Circular No. 283/117/96-CX, dated 31/12/96
Sub : Utilisation of MODVAT credit in respect of inputs on which credit
is availed, but the inputs are exported as such under bond-
It has been represented to the Board that the field formations have taken a view that
credit on inputs cleared as such for export under bond cannot be allowed to be
utilised for payment of duty on final products cleared for home consumption nor can it
be refunded in cash. In this regard, it has been stated that aforesaid facilities are
available where inputs are used in the manufacture of export products and not to the
cases where input have themselves been exported. This doubt has arisen on account of
the proviso to Rule 57F(4) according to which duty availed on inputs used in the
manufacture of final product exported under bond could be utilised towards payment of
duty on goods cleared for home consumption or refunded in cash.
2. The matter has been examined by the Board.
3. Rule 57A(1) provides for the general scheme of MODVAT given in Section V(AA) of the
Central Excise Rules, 1944 and it indeed mentions that credit of . duty will be
allowed for utilising towards payment of duty of excuse leviable on the final
products. Whereas Rule 57F is a more specific provision regarding manner of
utilisation of the inputs and the manner of utilisation of the credit allowed in
respect of duty paid thereon. Rule 57F (1) (ii) permits removal of the inputs as such
for export under bond. Proviso to Rule 57F(4) deals with manner of utilisation of
credit in cases of export of "final products" or "intermediate products" under bond.
Export of inputs as such under bond were treated as "final product" by virtue of
"deemed manufacture" clause (i.e. the expression as if such inputs have been
manufactured in the same factory) under the erstwhile Rule 57F(l)(ii) which covered
all. such cases within the ambit of proviso to Rule 57F(4). This expression was
omitted by Notification No. 2S/95-CE(NT) dated 29.6.95 with a view to simplify the
clearance procedure, which has created a doubt in respect of utilisation of credit in
such cases. It is not the intention of the Government to debar such manufacturer-
exporters from utilising credit. Clearance of inputs as such for export under bond can
still be treated at par with "final product" and the manner of utilisation of credit
in such cases will be governed by the provisions of the proviso lo Rule 57F(4).
4. It is also observed that in case such inputs and cleared on payment of duty by
debit in RG-23A Part-11 account by virtue of Rule 57F(4)(iii), the manufacturer will
be entitled for rebate under Rule 12(l)(a) of the Central Excise Rules. He is,
however, put to disadvantage if he opts for export under bond procedure. The exports
under "claim of rebate" and "export under bond" should be at parity., since, intention
of both the procedures are to make duty incidence "nil". It is also an established
principle that rules should be interpreted in a manner which do not render them
redundant.
5. Accordingly, it is clarified that the Modvat credit in RG-23-A Part-11 account
against the export of inputs as such under bond can be utilised in the same manner as
it is provided for a final product under "Proviso to Rule 57F(4). Obviously, it
follows from this that such inputs should be allowed to be exported under bond without
any reversal of the credit.
Sd/-
(P.K. Sinha)
Under Secretary (CX.S)
F.No. 267/19/96-CX.8
Presented by eximkey.com