Sales of excisable goods under shis schme

This query is : Resolved

CA Sanjay Baheti (Querist)
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13 August 2013 Dear Experts,

One of my client engaged in manufacturing activities i.e. manufacturing of Hydraulic Machines & duly registered as Manufacturer under Excise Law.

Now he going to dispatch/sale of said machines to a Renowned Customer under SHIS Scheme by virtu of Notification No 33/2012 dated 09/07/2012 as per law.The Value of Excisable Goods nearly Rs.100.00 Lacs.

As per above notification my client is not supposed to charge Excise duty @12.36% at the time of removal of Goods under the SHIS Scheme subject to submission of Certain documents as prescribed under this scheme prior to dispatch from the customer.

However as explained to us by concerned jurisdictional Excise Authority that my client has to reverse 6% of Basic Sales value of Goods to be dispatched at the tome of Removable of Goods as per Cenvat Credit Rules,2004 . However my client not having cenvat credit balance as on the date of dispatch so he has to pay the amount through PLA Account.This comes to nearly Rs 6.00 Lacs.

Now query is whether this tenable as per law or not as in purchase order from customer this was not mentioned therein hence this is not going to borne by them & My client says that even my margin is not to the extent of RS.6.00 Lacs if i am going to bear the same.

What's the factual position as per law & reply accordingly.

Regards

Madhukar N Hiregange

Madhukar N Hiregange (Expert)
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13 August 2013 Input credits are not available for manufacture of goods exempted from tax. Since credit of raw material would have been availed along with CG credit as well as input services, this restriction is in place except for exports.

Option available is to A) Maintain separate record of inputs used in such projects and not avail the credit.+ proportionate reversal of input services based on turnover as per Rule 6.
If the above cannot be done then the reversal is reqd.