Does the law provide for

Retention / re entry of duty paid goods?

by

 

VIJAY. K. KUMAR

MA, B.Ed,BL,MBA

Superintendent of Central Excise, Hyderabad

 

As per the earlier rules 51A and 173 H of the CER 1944 , duty paid goods were not to be retained in or returned to the factory, except under certain circumstances and with permission/ intimation etc,. Now the new rules do not have any thing corresponding to these rules. In the absence of any prohibition, it may reasonably be assumed that now duty paid goods can be retained in the factory or returned without any permission or procedure.

 

This view was confirmed recently by Pune-II Commissionerate Instruction. No. 2/2001, dated 12.11.2001 – 2001(135) T55. However the instructions say that "manufacturers can bring duty paid goods in the registered manufacturing premises for trading activity and permission in this regard is not warranted from the Central Excise Department. However a factory can not receive goods from outside which are identical to those manufactured by assessees without proper permission from the Commissioner."
(emphasis supplied)

 

As stated earlier, the new rules, do not stipulate any bar on retention or return of duty paid goods. So duty paid goods can be brought in or retained in the factory without any restrictions. However Rule 16 of the Central Excise Rules 2002, provides for allowing of credit on returned goods. This is a beneficial rule and not a restrictive one. The wording of the rule is very clear – "Where any goods on which duty has been paid at the time of removal thereof are brought to any factory ………………….. Shall be entitled to have CENVAT credit of the duty paid as if such goods are received as inputs under the CENVAT Credit Rules, 2002, and utilise this credit according to the said rules." This means that the duty paid goods can be subsequently returned to the factory and the rules actually visualise such return. The facility is that when such goods are returned, credit is allowed. There was a little confusion in the CE (No.2) Rules, 2001 regarding whether the returned goods were required to be the same ones cleared from the factory. In Part IV of Chapter 18 of the Central Excise Manual, it was clarified that "as per this rule the goods should return to the same factory in which they were produced." However Board recently clarified that there is no restriction that the goods should return to the same factory. And this clarification now finds place in the new rules 2002.

 

Thus the position is that duty paid goods can be retained in or returned to the factory without any conditions. If credit is required, the procedure under Rule 16 may be followed. Actually rule 16 also does not specify any procedure. Only if there is any difficulty in following the provisions of rule 16, the goods may be returned subject to the conditions as may be specified by the Commissioner. The conditions are to overcome the difficulties and not to create them. If no credit is required and no difficulties are faced, there appears to be no procedure to be followed.

Unless there is a bar in the rules to retain or return duty paid goods, it is doubtful if we can enforce any restrictions. EXCISE LAW TIMES – 15.04.2002 – A 116