Amendment in Cenvat Credit Rules – The exporters of services eligible to claim refund of input credit

The Government has issued Notification No. 4/2006 (Central Excise–NT) and Notification No. 5/2006 (Central Excise – NT) both dated 14th March 2006 to amend Rule 5 of Cenvat Credit Rules, 2004, which now enable exporter of output service to claim refund of Cenvat Credit in respect of input or input service used in export of taxable output service.

It may be noted that Rule 5 of Cenvat Credit Rules, 2004, hitherto allowed utilization of Cenvat credit in respect of input or input service to both, the manufacturer-exporter and also to the exporter of output service towards the payment of duty of excise on final product cleared for home consumption, or for export on payment of duty or service tax on output service. However, unlike the manufacture-exporter, the refund of Cenvat credit was not allowed in case of such exporter of output service if he could not utilize such credit. This anomaly is now rectified by issuance of Notification No. 4/2006 (Central Excise – NT).

Notification No. 5/2006 (Central Excise –NT), supersedes earlier Notification No. 11/2002 (Central Excise –NT) dated 1-3-2002, which now prescribe conditions for grant of refund of Cenvat credit as enumerated below in brief :–

• The final product or output service is exported as per the procedure laid down in Export of Service Rules, 2005.
   

• The claim for such refund should not be submitted more than once for any quarter in the calendar year. However, when average export clearance in value exceeds 50% of such     clearance in the preceding quarter or in case of EOU, such claim can be lodged once in every calendar month.
   

• Refund would be allowed only when utilization of Cenvat credit is not possible in respective quarter or the month, as the case may be.
   

• When the exporter is in the mixed business of export of taxable and exempt service and/or excisable and non-excisable goods, the refund would be allowed in the proportion of export turnover to the total turnover in the given period. In such a case, the denominator "total turnover" would mean sum total of the value of all output services whether taxable or exempt, all excisable/non-excisable goods and value of bought out goods sold.
   

• The claim is to be lodged and in Form "A" to the Jurisdictional Deputy/Assistant Commissioner together with copy of invoice and banker’s certificate of realization of export proceeds.
   

•  Section 11B of Central Excise Act, 1944, is made applicable and therefore application in Form "A" is to be filed before the expiry of one year from the date of such exports.