CENVAT VIS-À-VIS EXPORT PROCEDURES

CENVAT VIS-À-VIS EXPORT PROCEDURES

There are three options available to an exporter under Central Excise law for saving the duty paid on inputs used in manufacture of final product. These three alternatives are: -

(i) Bringing material at nil rate of duty under Rule 13 (1) (b) of Central Excise Rules for manufacture in bond of export goods;

(ii) To take refund of duty paid on inputs under Rule 12 (1) (b) of Central Excise Rules used in manufacture of Export goods;

(iii) To take Cenvat credit and take the refund of duty paid under Rule 57AC (7).

The other alternatives of saving input stage duty like Duty Drawback, DEEC (quantity based advanced license) and Duty Entitlement Pass Book (DEPB) Scheme are under the preview of Customs Authorities.

These all three alternatives from Excise department are equal but the exporters exporting their production opt for the first of these alternatives. The reason being the refund procedure is very cumbersome and obtaining the same from revenue department is more difficult. It leads to undue blockage of working capital from the time of payment of duty by supplier till the receipt of refund from the department.

However, the Notification No. 26/99-CE (N.T.), dated 06/04/1999 created a disparity between the first two options and the third alternative. This was brought by the amendment in Rule 12 as well as Rule 13 of Central Excise Rules which excluded the amendment in definition of materials. As a result of it, you can not take benefit of material used as a fuel under the aforesaid Rule. Normally, HSD oil, furnace oil, LDO etc. are used as a fuel.

There is ban on taking Cenvat credit on HSD oil for manufacture of final product as per Explanation to Rule 57 AA but the Cenvat credit is available on furnace oil, LDO etc. Even earlier it was available under erstwhile MODVAT Rules. As such, the manufacturer exporters using the LDO, furnace oil as a fuel are compelled to opt for third option of taking credit and then claiming refund under CENVAT Rules rather than simple and most beneficial provision of bringing inputs at nil rate of duty under Rule 13 (1) (b) of Central Excise Rules.

The earlier definition of “material” under Rule 12 or Rule 13 permitted the bringing of HSD also. As such, the intention of government was to put a ban on the same. But it has mentioned the word “fuel” in its amendment notification. The same benefit is available to exporters from other route then it shall also be allowed. The exporter are compelled to block their money for a long period right from bringing the inputs after payment of duty, utilizing the same in manufacture of final export goods, exporting it, filing of proof of export and claiming of refund claim on quarterly basis. A considerable time is lost and the amount is paid to exporter after a long battle with the department. Therefore, it is suggested that the facility of Rule 12 and Rule 13 for LDO and Furnace Oil used as fuel should be restored. This will help the exporter to devote their time and energy to constructive work.

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CENVAT VIS-À-VIS EXPORT PROCEDURES

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