Interest on amount paid under provisional assessment: Interest on amount paid under provisional assessment would now have to be computed from the due date under Rule 8(1) of the Central Excise Rules till the date of actual payment, whether the amount is paid before or after finalisation of provisional assessment. Rule 7 of the Central Excise Rules, 2002 has been amended in this regard, with effect from 1-3-2016, by Notification No. 8/2016-C.E. (N.T.), dated 1-3-2016. The amendment effectively neutralizes the recent decision of the Bombay High Court, as upheld by the Apex Court, wherein the High Court held that interest becomes leviable once the assessment is finalized, but where differential duty is paid prior to the finalisation of the assessment, then no interest is payable.

Excise Returns – Quantum of returns reduced and provisions being made for revision: Number of returns required to be submitted by an assessee under Central Excise Rules, 2002 have been reduced. Instead of two annual returns, i.e. Annual Financial Information Statement and Annual Installed Capacity Statement, only one annual return (form yet to be notified) will be required to be filed. Rule 12 of the Rules is being amended, from date yet to be notified, to provide for revision of return by the end of the calendar month in which the original return is filed. Annual Return will be allowed to be revised within a month of submission of original return. Similarly Rule 17 relating to EOUs is also being amended, to provide for revision of returns.

Cenvat Credit Rules, 2004 – Amendments: Cenvat Credit Rules, 2004 are being amended from 1-4-2016. Some of the important changes are highlighted here.

Amendments in definitions:

  • Wagons covered under sub-heading 860692 and equipment and appliances used in office located within factory, are being included as capital goods.
  • Goods used in pumping of water are being included as inputs and capital goods.
  • Capital goods of value upto Rs. 10,000/- per piece will qualify as inputs.
  • Service by way of transportation of goods by a vessel from India to a foreign port is being excluded from the purview of ‘exempted service’ (from 1-3-2016).

Credit availability and utilisation:

  • Option of maintaining separate accounts under Rule 6 for availment of credit on common inputs and input services is being omitted
  • Option of payment of 6% or 7% under Rule 6 available, but is now subject to a maximum of total credit available in the account at the end of the period to which the payment relates 
  • Rule 6(3A) providing formula is also amended.
  • Capital goods exclusively used for manufacture of exempted goods or provision of exempted services – Credit will not be not available for 2 years from the date of commencement of commercial production or provision of services.
  • ISD will be able to distribute Cenvat credit to ‘outsourced manufacturing units’, defined as job worker who is required to pay duty under Valuation Rule 10A on the goods manufactured for the ISD or job worker who manufactures goods bearing brand name of ISD and is required to pay duty on the value determined under Excise Section 4A.
  • Manufacturer having one or more factories would be allowed to take credit on inputs received under an invoice issued by a warehouse of the manufacturer
  • NCCD payment – Only NCCD credit utilizable with effect from 1-3-2016.
  • New Infrastructure Cess payment cannot be made by utilizing credit.
  • Tools (Chapter 82) sent to other manufacturers/job workers for production of goods according to his specifications, eligible for credit.
  • Period of the applicability of the AC/ DC Order permitting manufacturer to clear goods directly from premises of job worker extended from 1 year to 3 years.

Returns pruned 

  • Monthly return for information regarding receipt and consumption of principal inputs, abolished

Recovery of credit 

  • Rule 14(2) prescribing procedure based on first-in-first-out method for determining whether credit has been utilized, is being omitted.

Notification 

Exemption to goods for manufacture of excisable goods – New Rules amended: Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable and Other Goods) Rules, 2016, which were notified recently and were to come into effect from 1-4-2016 are now effective from 16-3-2016. Notification No. 22/2016-C.E. (N.T.), dated 15-3-2016 issued for the purpose, also omits option of provision of ‘security’ along with the general bond. Hitherto, these new Rules and the 2001 Rules provided for execution of general bond with surety or security. It may be noted that new Rules provide that if the recipient manufacturer is found to be nonexistent, the demand of duty, in case of nonuse of goods as intended, will be raised on the supplier manufacturer. 

