SUBJECT: CENTRAL EXCISE – BUDGET PROPOSALS FOR 2005-06
The Finance Minister has introduced the Finance Bill, 2005 in the Lok Sabha on 28th February, 2005. A number of changes in excise, customs and service tax have been made through the Finance Bill (Clauses 65 to 88, 116, 118 to 120 and 122 to 124) and through notifications Nos. 11/2005-Customs to 25/2005-Customs, 4/2005-CE to 13/2005-CE, 11/2005-CE (NT) to 14/2005-CE (NT) and 4/2005-ST to 8/2005-ST, all dated 1st March, 2005. For full details, the relevant provisions of the Finance Bill, 2005 and the notifications may be referred to.
2. The salient features of the proposals in respect of excise are indicated below:
1. Additional duty of excise on pan masala and specified tobacco products
1.1 An additional duty of excise has been imposed on cigarettes at specific rates ranging from Rs. 15 to Rs.180 per thousand cigarettes, and at rate equal to 10% of the aggregate of normal rates of excise duties on pan masala and certain specified tobacco products. Biris have been kept out of the purview this levy (relevant bill entries and notification No.6/2005-CE refers).
2. Small Scale exemption:
2.1 Eligibility limit for general SSI exemption has been increased from Rs. 3 crore to Rs. 4 crore, by amending notification No. 8/2003-CE (Notification No.10/2005-CE refers)
2.2 Notification No.9/2003-CE, providing concessional rate of duty of 60% of the normal rate with Cenvat credit, has been rescinded. (Notification No.11/2005-CE refers)
2.3 SSI units having annual turnover exceeding Rs. 40 lakh will now have to file a simple annual declaration. (Notification No.14/2005-CE(NT) refers).
2.4 These changes would come into effect from 1st April, 2005 (notification Nos. 10/2005-CE, 14/2005-CE (N.T.) and 11/2005-CE refer).
3.0 Cottage and Village industry:
3.1 Definition of ‘rural area’ as provided in clause (ff) of section 2 of the Khadi and Village Industries Commission Act, 1956 (61 of 1956) has been made applicable retrospectively for the period from 21.2.2000 to 1.3.2003 for the purposes of exemption under Notification No. 88/88-CE dated 01.03.1988 (relevant bill entry refers).
4.0. Imposition and Increase in Duty
4.1 Excise duty of 8% with CENVAT credit has been imposed on mosaic tiles.
4.2 Excise duty on molasses has been increased from Rs.500 per metric tonne to Rs.1000 per metric tonne.
4.3 Excise duty on cement clinkers has been increased from Rs.250 per metric tonne to Rs.350 per metric tonne.
4.4 Excise duty has been raised on iron and steel and on ships for breaking up, from 12% to 16%.
4.5 Excise duty of 16% has been imposed on road tractors (of engine capacity exceeding 1800 cc) for semi trailers.
4.6 A duty of 2% has been imposed on branded articles of jewellery of heading 7113 of the Central Excise Tariff.
5. Relief Measures:
5.1 Excise duty of Re. 1 per kg. on refined edible oils and Rs.1.25 per Kg. on vanaspati, bakery shortening and inter-esterfied, re-esterified, elaidnised fats, has been exempted.
5.2 Tea and tea waste have been exempted from additional duty of excise of Re. 1 per kg.
5.3 Excise duty has been reduced from 24% to 16% on air conditioners.
5.4 Excise duty has been reduced from 24% to 16% on tyres, tubes and flaps.
5.5 Excise duty has been reduced from 24% to 16% on Polyester Filament Yarn(PFY) including polyester textured yarns.
5.6 Excise duty has been reduced from 16% to 12% (with Cenvat credit) on matches made by mechanized and semi-mechanized sectors.
5.7 Excise duty on imitation jewellery has been reduced from 16% to 8%.
5.8 Excise duty has been reduced from 16% to 8% on cakes and pastries.
5.9 Parts manufactured and used captively for production of power tillers (of heading No. 84.32) have been exempted from excise duty.
5.10 Excise duty on electronic milk fat and solid non-fat tester has been reduced from 16% to 8%.
6. National Calamity Contingent Duty (NCCD): NCCD was imposed on following items by the Finance Act 2003:
6.1 1% on polyester filament yarn, motor cars, multiutility vehicles, and two-wheelers;
6.2 Rs.50 per metric tonne on domestic crude oil. This levy, which was valid upto 31.3.2005, has been extended without any time limit.
7. Retail Sale Price (RSP) based assessment: Abatement from retail price for levy of excise duty on air conditioners has been reduced from 35% to 30%, consequent to reduction in excise duty from 24% to 16%.
