The Hindu Business Line : Stock of light diesel oil — Ministry to move SC against Cenvat order

THE Finance Ministry has decided to file a special leave petition in the Supreme Court against the Karnataka High Court's order setting aside the Revenue Department's circular with respect to Cenvat credit on stock of light diesel oil (LDO) as on February 28, 2003.

The high court's order was given in the case of Grasim Industries Ltd. The Budget 2003-04 had with effect from March 1, 2003 withdrawn the Cenvat credit facility in respect of light diesel oil.

Under the existing scheme, Cenvat credit could be utilised for payment of any excise duty on any final product or for payment of duty on inputs or capital goods. A manufacturer of final product is allowed to take Cenvat credit on the excise duty, additional excise duty, national calamity contingent duty and countervailing duty paid on any inputs received in the factory.

The Revenue Department had in its March 2003 circular taken a position that the existing stock of LDO as on February 28, 2003, would not be eligible for the purpose of availing Cenvat credit. It had also said that any Cenvat credit that had been availed on LDO stock as on February 28, 2003 should be reversed by the assessee.

The circular also held that, prior to March 1, 2003, LDO was a specified input, only if used in the manufacture of final product on or before February 28,2003.

Official sources said that the Finance Ministry has now given instructions that the show-cause notices, which are yet to be adjudicated, may be kept pending till the department's SLP is finally decided by the Supreme Court.

In other cases, instructions have been given that show-cause notices may be issued to safeguard revenue. It has also been held that the notices in such cases be also kept pending.

Ever since the facility of availing Cenvat credit on duty paid on LDO was withdrawn by the Centre, industry associations have been working hard to get this facility restored.

The Finance Ministry had in March 2003 justified the decision of the Government to withdraw the Cenvat credit facility in respect of duty paid on LDO by pointing out that the decision was "an anti-evasion measure". It was held that the measure was brought about on account of large-scale adulteration.

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