To enable the States to levy sales tax on sugar, textiles and tobacco
products at a rate not exceeding 4% without being denied the 1.5% of total tax revenue,
suitable amendments have been made in the above Act. This will come into effect from a
date to be notified later. Cenvat Credit Rules, 2002 have been amended to allow credit of
AED (GSI) paid for payment of Cenvat duty and special excise duty.
17. Petroleum Products
The Additional Excise Duty on motor spirit (petrol) and high speed
diesel oil has been increased from Rs.1 per litre to Rs.1.50 per litre.
Excise duty on light diesel oil (LDO) has been increased by Rs.1.50
per litre. No Cenvat credit will be allowed in respect of the duty paid on LDO.
Concession of thirty paise per litre from surcharge on motor spirit,
intended for use in the manufacture of ethanol doped petrol, has been continued for one
more year, up to 29.2.2004.
18. Tea
Tea has been exempted from excise duty of Rs.1 per Kg. In its place, an
additional duty of excise of Re. 1 per Kg. by way of surcharge, for development of tea
plantation sector has been introduced. This will apply to imports also.
19. Health
Drugs and life saving equipment which are exempt from CVD (additional
duty of customs) are being exempted from excise duty. Drug intermediates used captively in
the factory of production has been exempted from excise duty. The following items have
been exempted from excise duty :-
Specified life saving drugs and life saving equipment
Glucometers and glucometer test strips
Cyclosporin
CAPD fluid system, its accessories and parts
Drugs and materials for clinical trial
Parts of wheel chairs
Drug intermediates used captively in the factory of production has been
exempted from excise duty.
20. Small Scale Industries Exemption Scheme
With effect from 1.4.2003, SSI exemption will be withdrawn on :-
Ceramic tiles. Printed ceramic tiles made from duty paid tiles
outside the factory will, however, be exempt from excise duty.
Stainless steel patties l pattas.
Woollen yam, shoddy yarn.
Value of exempted goods (excluding exports) will be included for
calculating the limit of Rs. 3 crores for eligibility under SSI exemption with effect from
1.4.2003.
21. Medicinal & Toilet Preparations
Changes have been made in respect of duty structure applicable to
medicines and toilet preparations containing alcohol under the M&TP Act, 1955. These
are as follows:-
The amendment to M&TP Act, 1955 carried out vide Finance Act,
2000 will now come into force w.e.f. 1.3.2003.
Duty on toilet preparations containing alcohol or narcotic substances
has been reduced from 50% to 16%.
Duty on medicines containing alcohol or narcotic substances has been
reduced from 20 % or specific rates to 16%.
Full exemption on Ayurvedic / Unani / Indigenous medicines,
containing self-generated alcohol and not capable of being consumed as alcoholic beverage
has been retained.
Toilet preparations containing alcohol or narcotic substances, will
be assessed on maximum retail price (MRP) basis, with an abatement of 40 % on the MRP.
22. Matches
Matches made by the non-mechanized sector have been fully exempted from
excise duty. Specific duty rates on matches manufactured in the mechanized and
semi-mechanized sector have been replaced by a uniform excise duty of 8% without Cenvat
credit. Bengal lights will also now attract duty at 8%. Provision is being made in the
Central Excise Rules for giving credit or refund of the central excise stamps available
with the assessee, but not utilized.
23. Retail Sale Price (RSP) based assessment
RSP based assessment has been extended to pesticides, insecticides (
both 35 % abatement of RSP ) and chewing tobacco and preparation containing chewing
tobacco ( both 50 % abatement of RSP ). Sanitary ware and fixtures of ceramics have been
excluded from the ambit of RSP based levy.
Rates of abatement on aerated water, air conditioners, biscuits,
boiled sweets, sugar confectionery, scented supari and pressure cookers have been reduced
by 5%, consequent to the reduction of excise duty on these items.
Changes in definition of RSP
The definition of RSP as mentioned in Explanation I to section 4A of
the Central Excise Act has been modified so as to extend it also to cases where the
governing law on such goods permits declaration of retail sale prices exclusive of taxes.