8. Chapterwise changes are given below:
Chapter 1 to 8
9.1 Tea and tea waste has been exempted from additional duty of excise of Re. 1 per kg. (Notification No. 7/2005-C.E. refers).
Chapter 10 to14
15.1 Excise duty has been exempted on refined edible oils, vanaspati, bakery shortening, inter-esterified fats, or re-esterified or elaidinised fats (S.Nos. 1 and 2 of notification No. 4/2005-CE refer).
15.2 A Chapter note has been inserted, with retrospective effect from 1st of March, 1986, so as to provide that, in respect of refined edible oils, process of refining shall amount to ‘manufacture’. A similar chapter note has also been inserted in chapter 15 ofthe new 8 digit Schedule (relevant bill entries refer).
Chapter 16 to19
16.1 Excise duty has been reduced on cakes and pastries from 16% to 8% (S.No. 3 of notification No. 4/2005-C.E. refers).
16.2 Excise duty has been increased on molasses from Rs. 500 PMT to Rs. 1000 PMT (relevant bill enrty refers).
Chapter 20 to 24
20.1 An additional excise duty has been on pan masala and certain specified tobacco products (notification No.6/2005-CE refers). As regards cigarettes the rates of this additional duty are as follows (relevant bill entries refers):
As regards pan masala and other specified tobacco products rates of this additional duty have been prescribed vide notification No. 6/2005-CE.
25.1 Excise duty has been increased on clinkers (2523 10 00) from Rs. 250 per metric tonne to Rs. 350 per metric tonne (relevant bill entry refers).
27.1 Additional duty of excise on Motor Spirit (petrol) and High Speed Diesel Oil has been increased from Rs. 1.50 per litre to Rs. 2.00 per litre (relevant bill entry refers).
27.2 The tariff rates of excise duty on certain petroleum products have been revised as under (relevant bill entries refer):
27.3 Effective rates of excise duty have been changed on certain petroleum products as under (S.Nos. 8 to 13 of notification No. 4/2005-CE refer).
Chapter 28 to 35
36.1 Excise duty has been reduced on matches (except Bengal lights) made by mechanised and semi-mechanised sectors, from 16% to 12% (S. No. 13 of notification No. 4/2005-CE refers).
Chapter 37 to 39
40.1 Excise duty has been reduced on tyres, tubes and flaps from 24% to 16% (S.No. 1 of notification No. 13/2005-CE refers).
50.1 Excise duty has been reduced on polyester filament yarn including texturised yarn from 24% to 16% (Notification No. 13/2005-CE refers).
50.2 Optional duty of 8% on processed yarn has been extended to all the yarns falling under 54 produced by independent processors (notification No. 29/2004-CE as amended vide S. No. 3 of the notification No. 10/2005-CE, and notification No. 30/2004-Central Excise as amended vide S. No. 4 of the
notification No. 10/2005-CE refers).
68.1 Excise duty has been imposed @ 8% on mosaic tiles (S.No 22 of notification No. 10/2003-CE as amended vide S.No. 2 of notification No. 10/2005-CE refers).
71.1 Excise duty has been imposed @ 2% on articles of jewellery, of heading 7113, on which a brand name or trade name is indelibly affixed or embossed on the articles of jewellery itself. Unbranded articles of jewellery and other articles of precious metals will continue to be exempt from duty. (refer S.No.14 notification No. 4/2005-CE, and S.No. 171 of notification No. 6/2002-CE as amended by 5/2005-CE refer).
71.2 Chapter notes have been inserted in chapter 71 both to define brand name or trade name and to prescribe that the process of affixing or embossing brand name or trade name on articles of jewellery of heading 7113 shall amount to ‘manufacture’(relevant bill entries refer).
71.3 In case of articles of jewellery made through job-work, the excise duty can be paid either by the person who supplies the raw materials such as precious metals, gemstones, etc. to the job-worker for manufacture of the articles of jewellery, or by the job-worker. Rule 12AA of Central Excise Rules, 2002, has been inserted to prescribe a special procedure for this purpose. Under this procedure, the duty liability, accountability and responsibility for complying with the excise procedures would be on the person who gets the articles of jewellery manufactured on job-work. The job-worker, however, at his option, can also undertake to comply with the excise law and pay duty. Consequential changes have also been made in the Cenvat Credit Rules, 2004 for this purpose (notification No. 12/2005-CE(N.T.) and 13/2005-CE(N.T.) refer).
