A tax tribunal has allowed an appeal by Honda Siel Power Products Ltd (HSPPL) against the excise authorities which denied duty exemption to the company under the CENVAT credit rules.

"There is no justification for denying the exemption," said the Customs, Excise and Service Tax Appelate Tribunal (CESTAT).

HSPPL, a 67:33 joint venture between the Japanese multinational Honda and India-based Siel, has a manufacturing plant at Pondicherry, where it is producing engines, gensets and water pumps.

Under CENVAT (Central Value Added Tax), HSPPL was to receive duty exemption on water pumps and was to pay only four per cent duty on it. For other products it had to pay 16 per cent duty.

However, during audit, the excise department found errors in accounting. The company had not maintained credit account for the period of April 2002 to March 2003. Due to this, the excise department slapped a notice, directing it to pay duty at the rate of 16 per cent instead of four per cent.

According to Cenvat rules, a company has to maintain two separate accounts - for the input used in manufacture of taxable goods and for exempted goods.

The company later challeged the duty order before the CESTAT and contended that it was a case of clerical error and that it has not evaded the duty intentionaly.

The tax tribunal agreed with the contentions of the HSPPL and rejected excise dapartment's duty demand saying," denial of credit on inputs as well as demand of duty at the non exempted rate is not contemplated in law".

http://economictimes.indiatimes.com/articleshow/1644431.cms