Cenvat Credit conversion of DTA to EOU
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Cenvat Credit conversion of DTA to EOU
Cenvat Credit can be transferred on conversion of DTA to EOU, ambiguity removed.
- A unit located in Domestic Tariff Area (‘DTA’) normally avails Cenvat Credit, and utilizes it for payment of it’s output liability on clearance of goods.
- The existing unit located in DTA can also be converted to an Export Oriented Unit (‘EOU’).
- Circular No.77/99-Cus dated November 18, 1999, clarified that credit lying in the books of account of the unit located in the DTA on the date of conversion into an EOU,cannot be transferred to the EOU. This Circular was based on Central Excise Rules, 1944 which prohibited EOUs from availing Credit.
- The Central Excise Rules, 1944 have since long been superseded, and the current Central Excise Rules, 2002 read with Cenvat Credit Rules, 2004 allow an EOU to avail and transfer Cenvat Credit on transfer of unit.
- CBEC had not withdrawn Circular No. 77/99-Cus,leading to litigation on the matter.
- The CBEC has vide Customs Circular No. 41/2016 dated August 30, 2016 clarified that, the Cenvat credit lying in the books of account of the unit located in DTA on the date of conversion into an EOU, can be transferred to the EOU.
- This circular will clear any ambiguity on the same.