The Hindu Business Line : No restrictions on availing both Cenvat, exemption routes

IN an industry friendly move, the Finance Ministry has clarified that a manufacturer of textiles or textile articles can simultaneously avail himself of the exemption route as well as the Cenvat route for clearing either similar or even different goods.

"There is no restriction on availing both (exemption route and Cenvat route) simultaneously," a Finance Ministry circular said. The only stipulation now being placed on a manufacturer opting for both the routes simultaneously is the requirement to maintain separate books of account for goods availing the exemption route and for goods availing the Cenvat route.

The Finance Minister, Mr P. Chidambaram, had in his Budget speech on July 9, 2004 introduced a new tax regime for the textile sector. Every manufacturer — be it handloom or powerloom or composite mill had been allowed the option to choose between the two routes. One is the exemption route and the other is the Cenvat route.

The latest clarification has come in response to queries from trade and industry on whether a manufacturer of textiles or textile articles can avail himself of the full exemption under the exemption route as well as clear similar or dissimilar goods on payment of duty under the Cenvat route (optional duty at the rates of 4 per cent for pure cotton goods and 8 per cent for other goods) simultaneously.

The Finance Ministry has also clarified on the excise treatment of the finished goods of textiles or textile articles lying in stock on July 8, and containing inputs on which the Cenvat credit had already been availed.

The main question before the revenue department was whether a textiles or textile articles manufacturer could adopt the new exemption route to clear the stock of finished goods (as on July 8) that contained inputs on which Cenvat credit has been availed. A similar poser was made by trade on whether the finished goods manufactured subsequently from inputs in stock (on which Cenvat credit has been availed) as on July 8 can be cleared through the new exemption route.

Ever since the new tax regime for textile sector has been introduced, trade has been seeking clarity on the treatment of the stock of inputs (or stock of finished goods which contained inputs) as on July 8 on which the manufacturer had already availed credit.

The Finance Ministry has now clarified that a manufacturer of textiles or textile articles who had not taken any credit on his pre-budget stock of inputs can clear his finished goods under the exemption route without payment of any excise duty.

For manufacturers who had pre-budget stock of inputs (or stock of semi-finished or finished goods which contained inputs) on which credit had already been availed, the revenue department has given two options. "He (manufacturer) can continue to pay duty on the finished goods made there from, at post budget rates i.e., 4 per cent for cotton and 8 per cent for others.

"Alternatively, he can reverse the credit amount and avail of full exemption on the finished goods," the Finance Ministry circular said.

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