Circular No. 206/40/96-CX dated 1/5/96

Subject: Admissibility of Modvat on inputs stored outside the factory- premises

The Board has been receiving representations on the issue relating to availment of MODVAT credit on material which is not received directly inside the manufacturer"s premises and the same is required to be stored outside the factory premises and subsequently transshipped to the manufacturer"s factory. This point was also raised in the 35th Central Advisory Council in meeting held on 4th November, 1995 wherein it was represented that as no invoices/subsidiary gate passes can be issued from the storage space outside the factory, there is a danger of modvat credit being lost.

2. The matter has been examined by the Board and it has been decided to allow Modvat credit in such type of situations where the manufacturer after buying the goods cannot bring these inputs inside the factory premises on account of shortage of storage space, hazardous nature of inputs etc.

I am further directed to say that such manufacturers can seek permission for storage of Modvatable goods outside the factory premises from the Juris-dictional Commissioner of Central Excise and the said permission will be granted treating the storage point as in extension of the factory premises. Suitable safeguards to protect revenue interests should, of course, be taken to prevent misuse of this facility. Credit in such cases will be taken in the books of accounts only when the entire inputs covered by invoice are received inside the factory for being put to use in production.

Sd./-
(Mallika Arya)
Under Secretary to the Govt. of India

F.No.267/65/96-CX.8

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