71.4 Excise duty on imitation jewellery (heading 7117) has been reduced from 16% to 8% (S.No. 16 of notification No. 4/2005-CE refers).
72.1 Excise duty on iron and steel is being raised from 12% to 16% (S.No 172A of notification No. 6/2002-CE as amended vide notification No. 5/2005-CE refers).
Chapter 84 & 85
84.1 Excise duty on air conditioners has been reduced from 24% to 16%. (notification No. 13/2005-CE refer). Consequently, abatement from retail sale price has also been reduced from 35% to 30% (S.No. 63 of notification No. 13/2002-CE(NT) as amended by notification No. 11/2005-CE(N.T.) refers).
84.2 Excise duty has been exempted on parts used captively in manufacture of power tillers of heading 84.32 (notification No. 4/2005-CE refers).
84.3 Excise duty exemption, for wind operated electricity generators, its components and parts thereof, has been extended to rotor and wind turbine controller (Item 13 of List 9 of notification No. 6/2002-CE as amended by notification No. 5/2005-CE refers).
84.4 Excise duty has been reduced on electronic milk fat and SNF tester from 16% to 8% (S.No. 17 of notification No. 4/2005-CE refers).
84.5 Excise duty exemption on specified machines for use in the plantation sector, available till 1.5.2005, has been extended till 1.5.2006 (notification No. 6/2002-CE as amended by notification No. 5/2005-CE refers).
84.6 Excise duty exemption for specified textile machinery under S.No.193, 195, 199 and 200 of notification No.6/2002-CE is being continued (amended vide notification No.5/2005-CE refer).
87.1 Tractors of heading 8701 are exempt from excise duty. Tractors of engine capacity more than 1800 cc for semi trailers have been excluded from the purview of the said excise duty exemption. Such tractors of engine capacity more than 1800 cc for semi trailers will now attract excise duty @ 16% (S.No. 295 of notification No. 6/2002-CE as amended by notification No. 5/2005-CE refers).
89.1 Excise duty on ships for breaking up has been raised from 12% to 16% (S.No 303 of notification No. 6/2002-CE omitted vide notification No. 5/2005-CE refers).
9. The Cenvat Credit Rules, 2004
9.1 The Cenvat Credit Rules, 2004 have been amended so as to allow domestic manufacturers to take credit of the additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, as substituted by clause 72 of Finance Bill 2005, for payment of any excise duty on their finished goods. Service providers are not allowed to take credit of this additional duty.
9.2 Credit of this additional duty can be utilised only for payment of excise duty (including special excise duty and additional excise duties) on final products (and not for paying service tax). Credit of this additional duty in respect of capital goods can be taken in one instalment (as against in two instalment in other cases). All provisions relating to Cenvat Credit, including those relating to rebate and refunds are applicable to this additional duty, as are applicable to the excise duty leviable under the Central Excise Act.
9.3 The Cenvat Credit Rules, 2004 have also been amended so as to allow credit of additional excise duty on pan masala and certain tobacco products, levied clause 85 of Finance Bill 2005. Credit of this duty can only be utilised for paying additional excise duty on pan masala and certain tobacco products. Credit of no other duty can be utilised for paying additional excise duty on pan masala and tobacco products.
10. Recovery of CENVAT credit of A.E.D.(G.S.I.) wrongly availed:
10.1 Section 88 of the Finance (No. 2) Act, 2004 is being amended to provide for recovery of –
(a) credit of AED (GSI) paid before 1st April 2000, and wrongly availed for
payment of CENVAT duty, and
(b) interest thereon.
The scheme provides for payment of the aforesaid amounts in 36 equated monthly instalments. (For details refer clause 124 (a) of Finance Bill, 2005).
10.2 Briefly, the salient features are as under:
(a) A manufacturer who is required to reverse the credit would be allowed to do so, in not more than 36 equated monthly instalments (EMIs). For this purpose, the amount of credit wrongly availed and the interest thereon shall be determined by the jurisdictional officer in the following manner,-.
(i) The Central Excise Officer would, by the 25th May 2005, serve notice on the assessee asking him to declare the amount of the CENVAT credit wrongly availed.
(ii) The assessee is required to furnish the details by the 31st May 2005 failing which he would be debarred from the scheme, and the credit and interest would be recovered in the manner , as existed prior to this amendment.
(iii) The interest payable would be @ 13% for the period between each date of utilization of wrongly availed credit and 10th September 2004. It has been deemed that the wrongly availed credit has been utilized first before utilizing the credit of AED (GSI) paid after 1st April 2000.
