODARA Versus DHIREN CHEMICAL INDUSTRIES – 2002 (139) E.L.T. 3 (S.C.)
5. In our view, the correct interpretation of the said phrase has not been placed in the judgment in the case of Usha Martin. The stress on the word “appropriate” had been mislaid. All that the word “appropriate” in the context means is the correct or the specified rate of excise duty.
6. An exemption notification that uses the said phrase applies to goods which have been made from duty paid material. In the said phrase, due emphasis must be given to the words “has already been paid”. For the purposes of getting the benefit of the exemption under the notification, the goods must be made from raw material on which excise duty has, as a matter of fact, been paid, and has been paid at the “appropriate” or correct rate. Unless the manufacturer has paid, the correct amount of excise duty, he is not entitled to the benefit of the exemption notification.
7. Where the raw material is not liable to excise duty or such duty is nil, no excise duty is, as a matter of fact, paid upon it. To goods made out of such material the notification will not apply.
I must also refer the para 9 of the ruling which held that
9. We need to made it clear that, regardless of the interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue.
Hence, the underlined from para 6 is again reproduced to have answer
…………For the purposes of getting the benefit of the exemption under the notification, the goods must be made from raw material on which excise duty has, as a matter of fact, been paid, and has been paid at the “appropriate” or correct rate.
Querry No. 3.Why there is reference to the expression “and not the buyer of such goods” ?
Answer : The notification is mean for manufacturer of goods opting for an exemption and condition for restricting availment of cenvat credit is only on the manufacturer .
If manufacturer pays excise duty , then such amount will be available as cenvat credit to the buyers of such goods .Hence, the expression has been used as “and not the buyer of such goods”
The entire notification is subject matter of interpretation and different school of thoughts may infer differently .However , any further querry on the same issue will be welcomed.
(Advocate Anand Mishra, AMLEGALS– The author is a leading indirect tax advocate handling cases in CESTAT & High Courts of India. He can be contacted on firstname.lastname@example.org and for more please refer www.amlegals.com)