Director General

Subject : Department of Revenue Circular No. 799/32/2004-CX dated 23-9-04 regarding

Department of Revenue had issued a Circular No. 796/29/2004-CX dated 4-9-04 wherein Department of Revenue had withdrawn the warehousing facility for removal of Petroleum Products without payment of duty from the refineries to warehouses or from one warehouse to another warehouse without payment of duty. A copy of circular is enclosed as Annexure I.

EPCES had submitted a representation to Shri Sidharth Kak, Member (Customs) vide our letter dated 10-9-04, a copy of the letter is enclosed as Annexure II, requesting that EOUs and SEZ units should continue to get the supply of petroleum products under CT3 facility as was available earlier.

This issue has been examined by the Department of Revenue and now Department of Revenue has issued Circular No. 799/32/2004-CX dated 23-9-04, a copy of the Circular is enclosed as Annexure III. In this circular Department of Revenue has clarified that EOUs are entitled to avail CENVAT Credit Scheme w.e.f. 6-9-2004 vide notification No. 18/2004-CE dated 6-9-04. Thus, the EOUs who receive duty paid goods can avail input credit for the duty paid on such goods and utilize the credit for payment of duty on DTA clearances and if for some reasons, the credit cannot be utilized, the same can be claimed as refund under Rule 5 of CENVAT Credit Rules. In addition, as per paragraph 8.3 of Foreign Trade Policy, the supplies to EOUs are treated as deemed exports. Thus the manufacturers have the additional facility to claim the benefit of refund of TED and deemed export drawback on such supplies to EOUs. In view of this the Department of Revenue has decided that no further procedure will be notified for EOUs.

This may please be seen for information. As regards fixation of deemed export duty drawback rate, duty drawback rates for furnace oil has already been notified by DGFT. For fixation of duty drawback rates for HSD, LSD etc, you are requested to send required data along with documentary evidence immediately so that EPCES could make a request to Ministry of Commerce and DGFT.

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Annexure I

Circular No. 796/ 29/2004-CX   F.No.261/27/3/2001-CX 8

Government of India
Ministry of Finance Department of Revenue
Central Board of Excise and Customs New Delhi dated the 4th September, 2004.

To
All Chief Commissioners of Central Excise
All Commissioners of Central Excise
webmaster@cbec.gov.in

Sub: Withdrawal of the warehousing facility for removal of petroleum products without payment of duty from the refineries - regarding.

Madam/Sir,

I am directed to say that the Government has decided to withdraw w.e.f. 6.9.2004 the warehousing facility of removal of petroleum products from the refineries to warehouses or from one warehouse to another warehouse without payment of duty. Accordingly, Notification No. 47/2001-CE (N.T.) dated 26.06.2001, issued under rule 20(1) of Central Excise Rules has been rescinded by Notification No.17/2004-CE (N.T.) dated 4.9.2004. The implications of withdrawal of warehousing facility are explained below:

(i) Consequent on the withdrawal of the facility of removal of petroleum products without payment of duty for warehousing purposes, the excise duty is liable to be paid by the refineries at the time of removal w.e.f. 6th September, 2004. The refineries are to pay duty on monthly basis.

(ii) Since no stocks on or after 6th September, 2004 can remain bonded/ warehoused, the excise duty is liable to be paid on the stocks of petroleum products lying in the warehouses on the midnight of 5th/ 6th September, 2004. The jurisdictional officers should ascertain such stocks of each petroleum product lying in the warehouses and ensure that appropriate duty is paid by the warehouses on such stocks immediately.

(iii) Since the warehousing provisions stand withdrawn w.e.f. 6.9.2004, the refineries are required to discharge the excise duty on petroleum products in transit immediately. The jurisdictional officers should ascertain the details of such goods and ensure appropriate duty is paid by the refineries immediately.

2. The assessable value of petroleum products cleared from the refineries on or after 6.9.2004, is to be determined under section 4 of the Central Excise Act, 1944 read with the Valuation Rules. For example, if the product is sold at the factory gate (refinery), the assessable value would be the transaction value under section 4(1)(a). If however, a product is removed by the refinery but sold from the depot, the assessable value is to be determined as per the mode of valuation applicable to the sale of goods through depot.

3. At present, the assessable value of Liquified Petroleum Gases (LPG) varies depending upon whether the sale is to the domestic consumers or to industrial consumers. However, w.e.f. 6.9.2004, the duty on LPG is to be paid by the refineries at the time of clearance of LPG. Since it may not be ascertainable in all cases whether a particular consignment is to be ultimately sold to domestic consumers or to industrial consumers, the assessment of LPG at the time of removal from the refineries in such cases may have to be done on provisional basis. Alternatively, the refineries may pay the excise duty at the highest of the assessable values and claim refund later on.

4. Certain products are allowed to be cleared without payment of duty to specified categories of end-users subject to the specified conditions. These exemptions continues to be in force. If such clearances to the end-users are effected directly from the refinery, no difficulty should arise in the implementation of such end-use exemptions. If any problem is noticed in the administration of end-use exemption, the same may be examined by the Chief Commissioner immediately and the details promptly reported to the Board with suitable suggestions and recommendations including any refund mechanism.

