Cenvat Credit Applicable on Textile Products

[CBEC Circular No. 948 dated 5^th July 2011]

Subject: Applicability of Circular No. 845/03/2006-CX dated 1.02.2007 on textile products falling under Chapter 55.

It has been brought to the notice of the Board that doubts have arisen on whether the benefit of proportionate Cenvat credit as clarified by Circular 845/03/2006-CX dated 1.02.2007 would be available to textile items of heading 5508, 5509, 5510, 5511, 5512, 5513 and 5514 of the First Schedule to the Central Excise tariff Act since a reference to these headings was omitted in Notification No.29/2004-CE dated 9^th July, 2004 vide notification No.11/2009-CE dated 7^th July,2009.

2. The matter has been examined. Prior to 7^th December,2008 textile goods of pure cotton attracted a concessional excise duty of 4% while others attracted a concessional excise duty of 8% under Notification no. 29/2004-CE dated 9^th July, 2004 . The duty rates under the said notification were reduced from 4% to Nil and from 8% to 4% respectively vide notification no. 58/2008-CE dated 7th December, 2008. When the duty rates were restored from Nil to 4% and from 4% to 8% in the said notification vide notification no.11/2009-CE dated 7th July, 2009, the reference to headings 5508, 5509, 5510, 5511, 5512, 5513 and 5514 were omitted in the said notification 29/2004-CE. This was done because items falling under these headings already attracted 8% by tariff. Thus the effective rate of excise duty on these textile items operated through the tariff since both the effective as well as the tariff/statutory rate was at 8%. Subsequently in Budget, 2010-11, when the general Cenvat rate was increased from 8% to 10%, the tariff rates for these headings were also increased to 10%. Since both the effective duty rate and the tariff rate are at 10% for these goods, the excise duty rates on these goods continue to operate by tariff even though they are no longer referred to in notification no. 29/2004-CE.

3. In view of the above, the non –mention of these headings in notification no.29/2004-CE has no bearing on the availability of Cenvat credit and applicability of Circular no. 845/3/2006. It is hereby clarified that the benefit of proportionate credit would continue be available to textile items falling under the aforementioned headings.

4. Trade & Industry as well as field formations may be suitably informed.

F.No.354/97/2011 -TRU