Recently, the Central Board of Excise and Customs (CBEC) has issued a circular clarifying that exemption from excise duty should not be denied in case of supply of manufactured goods by EOU to advance Licence/ Authorization holder in DTA, without payment of excise duty.
In the year 2003, the CBEC had issued Notification No. 22/2003 dated 31.03.2003 denying excise duty exemption to inputs, in case where goods cleared in DTA to which no excise or customs duty is levied. A similar notification was issued in case of customs duties on similar grounds.
As per the notification, various representations have been received seeking clarity on the applicability of the said notification in cases when goods manufactured by EOU are supplied to Advance Licence/Authorization holder in DTA.Recently, when the issue was discussed in the Central excise Tariff Conference wherein the CBEC was asked to clarify the same.
It is stated that “the issue has been examined. It is seen that s. no.22 of notification no. 23/2003-CE dated 31.03.2003, as amended, issued in respect of goods manufactured by EOUs and cleared in DTA, specifically exemptsCentral excise Duty when such manufactured goods are supplied to an AdvanceLicence/ Authorization Holder. In fact, clearance from EOU or DTA unit to Advance Licence/ Authorization Holder has been allowed without payment of Central Excise Duty, as both the cases are of “Import substitution”. In case of supply of goods to Advance Licence/ Authorization Holder, the export obligation is castupon person holding AdvanceLicence/ Authorization and in case of default in export obligation recovery from the person holding AdvanceLicence/ Authorization is provided for in law.”
“Further, if the EOUs are made liable to pay back the amount availedas exemption on the inputs in case of supplies to Advance Licence/ Authorization Holder, with reference to the said proviso under notification no 22/2003-CE dated 31.03.2003, then the EOUs would be placed in a disadvantageous position when compared to a DTA unit which supply manufactured goods to Advance Licence Holder without payment of Excise Duty in terms of notification 44/2001-CE(N.T) dated 26.06.2001 and without reversal of the CENVAT credit availed on inputs. This position has been clarified by Board vide circular no. 785/18/2004-CX dated 17.05.2004.”
The present circular clarifies that the above notifications are not applicable in case of supply of manufactured goods by EOU to advance Licence/ Authorization holder in DTA, without payment of excise duty.
Read the full text of the circular below.
