BACKGROUND:
We are a fertilizer company producing Urea and Ammonia, and also providing certain services such as maintenance & repairs service, renting of immovable services, etc.
We are paying 1% Excise Duty on UREA as per Serial No. 128 of Notification No. 12 /2012-C.E. dated 17th March,2012 (Notification attached below) and 12% Excise Duty on Ammonia.
Further, as per the definition of Exempted Goods, it includes goods in respect of which the benefit of an exemption under entry at serial number 128 of Notification No. 12 /2012- C.E. is availed. Therefore, UREA comes under the definition of Exempted Goods.
QUERY:
1. Instead of paying Excise duty in Cash, can CENVAT be used to pay Excise duty on UREA ?
2. Can CENVAT (availed on manufacturing ammonia) be used to pay Service tax on any Output services ?
OUR VIEW:
· Now, as per Rule 3, Sub rule (4) of CENVAT Credit Rules, 2004 -
“(4) The CENVAT credit may be utilized for payment of-
(a) any duty of excise on any final product; or
(b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially
processed; or
(c) an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or
(d) an amount under sub rule (2) of rule 16 of Central Excise Rules, 2002; or
(e) service tax on any output service
Provided that while paying duty of excise or service tax, as the case may be, the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the case may be, for payment of duty or tax relating to that month or the quarter, as the case may be:
Provided further that CENVAT credit shall not be utilised for payment of any duty of excise on goods in respect of which the benefit of an exemption under notification No. 1/2011-CE, dated the 1st March, 2011 is availed”
Now, as per Rule 3, Sub rule (4), 2nd Proviso of CENVAT Credit Rules, 2004 -
Provided further that CENVAT credit shall not be utilised for payment of any duty of excise on goods in respect of which the benefit of an exemption under notification No. 1/2011-CE, dated the 1st March, 2011 is availed:”;
This proviso explicitly says that, CENVAT credit shall not be used to pay Excise duty on goods in respect of which the benefit of an exemption under notification No. 1/2011-CE, is availed.This implies, that Excise Duty has to be paid in CASH only in respect of goods covered under not no. 1/2011-CE.
Our understanding is that, nothing has been explicitly said about goods in respect of which the benefit of an exemption under entry at serial number 128 of Notification No. 12 /2012- C.E. is availed. The above proviso doesn't say anything about Not. No 12/2012.
Therefore, instead of paying Excise duty on UREA in CASH, we may use the CENVAT Credit available with us to meet the Statutory dues.
· Further, as per Rule 3, Sub rule (4)(e) of CENVAT Credit Rules, 2004, CENVAT credit may be utilized for payment of service tax on any output service. It is clearly mentioned that CENVAT may be utilized on “ANY” output service. One to one relation is not required.
Is our view correct??
CAclubindia
