Trade Notice No. 06/2012 – Central Excise/SH
Dated Shillong, 19th March’ 2012.
Subject: - Budgetary changes in the Finance Bill, 2012– reg.
Attention of the members of Trade, Industry and all others concerned are hereby invited to the Finance Bill, 2012 presented by Hon’ble Finance Minister on 16th March, 2012. Changes in Central excise law and rates of duty have been proposed through the Finance Bill, 2012 [clauses 127 to 142 for Central Excise and clauses 151, 152, 154 to 156 for miscellaneous changes)]. In order to prescribe effective rates of duty and to carry out changes in the Rules made under the respective Acts, the following notifications are being issued:
Unless otherwise stated, all changes in rates of duty take effect from the midnight of 16th March/17th March, 2012. A declaration has been made under the Provisional Collection of Taxes Act, 1931 in respect of clauses 127, 128, 140, 141 and 151 of the Finance Bill, 2012 so that changes proposed therein also take effect from the midnight of 16th March/17th March, 2012. The remaining legislative changes would come into effect only upon the enactment of the Finance Bill, 2012. Retrospective amendments in the provisions of law or notifications issued under the respective Acts shall have the force of law only upon the enactment of the Finance Bill, 2012 but with effect from the date indicated in the relevant clause or Schedule. These dates may be carefully noted.
2. Some Important changes in respect of Central excise duty are as below.
3. Rate structure for goods, other than petroleum:
3.1 The standard rate of Central Excise duty for non-petroleum products has been enhanced from 10% to 12% ad valorem. The merit rate of excise duty for non-petroleum goods that hitherto attracted 5% has been increased to 6%. Similarly, the rate of duty of 1% imposed on 130 items in the last Budget has been increased to 2%. The exceptions to this increase are:
Ø Goods of heading no. 2701, i.e. coal;
Ø All goods of Chapter 31, other than those clearly not to be used as fertilizers;
Ø Articles of jewellery of heading 7113; and
Ø Mobile handsets and cellular phones of heading 8517.
3.2 As in the past, this concessional duty would be available only for goods in respect of which credit of duty on inputs and tax on input services has not been taken. Wherever credit is taken, the applicable duty would be 6%. In the case of jewellery, the scheme of levy has been rationalized. The details are discussed at para 7 below.
3.3 Changes consequential to changes in rate structure discussed above have also been carried out for clearances made by Export Oriented Units into the Domestic Tariff Area. The rate of excise duty on Medicinal and Toilet Preparations under the M&TP (Excise Duties) Act has also been increased from 10% to 12% ad valorem.
3.4 As far as possible, the standard rate and the merit rate (of 6%) have been incorporated in the First Schedule to the Central Excise Tariff itself through suitable entries in the Finance Bill, 2012 (clause 141). Owing to the fact that the current tariff rates for most of the lines are higher, these rates have been given effect to through notification no. 18/2012-CE dated 17th March, 2012 till the time of enactment of the Finance Bill.
3.5 In most cases, concessional rates of duty were prescribed in notification nos. 3 to 6/2006-CE, all dated 1st March, 2006 and Notification no. 3/2005-CE dated 24.2.2005. Concessional rates were also available in notification nos.10/2006-CE dated 1.3.2006; 2/2008-CE dated 1.3.2008; and 59/2008-CE dated 7.12.2008. For ease of reference, many of these exemption notifications have been merged and the entries arranged in chronological order in notification no. 12/2012-CE dated 17.3.2012.
4.1 The rate structure applicable to Portland cement falling under heading no.252329 has been revised. Both for packaged cement manufactured by mini-cement plants as well as nonmini cement plants, there were differential rates of duty depending on the Retail Sale Price (RSP) per bag of 50kgs, so far. Moreover, the rates of duty applicable to mini-cement plants were lower compared to non-mini plants. Now, a uniform rate of duty is being prescribed regardless of the RSP per bag although a difference in the rates applicable to mini and non-mini cement plants is being retained.
