The Hindu Business Line : Denial of Cenvat duty credit to TN textile producers revoked

IN a significant ruling, the Central Board for Excise and Customs (CBEC) has restored status quo ante for availing of credit of the Cenvat duty paid on inputs used in the fabric manufactured by independent textile weavers supplying to major garment manufacturer-exporters.

The restoration of the Cenvat duty credit to these independent weavers in the powerloom sector has come through a circular issued by the Board early this month. This has reverted the action of a Commissioner of Central Excise, who had issued notices to the textile fabric producers early this year, disallowing the duty credit.A good number of cotton textile producers in the powerloom sector in Tamil Nadu, supplying fabrics to major garment manufacturer-cum-exporters, have reasons to cheer over the move . The availment of credit of the Cenvat duty paid on inputs such as yarn and chemicals used in the fabrics, supplied to the manufacturer-exporters (for further processing in their export production), was questioned by the Central Excise Commissioner, Salem through a circular issued in January this year. The Commissioner advised the weavers to revert 8 per cent of the duty on the value of goods cleared by them in the past.

The Commissioner disallowed the credit on the inputs cleared under the Central Excise Notification No. 43/2001 CE issued under the Rule 19 of the Central Excise rules on the ground that the final product being exportable was exempted from excise duty. The Rule 6 of the Cenvat Credit Rules read with sub rules did not allow credit of duty paid on inputs, which are used in the manufacture of exempted final products.

But the independent textile weavers contended that the Excise notification is only a concessional notification offering `nil' rate of duty.

The Board in its clarification circular had pointed out that the Central Excise Notification No.43/2001 CE, issued under the Rule 19 of Central Excise Rules, only prescribed conditions, safeguards and procedures but the goods procured under this notification did not attract the provisions of the Rule 6 of the Cenvat Credit Rules of 2002. This circular from the Board has restored the status quo ante of the Cenvat duty credit to the weavers to the pre-January 2004 stage.

More Stories on : Textiles | Excise and Customs | Tamil Nadu

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page