F.No. 209/11/2005-CX-6, DT. 03/04/2007

Rebate on goods manufactured in North East etc., and subsequently exported under rule 18 of the Central Excise Rules, 2002 –reg.

Please refer to the instructions issued under letter of even number dated 08.12.2006 on the above subject. In this regard, references have been received from the field formations as well as the trade and industry seeking clarification on applicability of said instructions to the goods exported by units using the inputs manufactured and cleared by units availing the area based exemption scheme.

2. The issue has been examined. It is seen that the units located in other parts of the country are permitted to take full credit of duty paid on the inputs (procured from J&K, North East, Sikkim and Kutch) under rule 12 of the CENVAT Credit Rules, 2004. This rule is a special dispensation to ensure that the manufacturing units in North East, etc., are not placed at disadvantage vis-ŕ-vis units outside such areas. Further, there is no bar on utilizing this credit for payment of duty on goods cleared for exports. The units located in other parts of the country manufacture the goods, and pay the applicable excise duty on export of goods, and therefore, they are eligible to claim rebate of said duties under rule 18 of the Central Excise Rules, 2002. The Board"s instructions dated 08.12.2006 cannot be applied to such units as it clarifies that the term "duty paid" used in rule 18 of the Central Excise Rules, 2002 does not include that portion of duty, which is subsequently refunded to the "manufacturer" (units availing area based exemption). In the present case, the units located in other parts of the country are the manufacturers, and no portion of duty paid by them is refunded to them, therefore, rebate cannot be denied to such units

Yours faithfully,

(Rahul Nangare)
Under Secretary (CX-6&8)

F.No. 209/11/2005-CX-6

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