Budget 2013: AIIFA demands amendment in section 4A

NEW DELHI: The All India Induction Furnaces Association ( AIIFA) has demnded that in the Budget 2013 amendment should be made in section 4A of CENVAT. In a state, AAIFA said, "many of our members are having their Furnaces and Rolling Mills as separate entity but with common Directors / Partners. This is because of being old units or because of other constraints like space, power etc... The Furnace unit is selling its final product 'Ingot' to the Rolling Mill being its raw material at the market price. In such cases the units are being asked to pay duty on 110% of the cost of production as per Section 4A thus causing lot of problems and unnecessary litigation whereas the whole exercise is revenue neutral as both the units are registered under Central Excise and availing CENVAT."

AIIFA further said that also while calculating cost of production, the cost of raw materials (Scrap) is also taken and on calculating Assessable value as per Section 4 A as 110% of the cost of production, assessable value becomes too much higher than the market value. "Nowhere in the world has any country's steel industry had 10% rate of return. Even if the assessable value is taken as 110% of the cost of conversion (value addition) instead of production then the problem will be much less," it added.

AIIFA concluded, "as a result the CENVAT in Rolling Mills will increase to a level that net payment of duty in PLA becomes Nil and there is unutilized CENVAT in the books. To avoid all these problems many members have to sell their product in the open market even when they have their own downstream units and in turn these downstream units buy their raw material from the open market which again results into unnecessary transactions."

In view of above AIFFA requested to exclude the definition of related person for the excisable inter- connected undertaking i.e. where both selling and buying units are registered with the excise department and are availing the facility of CENVAT credit. AIIFA emphasized that there is no loss of revenue to the exchequer and this will help the industry from unnecessary paper work.