Input credit on full value product on captive consumption

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sachin

article assistant

25 Points Joined March 2012

i want to ask

S ltd. manufacturer two products product A and Product B, product A is in composition scheme with a liability of 2% and Product B is in normal scheme with liability of 12.36%.

produt A required raw material R with input credit of 12.36% which is not availed due to composition scheme

and product B required produt A as a raw material for captive consumption

i want to ask the exice liability of S ltd. on product B

it can be

1) 12.36% (considering product A as captive consumption on which no duty paid and without input credit on raw material R)

2) 14.36% ( 12.36% on product B + 2% on composition scheme on product A)

3) 10.36% ( 12.36% - 12.36% input credit on raw material R)

4) any other option

please suggest me the correct option along with notification/case/rules

THANKS in advance

regards

Sachin

Replies (3)

HS Negi

Senior Executive- F&A

590 Points Joined January 2009

Dear Sachin,

Please explain in full, what composition scheme you are availing before answering you.

Regards

HS Negi

sachin

article assistant

25 Points Joined March 2012

@ R S Negi

composition scheem as per notification number 1/2011 @ 2% is availed

raw material is cement; product A is RMC (ready mix concrete);product B is cement bricks

this is the full details about the product

regards

sachin

Manoj BG

Tax Professional and in Service

1795 Points Joined June 2009

As per notification no. 67/95 , if goods cleared and used for captive consumption for manufacture of dutiable goods, then captive consumption is exempted from excise duty liability. Howwver, if goods cleared for captive consumpion going to use in manufacture of exempted goods, then goods used as captive consumption chargeable to duty. at an applicable rate. Since, you product A and B is dutiable goods, no need to pay excise duty on product A which going to use in product B (final product) by virtue of notification no. 67/95

Further, you are eligible to avail cenvat credit of raw material R used in manufacture of product A aginst excise dutyliability of product B at the time of its clearance from factory.

Thus, first of all work out excise duty liability on prodct B and then deduct Cenvat credit of excise duty paid on raw material R dully supported by excise invoices. Remaining amount is liable to pay through PLA.

Dont forget to mention exemption details in ER-1 alongwith notification no..

Thanks and Regards,

Manoj B. Gavali