Subject : New Excise Procedure on textile and textile articles.
Trade is aware that certain measures like withdrawal of deemed credit, removal of specific duties, and removal of exemptions (including SSI exemptions) on textiles and textile articles including ready made garments would come into effect from 1-4-2003. With a view to avoid any hardship to trade and industry in the sector, in particular those who are coming within the excise net for the first time, and following detailed discussion with trade associations, new excise procedure (by way of amendment to the rules, notifications and issuance of executive instructions) have been notified on 25-03-2003. Salient features of these are as follows.
CHANGES IN THE CENTRAL EXCISE AND CENVAT CREDIT RULES
(a) Central Excise Rules, 2002 have been amended so as to prescribe special procedure for Textile and Textile articles. Under the special procedure, the duty liability, accountability and the responsibility for complying with the Excise procedures (such as registration, return filing, maintenance of records) would rest with the person who gets yarn, fabrics or ready made garments manufactured or processed on job-work. Such person would normally be the owner of the raw material who gets finished products manufactured on payment of job-charges. He can take credit of the goods which are used in job-work. In such a case, the job-worker (such as powerlooms, hand processors and power processors) would be totally free from the duty burden as well as from the procedural requirements. The job-worker, however, at his option, can take upon himself to comply with excise law and pay duty. He can also do so on behalf of the owner of the goods working as his agent. Conversely, such a registered job-worker can manufacture goods or get goods manufactured on job-work basis, get registered and pay duty, would be treated at par with actual manufacturer.
(b) The rules also provides for situations when the goods move from one job-worker to another during the course of completion of its manufacture. Such movement would be under simple challans which would contain certain minimum information and would be printed (including computer printed) and serially numbered. Such challans could also be in local/vernacular language.
(c) It is also provided that the owner of the goods can, if he so desires, clear the finished products from the premises of the job-worker on payment of duty.
(d) The owner of the goods can take credit of duty on inputs, which are used by the job-worker. In certain cases, an actual manufacturer (e.g. a yarn manufacturer) may also send some goods to a job-worker for further manufacture and receive back the goods after job-work, and if such manufacturer has a credit balance in respect of inputs used in other goods (including goods manufactured on job-work basis) , the same can be utilized for payment of duty on clearances of the goods received after job-work.
(e) In case a person wants to pass on the credit on goods sold by him without any manufacture, he is required to undertake registration as a registered dealer.
(f) In certain cases, some of the intermediate processes may be either exempt (e.g. , being carried out without aid of power or steam) or are not excisable (such as sizing of yarn). In order to ensure that the credit chain remains unbroken, it is provided to permit endorsement of the duty paying document issued in favour of a person undertaking such exempted/ non-excisable activity in favour of either the buyer of the goods or to another person who is undertaking a subsequent excisable activity. Such person simply has to endorse the duty paying document to the next person to whom they sell the goods. It would not be necessary for the person endorsing to be registered with the department. However, the person undertaking such exempted/ non excisable activity, can , at his option, get himself registered as a registered dealer. This would enable him to issue dealers’ invoice in favour of the person undertaking a subsequent excisable activity.
(g) Normally, the assessee not covered under SSI exemption are required to file monthly return as well as they are required to pay duty on a monthly basis. As a measure of facilitation, it is provided that in case of yarn preparatories (i.e. twisting, warping, doubling of yarns), unprocessed fabrics and readymade garments, the manufacturers would be required to file only quarterly returns in a simplified format. The duty, however, would be paid on monthly basis.
(h) Processors who undertake job-work and also do processing on their own and obtain dye and chemicals under invoice issued in his name, can take credit of duty paid on such dye and chemicals to pay duty on his dutiable clearances, even though some of these inputs were used for making goods cleared without payment of duty under the job-work scheme.
(i) Credit of duty paid on capital goods can be taken only by the manufacturer in whose premises the capital goods are installed.
(j) As the manufacturers and traders are expected to have stock of inputs as on 31-03-2003, for which they may not be in a position to produce the documents evidencing payment of duty, provisions have been made to give a one time credit for the inputs and / or inputs contained in the finished products lying in stock as on 31-03-2003. This facility would be available to all such persons who would be required to pay duty or pass on the credit i.e. manufacturers, persons getting the goods manufactured on job-work and registered dealers. All such persons would declare the stock of inputs (including those contained in process or are in stock of finished product) giving description, quantity (in unit length or weight, as the case may be) and value. If duty paying documents are available, credit will be allowed on the basis of these documents. Where no such documents are available, credit will be allowed on a deemed basis. In respect of yarn lying in stock, the credit amount will be notified separately. In respect of fabrics lying in stock, credit will be allowed at the rates prescribed under notification No. 54/2001-CE, or as the case may be under notification No. 6/2002-CE (NT) read with notification NO. 25/2003-CE (NT) dated 25.03.2003. As the duty payment for April, 2003 will have to be made only by 5th May 2003, credit would be admissible in respect of the stock lying on 31.3.2003, even if the rates are not notified on or before 1.4.2003. The assessee would work out the credit amounts and take credit accordingly. In the case of processed fabrics, only the stock lying with a manufacturer would be entitled for such credits. For unprocessed fabrics and yarns, the credit would be available both for manufacturers/ job workers, and also for traders who get registered.
(k) In case a person gets goods manufactured on job work and clears the same for sale, the excise duty would be payable on transaction value at which goods are sold. However, in case of the job worker, i.e. a weaver or processor prefers to clear goods on payment of duty (even if he is actually undertaking job work and is not selling the goods back to the trader) the duty would be worked out on the value calculated on the basis of the price of inputs i.e. yarns or grey fabric price plus the actual job charges.
(l) It has been brought to notice that some times sale of yarns, fabrics or ready made garments take place on approval basis. In such cases, the goods are sent to the buyer under a challan or proforma invoice and the sale is finalized after the approval of the buyer. The buyer may reject part or whole of the goods or negotiate the price depending upon the quality. Such goods may be sent to the buyer under a proforma invoice. Such challan/ proforma invoice would also be printed and serially numbered and have all particulars except the details of the duty payable. With in five working days from the issuance of the proforma invoice, the manufacturer would prepare the final invoice after making adjustments in respect of the goods rejected and returned by the buyer. The proforma invoice and the invoice would have cross refrence to each other by way of mention of their serial numbers.
(m) The special procedure for textiles and textile articles is not applicable to Export Oriented Units (EOUs) and units located in Special Economic Zones (SEZs).
( a) Commissioner of Central Excise, Pkl Ph. 561345
(b) Joint Commissioner of Central Excise, (Tech.), Pkl Ph. 561327
(c) Assistant Commissioner of Central Excise, (Tech), Pkl Ph. 561339
(d) Assistant Commissioner of Centra Excise, Div. Ambala Ph. 2444891
(e) Assistant Commissioner of Central Excise, Div. Y.Nagar Ph. 290040
Authority : Letter F.No. B-3/1/2003-TRU