TRADE NOTICE NO.    43 /2003

Dated:

27.03.2003

 

Subject: - Refund of unutilized deemed credit on grey fabrics used in the processed fabrics exported under bond – regarding.

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 Copy of Board's Circular No. 702/18/2003-CX (F.No.267/23/2003-CX.8) dated 13.03.2003 is communicated herewith for information and necessary action.

     The contents of  the Trade Notice may be brought to the notice of all concerned.

(Issued from file C.No. IV/16/2/2003 CX.. PoI)

                                                                                                           

                                                                        Sd/-                

                                                         (P.V.R. REDDY)

     ADDITIONAL COMMISSIONER (TECH.)

To

As per Mailing List (Both Department & Trade)

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COPY OF BOARD's CIRCULAR NO. 702/18/2003-CX dated 13.03.2003

I am directed to say that a doubt has arisen whether the refund claims of unutilized deemed credit of duty on procurement of grey fabrics used in the making of processed fabrics ultimately exported can be refunded in the background of the objection raised by C&AG about the admissibility of deemed credit on grey fabrics. C&AG has raised an objection that since grey fabrics is not mentioned as ‘declared inputs’ in the notification No.29/96-CE(NT) dated 03.09.96 (relevant at the material time), the deemed credit is not available thereon. Certain field formations have taken the view that since the admissibility of the deemed credit is under dispute, the unutilized credit, if any, accumulated on account of exports can not be refunded. A linked issue has been raised about grant of refund of such unutilized credit for the period 01.07.2001 to 28.02.2002 as it has been viewed that the supporting notification prescribing the procedure of grant of such refunds was issued only on 01.03.2002 vide notification No.11/2002-CE (NT), dated 1.3.2002.

 2. The above issues have been examined by the Board. It is observed that Department has contested the audit objection stating that although grey fabrics are not included as the declared inputs in the said notification, these are made out of duty paid yarn/ fibres, which are declared inputs and have suffered appropriate excise duty. Also deemed credit is admissible under the erstwhile rule 57A(2) of Central Excise Rules, 1944 even when the declared inputs are not used directly in the manufacture of final products but are contained in the final products. Though the issue is not settled yet, Board reiterates its earlier view and observes that the refund of the said unutilized deemed credit on grey fabrics is admissible. On the second issue, it is observed that the substantive provisions to grant such refund existed from 01.07.2001 in terms of rule 5 of CENVAT Credit Rules, 2001. Thus, refund being a substantive right, may not be denied merely because a notification prescribing the procedure for claiming the refund was issued later i.e. on 01.03.2002.

                                                                                                                                                                                    sd/-                     

                                                                        Vijay Mohan Jain
Under Secretary to the Government of India