EXCISE DUTY PROPOSALS

Surcharge on Pan Masala and Tobacco Products:

• An additional excise duty, by way of surcharge, is being levied on pan masala and certain specified tobacco products to finance the National Rural Health Mission. This additional duty will be charged at prescribed specific rates on cigarettes, and at a rate equal to 10% of the aggregate of normal rates of excise duties payable on pan masala and other tobacco products. This surcharge has not been levied on bidis.

• An additional duty of excise is being imposed on cigarettes at the following rates :-

Imposition and Increase in Duty:

• Excise duty of 8% with CENVAT credit has been imposed on mosiac tiles. SSI exemption is available.

• Excise duty of 16% has been imposed on road tractors (of engine capacity more than 1800 cc) for road trailers.

• Excise duty of 2% has been imposed on branded articles of jewellery. The process of affixing or embossing the brand or trade name on the article of jewellery shall amount to ‘manufacture’.

• Excise duty has been raised on iron and steel of chapter 72 from 12% to 16%.

• Excise duty has been raised on ships for breaking up from 12% to 16%.

• Excise duty on molasses has been increased from Rs.500 per metric tonne to Rs.1000 per metric tonne.

Relief Measures:

• Excise duty has been reduced from 24% to 16% on air conditioners.

• Excise duty has been reduced from 24% to 16% on tyres, tubes and flaps.

• Excise duty has been reduced from 16% to 12% (with Cenvat credit) on matches made by mechanized and semi-mechanized sectors (except Bengal lights).

• Excise duty on imitation jewellery has been reduced from 16% to 8%.

• Excise duty has been reduced from 16% to 8% on cakes and pastries.

• Excise duty exemption on specified machines for use in the plantation sector, available till 1.5.2005, is being extended till 1.5.2006.

Agriculture and Food Processing:

• 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, elaidinised fats, has been exempted.

• Tea and tea waste have been exempted from additional duty of excise of Re. 1 per kg.

• Parts manufactured and used captively for production of power tillers (of heading No. 84.32) have been exempted from excise duty.

• Excise duty on electronic milk fat and solid non-fat tester has been reduced from 16% to 8%.

Textiles:

• Excise duty on polyester filament yarn (PFY), including polyester textured yarns has been reduced from 24% to 16%.

• Optional duty has been prescribed for processed filament yarns (including polyester filament yarn) manufactured from yarn procured from outside by independent processors. Such yarn would either attract Nil excise duty without availment of Cenvat credit or excise duty @ 8% with Cenvat credit.

Small Scale Industry:

• The value of clearances in the preceding financial year, for determining eligibility or the exemption, is being increased from Rs.3 crore to Rs. 4 crore.

• Exemption scheme, which provides for a concessional rate of 60% of normal rate with Cenvat credit upto clearances of Rs. 1 crore (notification No. 9/2003-CE), is being withdrawn.

• SSI units having annual turnover exceeding Rs.40 lakh will now have to file a simple annual declaration.

• These changes will come into effect from 1st April, 2005.

Cottage and Village Industry :

• Definition of ‘rural area’ as provided in clause (ff) of section 2 of the Khadi and Village Industries Commission Act, 1956 (61 of 1956) is being 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.

Petroleum:

• Basic excise duty rates on certain petroleum products has been revised as under:-

• Additional duty of excise on motor spirit and high speed diesel oil has been increased from Re.1.50 per litre to Rs.2 per litre. This amount goes to Central Road Fund.

• There is no change in special additional excise duty of Rs.6.00 per litre on motor spirit.

National Calamity Contingent Duty (NCCD):

• For replenishment of the National Calamity Contingent Fund, duty on following items was imposed by the Finance Act, 2003:-

o 1% on polyester filament yarn, motor cars, multi-utility vehicles, and two-wheelers;

o Rs.50 per metric tonne on domestic crude oil.

This levy was valid for one year (upto 29.2.2004) and subsequently was extended upto 31.3.2005. It is proposed to extend this levy without any time limit.

Miscellaneous:

• Excise duty exemption available to wind operated electricity generators and parts has been extended to cover rotor and wind turbine controller.

• Excise duty on cement clinkers has been increased from Rs.250 per metric tonne to Rs.350 per metric tonne.

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%.

Amendments in Customs and Central Excise Act and Rules:

• The First Schedule of the Central Excise Tariff Act is being amended retrospectively with effect from 1st March, 1986 so as to provide that in relation to refined vegetable edible oils (of headings 1502 and 1503), the process of refining amounts to manufacture.

• Notification No. 88/88-CE is being amended with retrospective effect from 21st February, 2000 to 28th February, 2003 so as to provide that the present definition of ‘rural area’ is made applicable from 21st February, 2000.

• 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.

• Sections 128 and 157 and the Fourth Schedule of Finance Act, 2003 are being omitted consequent to exemption from the additional duty on tea.

• Finance (No.2) Act, 2004 is being amended so as to prescribe a scheme for recovery of credit of AED(GSI) paid prior to 1st April, 2000 utilized for payment of CENVAT duty, along with interest.

• 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.

• 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.

• 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.

• 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.

• CENVAT Credit rules have been amended so as to provide that credit of Additional Excise Duty, on pan masala and certain tobacco products (by way of surcharge) 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.

• 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.

• 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.

• 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.

• 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.

• Sections 28E and 28H of the Customs Act, 1962 are being amended so as to provide that advance ruling may also be sought in respect of determination of Rules of Origin of goods and matters relating thereto. It is also proposed to allow an existing Joint Venture in India to avail 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.

• Section 28F of the Customs Act, 1962, is being amended so as to rename “Authority for Advance Ruling” as “Authority for Advance Ruling (Customs, Central Excise and Service Tax)”.

• Section 127MA of the Customs Act, 1962 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

• The power of the Central Board of Excise and Customs (CBEC) to review orders passed by Commissioner of Customs 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 (Appeals) is being vested in a Committee of two Chief Commissioners of Customs. For this purpose suitable amendments are being made in section 128A, 129A and 129D of the Customs Act.