CBEC Clarifies but Cenvat Credit can be used for Payment of Any Excise Duty

[Ref: CBEC Draft Circular dated 10 September 2012]

Subject: Cenvat credit of basic excise duty for payment of NCCD

Representations have been received from certain industry associations seeking a clarification whether Cenvat credit of the duty of excise specified in the First Schedule to the Central Excise Tariff Act (commonly known as basic excise duty) paid on inputs used in or in relation to the manufacture of final products can be utilized for payment of National Contingency Calamity Duty (NCCD) on said final products. It is reported that some field formations are issuing show-cause notices for recovery of NCCD paid out of Cenvat credit of basic excise duty.

2. The matter has been examined. According to sub-rule (1) of rule 3 of Cenvat Credit Rules, 2004, a manufacturer or producer of final products is allowed to take credit of basic excise duty except when paid on any goods in respect of which the benefit of exemption under notification No.1/2011-CE dated 01.03.2011 or Sl. Nos. 67 and 128 of notification No.12/2012-CE dated 17.03.2012 is availed. According to sub-rule (4) of rule 3 of Cenvat Credit Rules, 2004, credit may be utilized for payment of any duty of excise on any final product. NCCD is a duty of excise levied under Section 136 of the Finance Act, 2001. The only restriction with regard to the utilization of Cenvat credit of any duty specified in sub-rule (1) for payment of NCCD is prescribed in the fifth proviso to sub-rule (4) whereby such credit cannot be utilized for payment of NCCD on goods falling under tariff items 8517 12 10 and 8517 12 90 respectively of the First Schedule to the Central Excise Tariff Act.

3. Further Rule 3(7) (b) of the Cenvat Credit Rules provides that CENVAT credit in respect of NCCD leviable under Section 136 of the Finance Act, 2001 shall be utilised towards payment of NCCD duty only. This envisages the utilisation of NCCD credit availed to be restricted for payment of NCCD on the final product but does not interfere with the provisions of Rule 3(4) (a) of the CENVAT Credit Rules that allow the credit of basic excise duty to be utilised for payment of NCCD.

4. From a combined reading of these provisions, it is evident that barring exceptions in the fifth proviso to rule 3(4), credit of basic excise duty paid on inputs used in or in relation to the manufacture of final products is permitted to be utilized for payment of NCCD on such final products in terms of the provisions of Cenvat Credit Rules, 2004. This position is in conformity with the view taken by CESTAT, Kolkata in Prag Bosmi Synthetics Ltd vs. CCE Dibrugarh 2007 (216) ELT 254, which was upheld by the Hon’ble Guwahati High Court vide order dated 29.06.2011 in C.EX ref. Case No. 4/2008 and since accepted by the Board.

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

F.No.354 /135/2012-TRU