Circular No. 4/2003

1. The Central Board of Excise and Customs, Department of Revenue, has amended the CENVAT Credit Rules, 2002 vide notifications No

What this is

Circular No. 4/2003 was issued by the Central Board of Direct Taxes on 14 March 2003. Its subject is 1. The Central Board of Excise and Customs, Department of Revenue, has amended the CENVAT Credit Rules, 2002 vide notifications No.

What it does

Gives power-loom owners a one-time assurance against scrutiny. Where such an owner filed an income-tax return for the first time for assessment year 2004-05, the return is not to be selected for scrutiny, provided he makes a true disclosure of his stock of yarn and finished goods not exceeding Rs. 20,000 per power-loom and files with the return evidence that the power-looms are owned in his name. The Board records that this will have no retrospective application or consequences.

Why it was issued

The CENVAT Credit Rules, 2002 had been amended to let yarn and fabric manufacturers and dealers take one-time credit on stock held as on 31st March, 2003 on a written declaration without duty-paying documents, and the Finance Minister announced in the Lok Sabha on 30th April, 2003 that the Income-tax Department would encourage power-loom owners, many of whom had never filed returns, to declare their stocks without fear of tax scrutiny.

Who it reaches

Power-loom owners filing an income-tax return for the first time for assessment year 2004-05
Yarn and fabric manufacturers and dealers taking CENVAT stock credit
Assessing Officers selecting returns for scrutiny

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it.

Circular No. 4/2003, dated 14-5-2003

1. The Central Board of Excise and Customs, Department of Revenue, has amended the CENVAT Credit Rules, 2002 vide notifications No. 25/2003-Central Excise (N.T.) dated 25th March, 2003 and No. 35/2003-Central Excise (N.T.) dated 10th April, 2003. The new rule 9A of CENVAT Credit Rules, inter alia, provides that a manufacturer, producer, first stage dealer or second stage dealer of yarn and unprocessed fabrics or a manufacturer of processed fabrics, who is unable to produce the document evidencing actual payment of duty, shall be granted to avail credit, calculated on the basis of rates notified by the Central Government, on inputs lying in stock or in process or contained in finished products lying in stock as on 31st day of March, 2003 upon making a written declaration of the description, quantity and value of the stock of each of such goods.

2. In this connection, the Hon'ble Finance Minister in his speech in Lok Sabha on 30th April, 2003 has also made the following announcement :

"I had also taken a number of measures to simplify the procedures for registration and filing of returns. A mechanism for getting one time credit on inputs in stock as on April 1, 2003, without the requirement of producing any duty paying documents, has already been prescribed. Let me further announce that it is possible that a number of power-loom owners have until now not been filing any income-tax returns. They may not even have proper books of account. However, they may now wish to declare their stocks for the purposes of CENVAT. Therefore, to encourage new assessees from the power-loom sector to come into the mainstream, the Income-tax Department will encourage power-loom owner to declare their stocks. Wherever the value of stocks declare do not exceed Rs. 10,000 per power-loom, such declaration will not be subject to any scrutiny for tax purposes. Also, this will not have any retrospective application or consequences."

3. It is hereby clarified that where an assessee, being an owner of power-looms, filed income-tax return for the first time for assessment year 2004-05, the same shall not be selected for scrutiny, provided the assessee makes a true disclosure of his stock of yarn and finished goods not exceeding Rs. 20,000 per power-loom, and furnishes along with the return of income evidence in support of ownership of power-looms in his name. And as announced by the Finance Minister, this will not have retrospective application or consequences.

What to watch

It is spent: it operates on first-time returns for assessment year 2004-05 alone.
The protection is conditional on the declared stock staying within the per-power-loom ceiling and on filing ownership evidence with the return; miss either and the return is an ordinary one.
The Finance Minister's speech, as reproduced in the circular, speaks of Rs. 10,000 per power-loom while the Board's own operative paragraph says Rs. 20,000; the operative direction is the paragraph.
The record carries the date as 14-3-2003 but the text signs off as dated 14-5-2003, which sits better with the announcement of 30th April, 2003 that it follows.

Where you meet it

In resisting scrutiny selection of a first return by a power-loom owner for assessment year 2004-05, and in explaining the source of stock declared for CENVAT purposes.

What it names

Rules it names. Rule 9A of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.

It mentions. Circular No. 4/2003

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.