(iv) The Central Excise Officer would determine the total credit with interest, and inform the assessee, in writing, the EMI with bifurcation of amounts of credit and the interest, by 15th June 2005.
For example, for assessee ‘A’,
(a) if the total credit availed of AED (GSI) availed prior to 01.04.2000 =Rs. 10 crores; and
(b) if the interest calculated as per above method is =Rs. 1.2 crores.
Then the total dues would be Rs.10 crores + Rs. 1.2 crores= Rs. 11.2 crores and the EMI would be Rs.11.2/36= Rs. 31.11 lakhs (Rs.27.77 lakhs credit +Rs.3.34 lakhs interest)
(v) The payment of monthly instalments would commence from the month following the month of the determination. The date of payment would be the same as the due date for paying excise duty i.e. 5th of a month.
(vi) An assessee can pay up the entire dues or a part thereof, before the due dates. Non-payment of any instalment resulting in any arrears would debar him from the scheme prospectively.
(vii)After all the EMIs have been paid, an order shall be issued closing the
proceedings. The assessee is however free to give all the above details even before the due date of 31st May 2005, and can make advance payments, if they so desire.
11. Amendments in Customs and Central Excise Act and Rules:
11.1) Rule 57CC, Rule 57AD of the Central Excise Rules and Rule 6 of the CENVAT Credit Rules are being amended retrospectively to provide a mechanism for recovery of amount due from a manufacturer when he is required to pay an amount of 8% or 10%, on his exempted clearances because of his failure to maintain separate account for common inputs used in both exempted and dutiable products. It is proposed to give retrospective effect to this provision with effect from 1st August, 1996.
11.2) Sections 128 and 157 and the Fourth Schedule of Finance Act, 2003 are being omitted consequent to exemption from the additional duty on tea.
11.3) Section 5A of the Central Excise Act, is being amended so as to provide that if any excisable good is exempted from duty of excise absolutely, the manufacturer of such goods will be bound to avail of the exemption.
11.4) Section 23A of the Central Excise Act is being amended so as to allow an existing Joint Venture in India to avail of the benefit of Advance Ruling. The Central Government is also being empowered to notify any class or category of persons as eligible for availing of the benefit of Advance Ruling.
11.5) Section 32PA of the Central Excise Act, 1944 is being amended so as to make a provision for sending back a case by the Settlement Commission to the Tribunal in the event of non-cooperation by the applicant.
11.6) The power of the Central Board of Excise and Customs (CBEC) to review orders passed by Commissioner of Central Excise is being vested in a Committee of two Chief Commissioners as may be notified by the CBEC. Similarly, the power of the Commissioner to review the orders of Commissioner (Appeal) is being vested in a Committee of two Chief Commissioners of Central Excise. For this purpose suitable amendments are being made in sections 35A, 35B and 35E of the Central Excise Act.
11.7) CENVAT Credit rules have been amended so as to provide that credit of Additional excise duty (by way of surcharge)on pan masala and specified tobacco products would be available for utilization of payment of this Additional excise duty only. Credit of no other duty can be utilized for paying this Additional excise duty.
11.8) The Schedule under the Additional Duties of Excise (Goods of Special Importance)Act, 1957 is being amended so as to align the entries with the new Excise Schedule introduced in the Central Excise Tariff (Amendment) Act, 2005.
11.9) The Schedule under the Additional Duties of Excise (Textiles and Textile Articles)Act, 1978 is being amended so as to align the entries with the new Excise Schedule introduced by the Central Excise Tariff (Amendment) Act, 2005.
11.10) The Third Schedule under the Central Excise Act, 1944 is being amended so as to align the entries with the new Excise Schedule introduced by the Central Excise Tariff (Amendment) Act, 2005.
11.11) The Seventh Schedule under the Finance Act, 2001 is being amended so as to align the entries with the new Excise Schedule introduced by the Central Excise Tariff (Amendment) Act, 2005.
12.1 DTA clearances of EOUs/EHTP/STP/SEZ units are being exempted from the excise duty leviable thereon as is equivalent to the additional duty payable thereon in terms of the proviso to section 3 of the Central Excise Act read with sub-section (5) of section of 3 of the Customs Tariff Act, 1975, as on their clearances to the DTA, normally, domestic internal taxes would be leviable (notification Nos. 8 & 9/2005-CE refer).
13. All the Trade Associations are requested to give wide publicity of the contents of this Trade Notice amongst their members/constituents.
14. Hindi version will follow.
CENTRAL EXCISE DELHI-I.
AUTHORITY: D.O.F.NO. 334/1/2005-TRU DATED 28th February, 2005.