Excise rebate vs. duty draw back

5234 views 3 replies

Sanjay Sharma

Astt. Manager-Indirect Taxation

76 Points Joined June 2008

Dear Sir,

We are exporting the Automobiles parts on payment of Excise duty and subsequently claiming the rebate of excise duty paid at the time of Export and while procuring inputs we are claiming the CENVAT credit of the excise duty paid on Inputs. There is no domestic sales, it is 100% export.

Questions need to be answered—

In your view, is it appropriate to deposit the Excise duty and then claim the same as rebate? ,
Should we stop the export on payment of duty and subsequent claiming of rebate, because in this scheme we are getting only our hard earned money back which we deposited as excise duty from the excise department after a considerable time, no value addition?
Alternatively, and most importantly, should we opt Export without payment of Excise duty under LUT and then claim (i) Refund of CNVAT credit accumulated on account of non-payment of duty on export, (ii) claim Duty Draw Back under All Industry Rate?

Pls. give us your valuable opinion about above situation and guide us which scheme we should go for.

Thanks and Regards,

Sanjay Sharma.

Replies (3)

Prabhat Kumar

Advocate & Consultant

1912 Points Joined July 2009

If you are a manufacturer exporter then you should export the goods under LUT without payment of Excise Duty.In case you are merchant exporter then obtain C.T-1 and procure the goods without payment of duty and export the same.

Sunil Kumar G

AGM Taxation

373 Points Joined April 2012

Its absolutely depend on your duty structure. If you buy locally and pay central excise duty and if you export without out payment duty (LUT/ Bond) your credit will be accumalated. It will affect your working capital. If you dont have domestic clearance again the duty credit accumalate every time you purchase inputs. So better you plan if your duty can recover under Rule 18 of Central Excise Rules (Rebate) so you can go ahead with Rule 18 otherwise you should work out Rule 5 of Cenvat Credit Rules Refund.

Rajesh Kumar

Advocate- Tax

7806 Points Joined December 2008

The procedure you are following is simple and easy to implement. However, if you are thinking to avail refund of Cenvat Credit under Rule 5- in that case it shall be better if you procure inputs without payment of Central Excise duty under notification 43/2001. In that case your working capital will not be stuck. The procedure is slightly tedious, but you can manage it easily once system is developed. It can be used in addition to Rule 5 which you can use for other credits taken for which Notification 43/2001 can be availed.

Going to AIR of Duty Drawback depends upon value addition in your manufacturing. If value addition is higher and decent drawback rate is there, it can be easiet way to take duty paid on inputs.