The details of these changes are as under:
4.2 Another important change in respect of Portland cement is that the item is being notified under section 4A of the Central Excise Act. Accordingly, the value for the purpose of charging duty on packaged cement would be determined on the basis of the Retail Sale Price. An abatement of 30% from the RSP is also being notified.
5.1 In the case of bidis, the rates of basic excise duty for both hand-rolled and machine-rolled bidis have been increased by ` 2 per thousand. Thus, BED on hand-rolled bidis (tariff item 2403 1921) has gone up from ` 8 to ` 10 per thousand sticks and that on machine-rolled bidis (tariff item 2403 1929) from ` 19 to ` 21 per thousand. [Notification No. 12/2012-CE dated 17th March, 2012 may be seen for details].
6. Pan Masala, Gutkha, Chewing tobacco, Zarda Scented Tobacco and Unmanufactured tobacco in pouches:
6.1 The above items packed in pouches with the aid of packaging machines are leviable to excise duty in terms of section 3A of the Central Excise Act. The rates of duty applicable to all these items under the compounded levy scheme have been increased. The details are available in notification nos. 13 and 14/2012-CE both dated 17th March, 2012.
6.2 For Zarda Scented tobacco covered by the aforesaid provisions, Cenvat Credit of duty paid on goods cleared in bulk has been allowed to manufacturers packing it in pouches and operating under the compounded levy scheme.
7. Precious metals and jewellery:
7.1 The scheme of levy of excise duty on precious metal jewellery has been revamped. Hitherto excise duty of 1% ad valorem was applicable to precious metal jewellery manufactured or sold under a brand name. The levy would now apply to both branded and unbranded goods (except silver jewellery) although at the same rate of duty of 1%. The important features of the scheme are as under:
i. Duty would be chargeable on tariff value which is being prescribed under section 3 of the Central Excise Act.
ii. Tariff value would be equal to 30% of the “transaction value” declared on the invoice and transaction value shall have the same meaning as assigned to it under section 4 of the Central Excise Act.
iii. The benefit of SSI exemption would be available to manufacturers of precious metal jewellery and the aggregate value of clearances (both for the purpose of eligibility and exemption) would be computed on the basis of tariff value. Suitable provisions are being incorporated in notification no.8/2003-CE dated 1st March, 2003 so that for the purpose of determining eligibility of a manufacturer/ factory for SSI exemption for the year 2012-13, the computation of aggregate value of clearances of ` 4 crore for the year 2011-12 is made on the basis of the tariff value i.e. taking 30% of the transaction value and not full transaction value. It may be noted that the exemption limit for the remaining part of 2011-12 i.e. between 17th March, 2012 and 31st March, 2012 is not being curtailed for manufacturers of unbranded jewellery who would come into the tax net afresh. In other words,
eligible manufacturers / factories would be entitled to exemption for the full threshold limit of ` 1.50 Crore for this period. For manufacturers who are already availing of the SSI exemption during 2011-12 also the computation of the exemption limit would have to be made on the basis of tariff value of clearances effected during the period from 17th March, 2012 to 31st March, 2012 by virtue of Explanation (C)(ii) of notification no.8/2003-CE dated 1.3.2003.
Illustration- If a manufacturer X clears goods of value 1.4 crore till 16th March 2012, and from 17th March to 31st March 2012 manufacturer X clears goods of transaction value 30 lacs, the total value of clearances for SSI exemption in financial year 2011 -12 shall be calculated as follows:-
Value of clearances from 1st April 2011 to 16th March 2012= ` 1.4 crore
Value of clearances from 17th March to 31st March 2012= ` 9 lacs (30% of transaction value 30 lacs)
Total value of clearances financial year 2011-12= ` 1.49 crore
iv. Rule 12AA of the Central Excise Rules has been amended to provide that every person who gets articles of jewellery of heading no.7113 produced or manufactured on job-work shall obtain registration, maintain accounts, pay duty leviable on such goods and comply with the procedural requirements, as if he is the manufacturer. In other words, those artisans or goldsmiths who only manufacture jewellery for others on job-work need not obtain registration. The option to the job-worker to register, if he so desires, has been deleted.
