Circular No. 948/09/2011-CX
Government of India
Ministry of Finance
(Department of Revenue)
Tax Research Unit
dated the 5th July, 2011
All Chief Commissioners of Central Excise (including LTU),
All Chief Commissioners of Customs & Central Excise,
All Director Generals,
Subject: Applicability of Circular No. 845/03/2006-CX dated 1.02.2007 on textile products falling under Chapter 55 – regarding.
It has been brought to the notice of the Board that doubts have arisen on whether the benefit of proportionate Cenvat credit as clarified by Circular 845/03/2006-CX dated 1.02.2007 would be available to textile items of heading 5508, 5509, 5510, 5511, 5512, 5513 and 5514 of the First Schedule to the Central Excise tariff Act since a reference to these headings was omitted in Notification No.29/2004-CE dated 9th July, 2004 vide notification No.11/2009-CE dated 7th July,2009.
2. The matter has been examined. Prior to 7th December,2008 textile goods of pure cotton attracted a concessional excise duty of 4% while others attracted a concessional excise duty of 8% under Notification no. 29/2004-CE dated 9th July, 2004 . The duty rates under the said notification were reduced from 4% to Nil and from 8% to 4% respectively vide notification no. 58/2008-CE dated 7th December, 2008. When the duty rates were restored from Nil to 4% and from 4% to 8% in the said notification vide notification no.11/2009-CE dated 7th July, 2009, the reference to headings 5508, 5509, 5510, 5511, 5512, 5513 and 5514 were omitted in the said notification 29/2004-CE. This was done because items falling under these headings already attracted 8% by tariff. Thus the effective rate of excise duty on these textile items operated through the tariff since both the effective as well as the tariff/statutory rate was at 8%. Subsequently in Budget, 2010-11, when the general Cenvat rate was increased from 8% to 10%, the tariff rates for these headings were also increased to 10%. Since both the effective duty rate and the tariff rate are at 10% for these goods, the excise duty rates on these goods continue to operate by tariff even though they are no longer referred to in notification no. 29/2004-CE.
3. In view of the above, the non mention of these headings in notification no.29/2004-CE has no bearing on the availability of Cenvat credit and applicability of Circular no. 845/3/2006. It is hereby clarified that the benefit of proportionate credit would continue be available to textile items falling under the aforementioned headings.
4. Trade & Industry as well as field formations may be suitably informed.
5. Receipt of this circular may kindly be acknowledged.
6. Hindi version will follow.