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TMI BlogAmendments in Customs and Central Excise - Budget 2010-2011X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise stated, all changes in rates of duty take effect from the midnight of 28th February/1st March, 2011. A declaration has been made under the Provisional Collection of Taxes Act, 1931 in respect of clauses 57(a)(i), 57 (b) and 70(a)(i) of the Finance Bill, 2011 so that changes proposed therein take effect from the midnight of 28th February/1st March, 2011. The remaining legislative changes would come into effect only upon the enactment of the Finance Bill, 2010. 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, 2011 but with effect from the date indicated in the relevant clause or Schedule. These dates may be carefully noted. 2. The important changes in respect of Customs and Central excise duty are discussed below. I. CENTRAL EXCISE 3 Rate structure for goods, other than petroleum: 3.1 The standard rate of Central Excise duty for non-POL products has been maintained at 10%. The merit rate of excise duty (CENVAT) for non-petroleum goods has been increased from 4% to 5%. The increased rate would apply to all such goods that hitherto attracted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up articles were exempt from Central Excise duty on the condition that no credit of duty on inputs is taken by the manufacturer in terms of notification no.30/2004-CE dated 9th July, 2004. If credit were taken, the applicable rate was 4% for goods of cotton, not containing any other textile material and 10% for others under notification no.29/2004-CE also dated 9th July, 2004. These notifications are being amended so that they apply only to those goods of Chapters 61, 62 and 63 not bearing a brand name or not sold under a brand name. For such goods, therefore, the optional duty regime would continue. In the case of ready-made garments and made-up articles bearing a brand name or sold under a brand name, no such option would be available and a duty of 10% would be payable regardless of the composition of the item/article. 3.5 Note 12 of Chapter 61 and Note 11 of Chapter 62 already prescribe that certain processes such as affixing a brand name on a product, labeling or re-labeling of containers etc. shall be processes amounting to manufacture. A similar note (Note 5) is being added to Chapter 63. As for the valuation of these goods, tariff value has already been fixed at the rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on so that it may be claimed at the time of their clearance from the factory. 3.8 A similar refund-based concession was hitherto available to motor vehicles of heading 87.03 with a capacity of 7 persons including the driver which are registered for use solely as taxis after clearance(S.No.34 (ii) of notification no.6/2006-CE). Two changes are being carried out in this exemption: (i) the condition regarding capacity of the vehicle is being modified so that the concession is available to vehicles with capacity upto 13 persons including the driver; (ii) instead of a concessional rate of 10% ad valorem, the manufacturer of such vehicles would be entitled to a concessional rate equivalent to 80% of the excise duty paid on such vehicle at the time of clearance. Thus, if a vehicle attracts a normal duty of 10%, the manufacturer would be entitled to a refund of the amount representing 2% i.e. one-fifth of the total duty if the vehicle is subsequently registered as a taxi. 3.9 Concessional duty of 10% is being prescribed for hydrogen vehicles based on fuel cell technology. Similarly, a concessional rate of Central Excise duty of 5% has been extended to specified parts of hybrid vehicles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff) has been fixed at 5% ad valorem. Bill entries contained in the Tenth Schedule to the Finance Bill, 2011 may be referred to for this purpose. For the remaining items in whose case the statutory/tariff rate is not Nil, a general effective rate of 5% is being prescribed (without any condition) through notification no. 2/2011-CE dated 1st March, 2011. This would enable those manufacturers who wish to avail of Cenvat credit to pay a concessional duty of 5%. 4.2 In the case of jewellery of gold, silver or other precious metals as well as articles of these metals falling under heading no. 7114, the levy would apply only to goods either bearing a brand name or sold under a brand name. Full exemption from excise duty is being retained for unbranded products of this class. 4.3 The following amendments have been made in the Cenvat Credit Rules, 2004 for the implementation of the 1% scheme: (a) The definition of "exempted goods" has been amended to include goods in respect of which the benefit of notification no.1/2011-CE is availed. This would imply that the credit attributable to such goods would have to be reversed when common inputs and input services are used for both these go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to another factory of the same manufacturer for manufacture of power tillers . Cotton stalk particle board . Enzymatic preparations for pre-tanning of leather . Colour, unexposed cinematographic film in jumbo rolls of 400 feet and 1000 feet . Pipe fittings required for a water supply project 5.2 Concessional duty of 1% is being provided for the following: . Sanitary napkins, baby and clinical diapers and adult diapers . Water filters using pressurized tap water but no electricity and their replaceable kits 5.3 Excise duty is being reduced from 10% to 5% on: . Kits for the conversion of fossil fuel vehicles into hybrid vehicles and parts of such kits . Grease proof paper and glassine paper 6. Important Legislative Amendments: 6.1 The provisions of sections 11A relating to the recovery of duty not levied, short levied, not paid, short paid or erroneously refunded have been redrafted with a view to improve the sequence in which provisions occur and simplify their language. Each sub-section consists of one sentence and conveys a single point. As far as possible, active voice has been used and provisos have been eliminated. In terms of content, the following im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of 18 per cent per annum under the existing provisions of sections 11AA and 11AB. 6.4 Section 11E is being inserted in the Central Excise Act to create a first charge on the property of a defaulter for recovery of Central Excise dues subject to the provisions of the Companies Act, Recovery of Debt due to Bank and Financial Institution Act, 1993 and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. This implies that after the dues, if any, owing under these provisions, dues under the Central Excise Act shall have a first charge. 6.5 The provisions of section 12 of the Central Excise Act enable the Central Govt. to borrow the machinery provisions of the Customs Act with suitable modifications and alterations in respect of duties imposed by section 3. These are being amended to include a reference to duties imposed under section 3A as well so that the same provisions can be applied in respect of duties collected on the basis of compounded levy. The amended provision shall acquire legal force upon the enactment of the Finance Bill, 2011 with retrospective effect from 10.05.2008. 