7.2 Unbranded jewellery is currently exempt. Full exemption from excise duty is being provided to branded silver jewellery. It may also be noted that in respect of articles of precious metals, the levy would continue to apply only to those articles that are manufactured or sold under a brand name. Full exemption from excise duty has been provided to gold coins of purity 99.5% and above and silver coins of purity 99.9% and above when manufactured from gold or silver on which the appropriate duty of customs or excise has been paid.
8. Important Legislative Amendments:
8.1 Barring legislative amendments involving an increase in the rate of duty for which a suitable declaration has been made under the Provisional Collection of Taxes Act, all amendments would come into effect on the date of enactment of the Finance Bill, 2012 i.e. the date on which the Bill receives the assent of the President. The legislative amendments relating to Central Excise Act and Central Excise Tariff Act have been explained in the Explanatory Memorandum to the Finance Bill, 2012. The important ones are discussed/ highlighted below:
8.2 The provisions of the Central Excise Act relating to offences and penalties are being aligned with those under the Customs Act. In terms of section 9(1)(i) of the Act, offences involving excisable goods where the duty leviable exceeds ` 1 lakh are punishable with imprisonment for a term which may extend to seven years and with fine. It is proposed to enhance this duty amount to ` 30 lakh. [Clause 130 of the Bill refers]
8.3 Section 9A of the Act presently provides that all offences under the Act shall be deemed to be non-cognizable within the meaning of the Code of Criminal Procedure. Sub-section (1) of this section is proposed to be substituted to prescribe that offences, other than offences punishable with imprisonment of three years or more under section 9, shall be non-cognizable. [Clause 131 of the Bill refers]. Through clause 135 of Finance Bill, 2012, section 13 dealing with the power to arrest is being substituted with a new section 13 and section 13A. The revised section 13 provides that offences punishable with imprisonment of three years or more under section 9 shall be cognizable. Section 13A is being inserted to provide that bail in the case of offences punishable with a term of imprisonment of three years or more under section 9 shall not be granted by a Court or Magistrate without an opportunity being given to the Public Prosecutor to present his case. However, in the case of minors, infirm and women the Magistrate may grant bail. Further, it excludes the jurisdiction of police officers to initiate investigation of offences under the Central Excise Act, unless authorized in this behalf by the Central Government, by a special or general order.
8.4 Section 12F relating to search and seizure is being amended to align the provisions with Customs Act (Clause 134). Section 18 is being substituted to provide that save as provided under the Central Excise Act, searches shall be carried out as per the procedure laid down in the Code of Criminal Procedure [Clause 136]. As a corollary to these changes, section 19 is being omitted and some consequential amendments are being carried out in section 20.
8.5 Section 11AC provides for reduced penalty if the duty along with interest is paid within 30 days of the communication of the order. It is being amended to make available the benefit of reduced penalty only if the reduced penalty is also paid within the specified period of thirty days. [Clause 133]
8.6 Notification No.1/2010-CE dated 6th February, 2010 provides exemption from Central Excise duty to goods cleared from new units or units that have undertaken substantial expansion in the State of Jammu and Kashmir for a period of ten years from the date of commencement of commercial production. Doubts were raised about the interpretation of provisions of this exemption relating to the date from which the ten years period is to be computed in the case of units undertaking substantial expansion. The notification is being amended retrospectively from the date of issue of the said notification i.e. 6th February, 2010 to provide that for units undertaking substantial expansion, the exemption period of ten years would be computed from the date of commercial production from the expanded capacity [Clause 139].
