Circular No. 323/39/97-CX

        I am directed to refer to Board's circular No. 59/88-CX-8 dated 27.10.88 (F.No. 263/32/88-CX 8) wherein it was clarified that small scale units who have opted for full exemption under notification No. 175/86-CE., could be permitted to avail exemption on goods cleared for home consumption under the said notification and to take credit of duty paid on inputs used in the manufacture of goods exported under bond or on payment of duty. It was also clarified that simultaneous availment of SSI exemption for home consumption and Modvat credit for export would be available provided the SSI units maintain separate accounts right from raw materials stage to the final production stage for export production as well as for home consumption production. Further, the units were allowed to take credit of duty paid on inputs used in the goods exported and utilise the same for payment of duty on similar products after crossing the exemption limit or if the adjustment is not possible for any reason the credit could be refunded in accordance with the provisions of Modvat rules.

2.    doubts have been raised whether Board's above said instructions are equally applicable to units availing SSI exemption under notification No. 16/97-CE., dated the 1st April, 1997, since the benefit of exemption and concessional rate of duty under the notification is available subject to the condition that the assessee does not avail Modvat credit under rule 57A upto a clearance value of Rs. 100 lakhs.

3.    The matter has been examined. It is observed that the aforesaid notification allows exemption on specified goods cleared for home consumption only. Goods cleared for export either under bond or on payment of duty are not covered under the said notification. Therefore, it the assessee wants to avail Modvat credit of duty paid on inputs used in the manufacture of goods exported, such credit can not be denied.

4.    Further, the credit of duty paid on inputs used in the final products cleared for export under bond is also available under Rule 57F(13). The credit so taken by a manufacturer can be utilised towards the payment of duty on similar final products cleared for home consumption on payment of duty and where such adjustment is not possible, the credit can be refunded to him in accordance with the procedure prescribed by the Government.

5.    It is, therefore, clarified that the Board's aforesaid instructions would mutatis mutandis apply to the units, simultaneously availing exemption under notification No. 16/97-CE., and Modvat credit on inputs used for their export production. The credit so availed can either be utilised for payment of duty when the units start paying duty after crossing the limit of Rs. 100 lakhs or the same can be refunded as per the provision of Modvat rules. It may kindly be ensured that all such units maintain separate accounts properly right from raw materials stage to the final production stage for export production as well as for home consumption production.

6.    Field formations may be advised accordingly.