6.6 It has been decided to empower the Joint Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Excise Act with effect from 27.02.2010. Subsequently, parts, components and assemblies of certain vehicles falling under chapter 84 were also notified under these provisions with effect from 29.04.2010. However, these goods were not simultaneously included in the Third Schedule to the CETA. These are now being included in the Third Schedule retrospectively w.e.f. 27.02.2010 and 29.04.2010 respectively. 6.12 Amendments are being made in the Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 to remove sugar and textile and textile products from its purview. This would enable the State Governments to levy VAT on these items. 6.13 According to Note 5 the repacking of perfumes from bulk packs to retail packs, labeling or re-labeling of containers is a process amounting to manufacture. In the case of traditional perfumes, commonly known as „Attar., this repacking is done at the point of retail sale to the customer in the retail shops. As a consequence, retail shops are required to obtain registration and comply with all the formalities of Central Excise law. The trade has represented that this poses a heavy compliance burden. Full exemption f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny employee including food articles etc. have been expressly excluded. (b) The definition of „input service. has also been rationalized to impart clarity and to achieve congruence between goods and services so that the services related to any goods excluded from the definition of „inputs. are also excluded from the definition of „input services.. To give an example, goods used for construction have been excluded from inputs while construction services, works contract service, and other specified services in so far as they are used for construction have been kept out of the purview of input services. (c) In the case of capital goods, there is no material change in the definition. Credit of duty paid on capital goods used outside the factory for generation of electricity for captive use within the factory has been permitted. (d) The process of obtaining goods and material mainly melting scrap and re-rollable scrap of steel, by breaking up of ships, boats and other floating structures is deemed to be a process of manufacture in terms of section note 9 of Section XV of the Central Excise Tariff. In the breaking of ships, a number of used serviceable articles suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... software for the purposes of charging CVD is required to be determined on the basis of the retail sale price (RSP) affixed on the package under the Standards of Weights and Measures Act, 1976. It has been represented by the trade that in certain situations packaged software is not required to bear the RSP when imported and difficulties are being experienced in the assessment of such software to CVD. In order to resolve the issue, packaged software which is not required to bear RSP is being exempted from so much of the additional duty of customs as is equivalent to the duty payable on the portion of the value which represents the consideration paid or payable for transfer of the right of its use. Such software would therefore be required to pay CVD only on that portion of value representing the value of the medium on which it is recorded alongwith freight and insurance. The exemption is subject to the fulfillment of certain conditions. A parallel exemption is also being provided from central excise duty in respect of IT software manufactured domestically. Postal Imports: 11. Description of heading 9804 in the First Schedule is being amended to cover all dutiable items intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 1st March, 2002 so that it may be distinguished from non-coking coal which attracts a duty of 5%. Similarly, an Explanation has been added to the entry at S. Nos 344 and 345 of the same notification to define a „Completely Knocked Down. (CKD) unit of a vehicle to exclude a unit containing a pre-assembled engine, gearbox or transmission mechanism as well as a body assembly on which a sub-assembly of assembled engine, gearbox or transmission mechanism is installed. The Explanation to Notification No. 14/2004-Customs dated 8Th January,2004 has been amended to clarify that a water supply project includes water pumping station and water storage facility. A similar amendment has been carried out in entry 26A of Notification No. 42/1996-Customs dated the 23rd July, 1997. 13.4 As a trade facilitation measure, it has been decided to reduce the security amount to be tendered at the time of registration of a contract under Project Import Regulations to 2% of the contract value with a ceiling of Rs.1 crore to be taken in the form of bank guarantee. It has also been decided that the bank guarantee would not be required to be renewed if the finalization is not completed within six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the premises of importer or exporter. (iii) Consequential amendments are being proposed in section 18 relating to provisional assessment. It is being provided that the importer may make a request for assessment of goods by the officer when he is not in a position to self-assess. The provisions of section 19 are also being amended to prescribe that the finalization of provisional assessment may be carried out by the proper officer. Other consequential amendments include amendments in section 46 and 50 to make the electronic filing of bills of entry/shipping bills the norm. Power is also being conferred on the Commissioner of Customs to permit filing in any other manner when electronic filing is infeasible. Section 157 is being amended to empower the Board to issue regulations for specifying the manner of conducting audit. These provisions would come into effect on the date of enactment of Finance Bill, 2011. They may be examined carefully and suggestions/comments, if any, in this regard may be sent to the Board. 14.2 Sub-section (1) of section 27 is being substituted so as to enhance the time limit for claiming refund of duty and interest from six months to one year for all cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eared after 15.1.2003. This provision would come into force on the date of enactment of the Finance Bill, 2011. Pending cases of these importers pertaining to the period mentioned above may be identified and disposed off accordingly. 14.11 Special provision is being made vide clause 58 of the Finance Bill, 2011 read with the Seventh Schedule to impose definitive safeguard duty retrospectively on imports of caustic soda lye imported into India during the period from 04.12.2009 to 03.03.2010. This would validate the imposition of provisional safeguard duty on this product during the same period. This provision would come into force on the enactment of the Finance Bill. 14.12 Notification Nos.92/2004-Customs dated 10th September, 2004, 41/2005-Customs dated 9th May, 2004, 90/2006-Customs dated 1st September, 2006, 64/2008-Customs dated 9th May, 2008 and 136/2008-Customs dated 24th December, 2008 have been retrospectively amended (in the case of first four w.e.f. 1st April, 2008; and the remaining ones from the date of their issuance). Clause 53 read with Second Schedule of the Finance Bill refers. The implication of these amendments is that benefit of reward schemes such as the Serv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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