Section 2 (1) of Central Excise Act is being amended to provide that
for goods presently covered under the provisions of section 4A, any process of packing,
re-packing, labeling or re-labeling of goods, putting them into unit containers or any
subsequent declaration of RSP on goods or alteration thereof shall amount to manufacture.
Provisions of section 4A of the Central Excise Act are being amended
so as to :-
provide that in case of affixing higher RSP subsequent to clearance
of goods on payment of duty on a lower RSP, the excise duty would be leviable on the basis
of such higher RSP affixed later on.
assume powers to enable the government to ascertain the RSP of goods
having no RSP declared or the declared RSP being tampered with, obliterated or altered;
and
assume powers to make rules for such ascertainment.
24. Default in payment of duty
Under the existing procedure, in certain cases of default in payment of
duty assessed under rule 8(3) of the Central Excise Rules, the manufacturer is denied the
benefit of utilization of Cenvat credit for certain period. This is being done away with,
and even in cases of default, there will be no denial of the credit nor the facility of
paying duty in monthly installments be withdrawn. A system of automatic payment of
interest at the rate of 2% per month or Rs.1,000 per day, whichever is higher, has been
proposed starting from the date on which the duty was required to be paid till the date of
payment (subject to the interest not exceeding the duty amount). Once the assessee pays
the amount, there will be no need to issue SCN or pass an order. Provisions are also being
made that in case of non-payment of the defaulted amount within a reasonable time, the
goods in respect of which the payments are in default would be liable to confiscation and
the amount in default may be recovered as if these are arrears of revenue.
25. Monthly payment of duty
From 1.4.2003, the fortnightly duty payment scheme will be replaced
by monthly payment scheme. Duty for a month will have to be paid by 5th of the
next month. However, for the month of March, the duty has to be paid by 31st
March, both for SSI and non-SSI units.
It is also being provided that date of payment of cheque in the
nominated banks will be the date of payment of duty, provided the cheque is honoured.
26. Valuation
Section 4 of the Central Excise Act has been amended by providing an
explanation so as to clarify that the total amount received by a manufacturer will be
deemed to be the price-cum- duty and the assessable value should be determined accordingly
subject to exclusion of sales tax or other taxes, if paid. Similar will be the position
when additional considerations are received.
Rule 7 of the Valuation Rules provides as to how the value is to be
determined in the case of goods sold from a depot, etc. This provision is now being
incorporated in section 4 of the Central Excise Act itself whereby sub-section 3 has been
amended to provide that "place of removal" will include a depot, premises of a
consignment agent or any other place or premises from where the excisable goods are to be
sold after their clearance from the factory. Suitable amendments have been made to provide
that the time of removal in the case of goods removed from the place of removal shall be
deemed to be the time of clearance of such goods from the factory.
Rule 5 of the Valuation Rules provides for deduction of actual cost
of transportation when the price at the place of removal is not known. This is subject to
production of actual invoice. It is proposed to allow deduction of freight worked out on
an average basis. It is clarified that the deduction of average freight or actual freight
is only in respect of cost of transportation beyond the place of removal when the goods
are sold for delivery at a place other than the place of removal. In case of a depot, the
cost of transportation up to the point of depot or any other place from where the goods
are sold will continue to be included.
27. Retrospective Amendments
It may be recalled that notification No.61/2002-CE dated 23.12.2002
was issued to provide that :-
the Cenvat credit of the duty paid on the inputs used in the
manufacture of final products cleared after availing of the exemption under notification
No.32/99-CE and 33/99-CE both dated 8.7.1999 (North East exemption notifications] shall be
utilized only for payment of duty on the final products cleared after availing of the
exemption under the said notifications; and
the refund allowable under these notifications shall not exceed the
amount of duty paid less the amount of the Cenvat credit availed of, in respect of the
duty paid on the inputs used in or in relation to the manufacture of goods cleared under
the corresponding exemption notification.
