Circular No. 877/15/2008-CX dated
17.11.2008
Clarification regarding reversal of Cenvat Credit in case of trade discount
Representations have been received from trade and
industry seeking clarification on the issue whether proportionate credit should
be reversed in cases where a manufacturer avails credit of the amount of duty
paid by supplier as reflected in the excise invoice, but subsequently the
supplier allows some trade discount or reduces the price, without reducing the
duty paid by him.
2. The issue has been examined. Since, the discount in such cases are given in
respect of the value of inputs and not in respect of the duty paid by the
supplier, the effect of reduction of value of inputs may be that the duty
required to be paid on the inputs was less than what has been actually paid by
the inputs manufacturer. However, the fact remains that the inputs manufacturer
had paid the higher duty. Rule 3 of Cenvat Credit Rules, 2004 allows credit of
duty “paid” by the inputs manufacturer and not duty “payable” by the said
manufacturer. There are many judgements of Hon’ble Tribunal in this regard which
have confirmed this view.
3. In view of above, it is clarified that in such cases, the entire amount of
duty paid by the manufacturer, as shown in the invoice would be available as
credit irrespective of the fact that subsequent to clearance of the goods, the
price is reduced by way of discount or otherwise. However, if the duty paid is
also reduced, along with the reduction in price, the reduced excise duty would
only be available as credit. It may however be confirmed that the supplier, who
has paid duty, has not filed/claimed the refund on account of reduction in
price.
4. Trade and field formations may be suitably informed.
5. Hindi version will follow.
6. Receipt of this Circular may kindly be acknowledgedYours
faithfully,
(Rahul Nangare)
Under Secretary to the Government of India.
F.No.267/54/2008-CX-8
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