Ratio Decidendi

Cenvat credit when admissible on invoices issued by unregistered unit: CESTAT Delhi has held that Cenvat credit cannot be denied for technical lapse of absence of registration certificate, with the input supplier, at the time of issuance of invoice. It observed that the disputed goods had suffered duty and were received/used in the factory for production of the final product. [South Eastern Coalfields Ltd. v. Commissioner – Final Order No. 50014/2016, dated 5-1-2016, CESTAT Delhi]

Cenvat credit utilization for payment of duty on inputs procured duty free but not utilized as per conditions, correct: Delhi Bench of the CESTAT has held that duty paid, by recipient, on inputs initially procured duty free, but where the same were not utilized according to the conditions of exemption, by utilizing Cenvat credit, is correct. It was also held that credit again taken of such duty payment, which was again utilized in payment of duty on final product wherein the said inputs were used, was also correct. [Shree Rajasthan Syntex Ltd. v. Commissioner – Final Order No. 50200-50202/2016, dated 9-2-2016, CESTAT Delhi]

Cenvat credit on furnace oil not required to be reversed on clearance of sludge: Taking note of the fact that sludge arises due to storage and handling and that the same cannot be put to use as furnace oil, CESTAT Delhi has upheld the Order of Commissioner (Appeals) holding that reversal of credit availed on furnace oil is not required on removal of sludge. Commissioner (A) in the impugned order had held that when the assessee clears furnace oil sludge, he does not clear inputs (furnace oil) as such, as the sludge cannot be equated with the furnace oil. It was held that clearance of the furnace oil sludge is not covered under Rule 3(4) of Cenvat Credit Rules, 2002. [Commissioner v. Prism Cement Ltd. – Final Order No. 50070/2016-EX(DB), heard on 1-1-2016, CESTAT Delhi]

Demand on shortage of Cenvatted inputs when not sustainable: CESTAT Ahmedabad has allowed assessee’s appeal in a dispute involving demand on shortage of Cenvatted inputs. The Tribunal in this regard found force in the contention of the assessee that no excise duty can be levied on clearance of inputs on the ground that there is shortage, since the said duty is leviable on ‘manufacture’, and there is no manufacture of inputs in the instance case. It was held that levy of Central Excise duty on the value on such inputs has no sanction of law. [Stove Industries Ltd. v. Commissioner - Order No. A/10124/2016, dated 22-2-2016, CESTAT Ahmedabad]

Captive consumption exemption to moulds: Exemption on captive consumption under Notification No. 67/95-C.E. is available to moulds manufactured, where the invoices for the same were raised and payments were received from buyers, but such moulds were not cleared out of factory. CESTAT Delhi in this regard noted that ownership of the goods is not relevant and that the only criterion for grant of exemption is that the capital goods manufactured in a factory are used within the factory of production. [Ozla Plastooraft (P) Ltd. v. Commissioner – Final Order No. 50217-50218 /2016, dated 11-2-2016, CESTAT Delhi]

Cenvat credit on containers when value thereof not included in value of final product: Rejecting the contention of the Revenue Department that since the value of chlorine containers was not included in the value of the final product, Cenvat credit would not be available on the same, CESTAT Ahmedabad has allowed Cenvat credit on such containers used in the manufacture of final goods. It observed that there was no material available on record that any proceeding was initiated against the assessee for non-inclusion of the value of the containers in the assessable value of the final product. [Kadakia Alkalies & Chemicals Limited v. Commissioner - Order No. A/10118 / 2016, dated 23-2-2016, CESTAT Ahmedabad]

Provisional release of currency seized as proceeds of clandestinely removed goods, permissible: CESTAT Delhi has held that currency/cash seized as proceeds of clandestine manufactured and cleared excisable goods, could be provisionally released on certain conditions. The Tribunal in this regard rejected the contentions of the department that there is no provision under the Central Excise Act, 1944 to provisionally release the currency. It was noted that since the seized goods were already allowed to be provisionally released, applying a different treatment for the currency which is seized as goods, was not correct. Regarding revenue interest, the Tribunal was of the view that provisional release of the currency was sought only to discharge liability along with interest, and therefore, the same would be in the interests of revenue. [Pramod Auto Parts (P) Ltd. v. Commissioner – Final Order No. 53204/2015, dated 7-10-2015, CESTAT Delhi]

Exemption to sub-contractor: CESTAT Delhi has allowed exemption to the assessee in a case where the certificate from the competent authority was issued in the name of another firm which also mentioned that the purchase order was placed on yet another firm, who placed the purchase order on the assessee. The dispute involved exemption under Notification No. 3/2004-C.E. to machineries, appliances and components required for setting up of water supply plants. [K.E.I. Industries Ltd. v. Commissioner– Final Order No. 50171/2016, dated 3-2-2016, CESTAT Delhi]