Similarly, notification No.42/2002-CE(NT) dated 23.12.2002
was issued to disallow diversion of the credit taken on inputs used for manufacture of
products exempted under the said North East notifications for payment of central excise
duty on other products. Such diversion simply implied payment of a greater amount of duty
through account-current on the products exempted under the said notifications thereby
resulting in unintended benefit.
The amendments made in December, 2002 sought to plug this loophole.
These provisions are now being given retrospective effect w.e.f. 8.7.1999. Consequently,
all assessments from 8.7.1999 onwards in respect of these two notifications will have to
be revised to ensure that the entire credit of duty paid on the inputs used in the
manufacture of the exempted final products is used only for payment of duty on final
products cleared under these notifications and refund is restricted to total duty paid
less the total credit in respect of the duty paid on inputs. Similarly, if any credit
taken in respect of inputs used in the manufacture of goods cleared under 32/99-CE and
33/99-CE was used for payment of duty on other goods not entitled to the benefit under
these notifications, such credit is not admissible and amount equal to the credit so
utilized has to be demanded from the manufacturers. The assessee will have to make the
payment within 30 days of the enactment of the Finance Bill. Similar amendment has also
been made prospectively in the notifications for Kutch district of Gujarat and State of
J&K.
Clause 146 (1) of the Finance Bill amends notification No.32/99-CE
and 33/99-CE retrospectively so as to provide that the exemption under this notification
will not be available to cigarettes and pan masala containing tobacco with effect from
8.7.1999 and in respect of all products of chapter 24 w.e.f. from 1.3.2001.
Notification no.32/99-CE has also been amended retrospectively to
provide that w.e.f. 12.2.2002, benefit under this notification will not be available to
goods manufactured and cleared by (i) Numaligarh Refineries Limited (ii) Bonagaigaon
Refineries and Petrochemicals Limited (iii) Indian Oil Corporation, Guwahati and (iv)
Assam Oil Division, Indian Oil Corporation, Digboi.
Under rule 57R(8) of the Central Excise Rules, there were some
disputes as to whether the credit was admissible in the case of manufacturers who claim
revenue expenditure in respect of amount of duty paid on the finished goods in the profit
and loss account. It was argued that the manufacturer can be said to have claimed revenue
expenditure in respect of the duty paid on the finished goods through modvat credit.
Consequently, it was argued that the credit taken of the duty paid on the capital goods
was not permissible. As this was not the intention, rule 57R(8) and 57R(5) have been
amended retrospectively with effect from 23.7.1996 so as to delete the reference to
revenue expenditure. Credit would be admissible so long as the manufacturer does not claim
depreciation under section 32 of the Income Tax Act, 1961 in respect of that part of the
value of capital goods which represents the amount of specified duty on such capital
goods. Consequently, on enactment of the Finance Bill, 2003, all pending cases may be
decided accordingly in the light of amendment made.
28. Pre-budget stocks
The restrictions on clearances on budget day have been removed this
year with the result that all clearances up to midnight of 28.2.2003 / 1.3.2003 are
entitled to pay duty at the rates prevailing on this date. All the budgetary changes,
unless otherwise stated, will come into effect from midnight of 28.2.2003 / 1.3.2003 and
clearances effected after this period will attract the new rates of duty. As regards the
dutiability of the stocks manufactured prior to 28.2.2003 / 1.3.2003, pre-budget stocks
will be leviable to excise duty at the rates prevailing on the date of their removal. In
other words, the goods cleared after 28.2.2003 would be liable to pay duty at the new
rates even if they were exempted on or prior to 28.2.2003. However, goods which were not
subject to the levy at all, for instance, the levy of NCCD on new items, same will have to
be treated differently. In this connection, your attention is invited to the decision of
the Supreme Court in the case of CCE Hyderabad v/s Vazir Sultan Tobacco Ltd 1996 (83) ELT3
(SC) which has laid down the guidelines as regards the duty liability of pre-budget stock.
In respect of a completely new levy, the pre-budget stock will not attract the new levy as
there was no liability when the goods were manufactured, irrespective of their date of
removal.
