The communication to this effect was forwarded on Friday to the concerned ministries.
According to ISA, such a dispensation has been given in the case of readymade garments where the person who gets readymade garments manufactured on his account has been made responsible to pay excise duty. Out of 40,000 million square meter of cloth produced by the textile industry, share of powerloom sector has been as high as 24,000 million square meter. "Since powerlooms are not willing to come into the excise fold, the Centre has to devise an artificial system of deemed Cenvat credit to continue the Cenvat chain. To induce powerlooms to accept excise procedure the Union finance minister in his annual budget for 2002-03 launched a scheme for optional payment of duty on grey fabrics. Even this scheme has not made any headways as the powerloom sectors response continues to be lukeworm," the ISA sourced told FE. The ISA has brought to the notice of the Centre that there is a provision under the excise regulation for supply of raw materials or semi processed materials from a factory to a job worker with a condition to return the goods processed by the job worker to the same factory, which supplied raw materials or semi processed goods so that processed goods may be cleared for home consumption on payment of relevant duty from the factory. Under this, the job worker is not required to pay excise duty but he is obliged to return the processed goods to the factory, which supplied raw materials/semi processed goods to the job worker.
According to the ISA, the Centre should amend the notification issued in 1986 so that fabrics are included in it and mills may supply yarn to powerloom weavers and get back grey cloth and pay fabric duty at their end. It has sought amendment to the notification of March 2002 which specifies the procedure for grant for deemed Cenvat credit to processors of fabrics, if non duty paid fabrics are processed by them. In the case of synthetic fabrics, deemed Cenvat credit of 66 and two- third per cent of the aggregate of excise duty payable on processed fabrics is available to independent power processors to cover duty paid on yarn, dyes, chemicals, consumables and packaging materials.
For composite mills, the deemed Cenvat credit for synthetic fabrics is 60% of the aggregate of the duty of excise leviable on processed fabrics as they get Cenvat credit on dyes, chemicals, consumables and packaging materials at actuals on the basis of duty paid documents.
"In other words, independent power processors are entitled to Cenvat credit of six and two thrid per cent of the aggregate duty of excise on dyes, chemicals, consumables and packaging materials consumed by them on deemed basis. They process either duty-paid grey fabrics or non duty paid grey fabrics, depending upon the business received by them," sources said.