5. The Chief Commissioners and Commissioners are requested to ensure that there is no hold-up of clearances of petroleum products or any disruption caused in the movement of petroleum products as a result of the withdrawal of warehousing provisions. No precipitate action should be taken. In case of any difficulty in determining the assessable value or on any other account, refineries/warehouses may be advised to resort to provisional assessment. Difficulties/ problems, if any, that are noticed in the implementation of “switch over” may be examined on an urgent basis by the Chief Commissioner and the same may be brought to notice of Board immediately along with views and suggestions.

6. Suitable instructions may be issued to all the officers concerned and the trade and industry may also be suitably informed about the above changes.

7. It may, however, be noted that the warehousing facility continues to be extended to specified goods falling under Chapter-29 of First Schedule to Central Excise Tariff Act, 1985 and to specified goods intended for direct supply as stores to a foreign-going vessel or aircraft or to a meal uplift station outside India vide Sl. No. 1 and 2 of the new Notification No. 17/2004 – CE (N.T.) dated 4th September, 2004.

8. Trade and field formations may be informed suitably.

9. Receipt of the circular may be acknowledged.

10. Hindi version shall follow.

Yours faithfully,
(Vijay Mohan Jain)
Under Secretary to the Government of India

Copy to:

1. PPS to Chairman/ CBEC and All Members/ CBEC
2. All Directorates under CBEC.
3. All sections of CBEC

Annexure II

EXPORT PROMOTION COUNCIL FOR EOUs & SEZ UNITS
705, BHIKAJI CAMA BHAVAN, BHIKAJI CAMA PLACE, NEW DELHI 110 066
TEL : 26165805, 26167042, FAX: 26165538, EMAIL : epces@vsnl.net

L.B. Singhal EPC/SEZ/AM05/F-5
Director General September 10, 2004

Dear Sir,

Sub : Denial of CT3 facility to EOUs/SEZ Units for procurement of petroleum products because of withdrawal of the warehousing facility for removal of petroleum products vide Circular No. 796/29/2004-CX dated 4-9-04

EOUs/SEZ units were taking supply of petroleum products like LDO, HSD and Furnace Oil etc from the bonded warehouses of petroleum companies like IOC, without payment of duty under CT3 facility. However, now Department of Revenue has issued Circular No. 796/29/2004-CX dated 4-9-04 (copy of the circular is enclosed) which has withdrawn the warehousing facility for removal of petroleum products without payment of duty from the refineries.

Because of issuance of this Circular, there is an apprehension that EOUs/SEZ Units may not be able to procure these products without payment of duty under CT3.

I have received a large number of representations on this issue. I am enclosing copies of the representations from the following :-

(1) M/s Alps Industries, Ghaziabad

(2) M/s Ginni International Ltd, New Delhi

(3) M/s Kemwell International Ltd, Bangalore

(4) M/s IG Petrochemicals Ltd, Raigad

(5) M/s Opto India Ltd

(6) M/s Moser Baer India Ltd, Okhla, New Delhi

(7) EPCES Regional Office – Cochin

Circular No. 796/29/2004-CX dated 4-9-04, paragraph 4 provides that certain products are allowed to be cleared without payment of duty to specified categories of end-users subject to the specified conditions. These exemptions continues to be in force. It is not clear whether this refers to the supplies to EOUs/SEZ Units. I shall be grateful if you could kindly get this examined at the earliest and issue the instructions that supplies to EOUs/SEZ Units will continue to be available under CT3, as was the practice so far.

With warm regards,

Yours sincerely,

Sd/-
(L. B. Singhal)
Shri Sidharth Kak,
Member (Customs)
Ministry of Finance,Govt. of India, New Delhi

Annexure III

Circular No. 799/32/2004-CX

F.No. 261 /27/3/2001-CX-8

Government of India
Ministry of FinanceDepartment of Revenue
Central Board of Excise & CustomsNew Delhi, the 23rd September, 2004.

To
All Chief Commissioners of Central Excise
All Commissioners of Central Excise
The Comptroller and Auditor General of India
Webmaster@cbec.gov.in

Sub: Withdrawal of warehousing facility for removal of petroleum products without payment of duty from the refineries –Supplies to Export Oriented Units- regarding.

Madam/Sir,

I am directed to state that references have been received on the issue relating to removal of petroleum products without payment of duty to Export Oriented Units consequent on withdrawal of the warehousing facility for petroleum products.

2. The matter has been examined. It has been observed that EOUs are entitled to avail CENVAT Credit Scheme w.e.f. 06.09.2004 vide notification No. 18/2004-CE (N.T.) dated 6.9.2004. Thus, the EOUs who receive duty paid goods can avail input credit for the duty paid on such goods and utilize the credit for payment of duty on DTA clearances and if for some reasons, the credit cannot be utilized, the same can be claimed as refund under rule 5 of CENVAT Credit Rules. In addition, as per para 8.3 of Foreign Trade Policy, the supplies to EOUs are treated as “Deemed Export”. Thus, the manufacturers have the additional facility to claim the benefit of refund of Terminal Excise Duty and deemed Export drawback on such supplies to EOUs.

3. In view of the fact that number of mechanisms have already been provided to give excise duty relief on excisable goods supplied to EOUs, it has been decided that there is no justification to consider any further procedure in the matter.

4. Trade and field formations may please be informed suitably.

5. Receipt of the Circular may be acknowledged.

6. Hindi version will follow.

Yours faithfully,
(Vijay Mohan Jain )
Under Secretary to the Govt. of India

Copy to:

1. PPS to Chairman/CBEC and All Members, CBEC
2. All Directorates-General/Directorates under CBEC
3. All sections under CBEC