9. Amendments to First Schedule of Central Excise Tariff Act:
9.1 The First Schedule to the Central Excise Tariff is being amended so as to carry out the following changes:
i. omit the words “or polishing” in Note 6 of Chapter 25 so as to remove doubts about the correct classification of polished marble;
ii. revise the description of tariff items 2601 11 10 to 2601 11 90 covering iron ore and concentrates based on Fe content;
iv. insert a note in chapter 48 to provide that notwithstanding anything contained in Note 12, if the paper and paper products of heading 4811, 4816 or 4820 are printed with any character, name, logo, motif or format they shall remain classified under Chapter 48 as long as such products are intended to be used for further printing, to avoid classification disputes;
iv. insert a note in Chapter 71 to provide that for the purposes of headings 7113 and 7114, the process of affixing or embossing trade name or brand name on articles of jewellery or on articles of goldsmiths‟ or silversmiths‟ wares of precious metal or of metal clad with precious metal, shall amount to “manufacture”;
v. insert a note in Chapter 72 to provide that the process of oiling and pickling in respect of goods of heading 7208 shall amount to “manufacture”;
vi. insert a note in Chapter 76 to provide that the process of cutting, slitting and printing of aluminium foils shall amount to “manufacture”;
vii. insert a note in Chapter 85 to provide that the processes of matching, batching and charging of Lithium ion batteries or the making of battery packs shall amount to “manufacture”;
viii. align the entries relating to copper scrap, brass scrap, nickel scrap, aluminium scrap, lead scrap and zinc scrap with the revised ISRI classification.
9.2 Through clause 142 of the Finance Bill, a Note is being inserted in Chapter 54 to provide that notwithstanding anything contained in Note 1, man-made fibre such as polyester staple fibre and polyester filament yarn manufactured from plastic and plastic waste including waste polyethylene terephthalate bottles shall be classified as textile material under Chapter 54 or Chapter 55, as the case may be. This amendment is being carried out with retrospective effect from 29.06.2010. Duty in respect of clearances already made is to be recovered from the manufacturers of these goods within one month of the date of enactment of the Finance Bill, 2012 failing which interest at the rate of 24% is payable. Simultaneously, the manufacturers are being permitted to take into account credit of duty paid on inputs, input services and capital goods.
10. Amendments in Central Excise Rules, 2002
10.1 Rule 22 (3) is being amended to empower the officers of audit, cost accountants and chartered accountants appointed under section 14A or 14AA to prescribe the time limit within which the units being audited will produce the documents.
11. Amendments in Cenvat Credit Rules, 2004
11.1 Rule 3(5) and 3(5A) are being amended to prescribe that in case the capital goods on which Cenvat credit has been taken are cleared after being used then the amount payable shall be either the amount calculated on the basis of Cenvat credit taken at the time of receipt reduced by a prescribed percentage or the duty on transaction value whichever is higher.
11.2 Rule 10A is being inserted to permit transfer of unutilized credit of SAD lying in balance at the end of each quarter to another factory of the manufacturer.
(provided that nothing contained in this sub-rule shall apply if the transferring and recipient registered premises are availing the benefit of the following notifications (i) No.32/99-Central Excise, Dated 8th July, 1999, (ii) No. 33/99-Central Excise, Dated 8th July, 1999, (iii) No. 20/2007-Central Excise, Dated 25th April, 2007, to name a few….)
11.3 Rule 14 is being amended to substitute the word “or” with “and” so that interest is not payable on credit wrongly taken unless the same is utilized. Similar changes are being carried out in Rule 16 of the Chewing Tobacco and Un-manufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. However, penalty provisions for such cases have not been amended.
12. In order to achieve a sharper focus, only the key highlights of the budgetary changes has been alluded in this Trade Notice. The details are contained in the Finance Bill and notifications which alone have legal force.
13. Finance Bill, 2012, Finance Minister’s Budget Speech, Explanatory Memorandum to the Bill, relevant notifications and Explanatory Notes etc. can be seen / downloaded from www.indiabudget.nic.in, www.cbec.gov.in as well as from www.cexstshillong.gov.in.
Issued vide D.O.F. No. 334/3/2012-TRU, Dated 16th March, 2012.
of Joint Secretary (TRU-I).
Disclaimer: Though care has been taken to avoid the occurrence of errors or mistakes in the Budget documents, in case of any inadvertent mistake, the provisions of the Finance Bill may be referred to.