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. It is pertinent to note that more or less , similar and/or same proviso has been inserted in 3 notifications i.e 34/2015-C.E, 35/2015-C.E & 36/2015-C.E. The difference only lies in following manner :
1. inclusion of inputs in Notification No. 34/2015 -C.E
2.inclusion of inputs and input services in Notification No. 35/2015-C.E 3.inputs or capital goods and/or inputs or input services , as and wherever applicable , in Notification No. 36/2015-C.E 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.”.
Date of Effect This duty implication is effective from 17th July 2015 Scope of Notification The scope of the notifications is 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 part, 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 cenvat 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. The situation of goods under process i.e WIP shall also fall under the ambit of the same . I further like to refer to Vazir Sultan , wherein Apex Court held that
11. We are of the opinion that Section 3 cannot be read as shifting the levy from the stage of manufacture or production of goods to the stage of removal. The levy is and remains upon the manufacture or production alone. Only the collection part of it is shifted to the stage of removal. Once this is so, the fact that the provisions of the Central Excise Act are applied in the matter of levy and collection of special excise duty cannot and does not mean that wherever the Central Excise duty is payable, the special excise duty is also payable automatically. That is so as an ordinary rule. But insofar as the goods manufactured or produced prior to March 1, 1978 are concerned, the said rule cannot apply for the reason that there was no levy of special excise duty on such goods at the stage and at the time of their manufacture/production. The removal of goods is not the taxable event. Taxable event is the manufacture or production of goods.
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.
by Anand Mishra, Founder Advocate, AMLEGALS ( The author is a leading advocate and handling cases in Tribunals & High Courts of India. He can be contacted on firstname.lastname@example.org .For more please refer www.amlegals.com .
Update of 21.07.2015 – A major relief,by explaination under notification no.37/2015-C.E dated 21.07.2015 for Notification no.34/2015-C.E
Explanation.- For the purposes of this notification, appropriate duty or appropriate additional duty includes nil duty or concessional duty, whether or not read with any relevant exemption notification for the time being in force.”. Since, the impact of the above refered notification is nullified by this explanation ,hence, such clearences will be exempted and duty is not required to be paid.